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IRS Releases Updated Retirement Plan Correction Procedures
posted: Wednesday, October 12th
Changes Effective January 1, 2017
The IRS has released a new revenue procedure that updates the retirement plan correction procedures of the Employee Plans Compliance Resolution System (EPCRS).
Background
The EPCRS sets forth a comprehensive system of correction programs for sponsors of retirement plans that are intended to satisfy certain requirements of the Internal Revenue Code, but that have not met these requirements for a period of time. This system permits plan sponsors to correct these failures and thereby continue to provide their employees with retirement benefits on a tax-favored basis.
There are three ways to correct mistakes under the EPCRS:
- The Self-Correction Program (SCP) permits a plan sponsor to correct certain plan failures without contacting the IRS or paying any fee.
- The Voluntary Correction Program (VCP) permits a plan sponsor to, any time before audit, pay a fee and receive IRS approval for correction of plan failures.
- The Audit Closing Agreement Program (Audit CAP) permits a plan sponsor to pay a sanction and correct a plan failure while the plan is under audit.
New Revenue Procedure
Highlights of the new revenue procedure (Revenue Procedure 2016-51) include the following:
- The Self-Correction Program (SCP) permits a plan sponsor to correct certain plan failures without contacting the IRS or paying any fee.
- The Voluntary Correction Program (VCP) permits a plan sponsor to, any time before audit, pay a fee and receive IRS approval for correction of plan failures.
- The Audit Closing Agreement Program (Audit CAP) permits a plan sponsor to pay a sanction and correct a plan failure while the plan is under audit.
The availability of the SCP for significant failures has been modified to provide that, for qualified individually designed plans, a determination letter need not be current to satisfy the "Favorable Letter" requirement.
The new revenue procedure also outlines a revised approach for determining Audit CAP sanctions.
The new revenue procedure is effective January 1, 2017. Plan sponsors may not elect to apply provisions before that date. Revenue Procedure 2013-12 (as modified by Revenue Procedures 2015-27 and 2015-28) is in effect for 2016. However, beginning January 1, 2017, the older revenue procedures no longer apply.
Click here for additional details and links to the various revenue procedures discussed above.