The DOL recently released its Spring Regulatory Agenda, and it contains several important retirement and welfare plan initiatives for this year. Below is a summary of some of the material items that plan sponsors should be aware of, along with the DOL’s proposed schedule of rulemaking: Final Pension Benefit Statement Lifetime Illustrations Rule (Final Rule scheduled for August 2022). Note: Under the DOL’s previously issued Interim Final Rule, the inclusion of lifetime illustrations once per year on pension benefit statements became effective in June 2022. Revised procedures for granting prohibited transaction exemptions (the DOL is currently reviewing comments from its Proposed Rule from March 2022). Amendment and restatement of the DOL’s Voluntary Fiduciary Correction Program to expand the scope of eligible transactions and to streamline correction procedures (Interim Final Rule scheduled for July 2022). Amendment of the regulatory definition of the term “fiduciary” under ERISA for those persons who render investment… Continue Reading
Starting this month, when the IRS selects a tax-qualified retirement plan for examination, it will notify the plan sponsor by letter and provide the sponsor a 90-day window to review the plan document and operations for compliance with all plan qualification requirements. If the sponsor’s review reveals any operational or documentary failures that would otherwise qualify for self-correction under the IRS’s Employee Plan Compliance Resolution System (“EPCRS”), the sponsor will have the opportunity to self-correct those mistakes. If the plan sponsor’s review reveals any operational or documentary failures that, absent the examination, would require correction under the voluntary correction program (“VCP”) component of EPCRS, the sponsor can request a closing agreement, and the IRS will use the VCP fee structure to determine the sanction amount the sponsor will pay under the closing agreement. The sponsor must notify the IRS of the errors discovered and the correction within the 90-day window. The… Continue Reading
In Revenue Procedure 2021-30 (“Rev. Proc. 2021-30”), the IRS made certain updates to the Employee Plans Compliance Resolution System (“EPCRS”), including updates to the Self-Correction Program (“SCP”) and the Voluntary Correction Program under EPCRS. Among other updates, Rev. Proc. 2021-30 expands the correction methods for benefit overpayments by adding (i) the “funding exception correction method,” which provides an exception to corrective payments for plans that meet certain funding requirements, and (ii) the “contribution credit correction method,” which prescribes the amount of overpayments required to be repaid to the plan under certain circumstances. Further, Rev. Proc. 2021-30 (i) expands the circumstances under which plan sponsors may correct operational failures under the SCP by plan amendment, and (ii) extends, by one year, the end of the SCP correction period for significant failures. Rev. Proc. 2021-30 is available here.
The IRS recently issued a list of the top errors it finds in Voluntary Correction Program (?Ç£VCP?Ç¥) submissions, which is available here. The errors listed generally relate to issues associated with the submission of files in the correct PDF format, failing to pay the correct user fee, or the incorrect submission of the Form 8950. Filing a VCP application can be a useful method for plan sponsors to correct operational issues that have spanned numerous years or?á other issues for which self-correction is unavailable. Errors in the submission can delay resolution of the application or, in some cases, cause a rejection of the application. In addition to the common errors outlined by the IRS, plan sponsors should also use care to avoid the following additional common issues: Failure to Submit a Comprehensive Filing ?Çô If one operational error is found, plan sponsors should conduct a self-audit prior to filing a… Continue Reading
Previously, IRS Notice 2020-23 extended the due dates for certain tax payments, filings, and other ?Ç£Time-Sensitive Actions?Ç¥ that would ordinarily fall on or after April 1, 2020 through July 14, 2020 to July 15, 2020. See our prior blog post on Notice 2020-23 here. The IRS recently issued Notice 2020-35 to make additional Time-Sensitive Actions eligible for relief. For example, under this new guidance, an employer that receives a compliance statement issued under the voluntary correction program (VCP) component of the Employee Plans Compliance Resolution System (EPCRS) with a 150-day deadline to implement all corrective actions that ends between April 1, 2020 through July 14, 2020 has until July 15, 2020 to implement the corrections. A full list of the Time-Sensitive Actions is included in Section III.B of Notice 2020-35, which is available here.
The IRS recently published Rev. Proc. 2019-19, which sets forth the most current consolidated statement of the correction programs under the IRS?ÇÖs Employee Plans Compliance Resolution System (?Ç£EPCRS?Ç¥). Pursuant to the new guidance, which became effective April 19, 2019, eligible plan sponsors may use the self-correction program (?Ç£SCP?Ç¥) component of EPCRS to correct certain failures that were previously only correctable under the voluntary correction program (?Ç£VCP?Ç¥) or Audit CAP components of EPCRS. Unlike VCP and Audit CAP, SCP does not require any filings or payments to the IRS. The amended SCP now includes procedures for correcting certain plan document failures and for correcting certain participant loan failures (including defaulted plan loans). Rev. Proc. 2019-19 also expands the circumstances under which certain operational failures may be corrected by plan amendment under SCP. View Rev. Proc. 2019-19. View a summary of the key changes to the SCP component of EPCRS.
On September 29, 2016, the IRS released Rev. Proc. 2016-51, which sets forth the comprehensive Employee Plans Compliance Resolution System (?Ç£EPCRS?Ç£) and supersedes Rev. Proc. 2013-12 (i.e., the most recent comprehensive statement of EPCRS). The modifications to EPCRS made by Rev. Proc. 2016-51 were primarily ministerial (e.g., making certain changes in response to modifications made to the IRS?ÇÖs determination letter program). One noteworthy change, which will become effective January 1, 2017, is that the IRS will no longer refund 50% of the user fee in connection with anonymous voluntary correction program submissions for which an agreement cannot be reached. View Rev. Proc. 2016-51.
The IRS recently published two revenue procedures, which make various modifications and clarifications to the Employee Plans Compliance Resolution System (“EPCRS“), as set forth in Rev. Proc. 2013-12. Of particular note under Rev. Proc. 2015-27 (released on March 27) is a clarification that, with respect to certain plan overpayments, a plan sponsor is not necessarily required to attempt to recoup overpayments directly from participants and beneficiaries. Rev. Proc. 2015-27 also reduced the Voluntary Correction Program fees required for certain participant loan failures. The second revenue procedure, Rev. Proc. 2015-28 (released on April 2), provides new safe harbor correction methods for employee elective deferral failures under 401(k) and 403(b) plans (including plans that have automatic contribution features). Pursuant to these safe harbors, the qualified nonelective contributions that were previously required under EPCRS to correct elective deferral failures may be reduced or eliminated if the failures are corrected within a specified period… Continue Reading
The Internal Revenue Service (the ?Ç£IRS?Ç¥) recently updated the retirement plan ?Ç£Fix-It?Ç¥ guides (the ?Ç£Guides?Ç¥) published on its website.?á The Guides provide tips on how to identify, correct, and avoid common mistakes in retirement plans.?á There are separate Guides for each of the following types of retirement plans: 401(k), 403(b), SEPs, SIMPLEs, and SARSEPs. E ach guide provides (i) an overview of the rules for each type of plan and the Employee Plans Compliance Resolution System, (ii) a description of the most frequent errors found by the IRS for each type of plan, and (iii) guidance on how to find, fix, and avoid the most common errors. Copies of the Guides are available here.