IRS Expands Self-Correction Program

The IRS’ Employee Plans Compliance Resolution System (EPCRS) provides three types of programs available to retirement plan sponsors for correcting operational and other types of plan failures.  These programs are known as the:

  1. Self-Correction Program (SCP) which allows plan sponsors to correct certain plan failures without contacting the IRS or paying a user fee;
  2. Voluntary Correction Program (VCP) for correcting failures with IRS approval that cannot be self-corrected; and
  3. Correction on audit program (Audit CAP) wherein failures that cannot be corrected through the SCP or VCP are identified on IRS audit and require correction and possible fees by the plan sponsor.

Recently, the IRS expanded certain aspects of the Self-Correction Program (Rev Proc 2019-19). Specifically, the self-correction program has been expanded to resolve loan failures, operational failures, and plan document failures.  

Failures involving plan loans can be corrected through the SCP in instances such as when:

  • The loan does not meet exception criteria, or the loan is in default status;
  • Spousal consent for the loan was not obtained; or
  • The number of loans exceeds the allowed amount permitted by the plan.

Operational failures and plan document failures can now be corrected through the self-correction program.  With regard to plan document failures, a self-correction for a retroactive amendment is permitted, but only if a favorable determination letter is in place for the plan, and as long as the correction is accomplished within a specific timeframe, generally, by the close of second plan year following the year of the failure.  The plan sponsor must be able to show compliant policies and practices.

Changes made by this guidance became effective on April 19, 2019.  Additional information about these changes and correction programs is available on the IRS website.

The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.

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