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
The DOL recently finalized Prohibited Transaction Exemption 2020-02 ?Çô Improving Investment Advice for Workers & Retirees (?Ç£PTE 2020-02?Ç¥) for investment advice fiduciaries.?á PTE 2020-02 finalizes the proposed exemption which we previously reported on here.?á This guidance for investment advice fiduciaries completes the regulatory process that began in 2016 with the new fiduciary regulations and exemptions issued under the Obama administration, which were vacated in 2018, and the reinstatement of prior regulations and the issuance of new exemption guidance earlier this year.?á While PTE 2020-02 makes some changes to the proposed exemption, it largely retains the proposed exemption?ÇÖs protective framework, including the ?Ç£Impartial Conduct Standards?Ç¥ (under which investment advice fiduciaries must provide advice that is in the retirement investor?ÇÖs ?Ç£best interest?Ç¥), required disclosures, implementation of policies and procedures to comply with the standards and mitigate conflicts of interest, and retrospective compliance review.?á The final exemption also includes a self-correction mechanism for… Continue Reading
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.