Posted By: Maria T Hurd, CPA, RPA
Improved EPCRS : More Self-Correction Options Inside the Box
Perfection is aspirational, especially when it comes to retirement plan administration. That is why 30 years ago, in 1991, the IRS created the EPCRS (Employee Plan Compliance Resolution System), a mechanism for plan sponsors to fix mistakes. Compliance with pre-approved correction methods grants plan sponsors forgiveness without punishment. But sometimes, even the approved correction methods need fixing.
The most recent update to the EPCRS Program:
- extends the amount of time during which errors can be corrected,
- expands the availability of retroactive plan amendments to situations that don’t apply to all participants, and
- increases the de minimis threshold to correct overpayments.
Although self-correction opportunities were enhanced, anonymous VCP filings were eliminated. Those who cannot take advantage of the improved self-correction opportunities will have to decide whether they will show their face after a non-binding, pre-submission conference. The elimination of the anonymous VCP submissions is not ideal, but as we said perfection is aspirational, so we will accept the improved self-correction options summarized in the table below. As long as you are willing to stay inside the box, your self-corrections can be executed anonymously.
Timing of Corrections by Type
| Revenue Procedure 2019-19 | Revenue Procedure 2021-30 |
| Self-correct insignificant errors at any time. | Self-correct insignificant errors at any time. |
| Self-correct significant errors by: the last day of the second plan year after the failure | Self-correct significant errors by: he last day of the third plan year after the failure |
| Self-correct ADP/ACP failures by: the last day of the third plan year after the year of the failure | Self-correct ADP/ACP failures by: the last day of the fourth plan year after the year of the failure |
| Self-correct a limited list of document failures by: the last day of the second plan year after the failure | Self-correct a limited list of document failures by: the last day of the third plan year after the failure |
Retroactive Plan Amendments
| Revenue Procedure 2019-19 | Revenue Procedure 2021-30 |
| Revenue Procedure 2019-19 added the following self-correction through plan amendment parameters to the previously existing ones: | |
| 1. Retroactive amendment to conform the plan terms to actual operations permitted if:
2. the amendment results in an increased benefit, right, or feature that.. 3. applies to ALL employees eligible to participate in the plan and 4. the provisions are permitted by the Internal Revenue Code and satisfy the correction principles of EPCRS |
1. Retroactive amendment to conform the plan terms to actual operations permitted if:
2. the amendment results in an increased benefit, right, or feature that.. 3. THIS CONDITION WAS ELIMINATED 4. the provisions are permitted by the Internal Revenue Code and satisfy the correction principles of EPCRS |
| Previously permitted retroactive amendment reasons remain unchanged, subject to nondiscriminatory availability conditions: | |
| 1. to allow an impermissible hardship distribution
2. to allow the entry of a participant who had not met the eligibility requirements |
1. to allow an impermissible hardship distribution
2. to allow the entry of a participant who had not met the eligibility requirements |
Improper Exclusion
| EPCRS | Deferrals Begin by the First Paycheck | Corrective Contribution | Notice Requirement |
| Rev. Proc. 2019-19 vs. 2021-30 | ON OR AFTER | ||
| No change | First 3 months of the plan year | 0% QNEC
100% match or QMAC |
No Notice |
| No change | A rolling three-month period beginning with the first omission | 0% QNEC
100% match or QMAC |
Notice |
| No change | Automatic Contribution Arrangement by 9 1/2 months after the plan year of failure | 0% QNEC
100% match or QMAC |
Notice |
| No change | Participant Notifies ER of Failure Deferrals start by the last day of the month following EE notification | 0% QNEC
100% match or QMAC |
Notice |
|
Rev. Proc. 2019-19
CHANGED
Rev. Proc. 2021-30 |
Between 3 months and the last day of the second year after the error occurred timing changed to
Between 3 months and the last day of the third year after the error occurred |
25% QNEC 100% match or QMAC
25% QNEC 100% match or QMAC |
Notice
Notice |
|
Rev. Proc. 2019-19
CHANGED
Rev. Proc. 2021-30 |
After the last day of the second year, after the failure or at any time
Timing changed to
After the last day of the third year after the failure or at any time |
50% QNEC 100% match or QMAC
50% QNEC 100% match or QMAC |
No Notice
No Notice |
Overpayments to Participants
| Revenue Procedure 2019-19 | Revenue Procedure 2021-30 |
| De minimis threshold for correction of overpayments: $100 | De minimis threshold for correction of overpayments: $250 |
| Nondiscriminatory retroactive amendment consistent with EPCRS principles to conform provisions to operations | Nondiscriminatory retroactive amendment consistent with EPCRS principles to conform provisions to operations |
| Reduction of future payments | Reduction of future payments |
| Lump-sum or Installment repayment agreement with participant plus earnings.
If participant refuses to repay an amount to which he/she was otherwise entitled and no other participant is affected, no action. If other participants are short-changed, the employer or service provider at fault must make the plan whole. |
Lump-sum or Installment repayment agreement with participant plus earnings.
If participant refuses to repay an amount to which he/she was otherwise entitled and no other participant is affected, no action. If other participants are short-changed, the employer or service provider at fault must make the plan whole. |
Anonymous Submission Program
| Revenue Procedure 2019-19 | Revenue Procedure 2021-30 |
| Anonymous Submission Program available through December 31, 2021 | Non-binding IRS feedback through a VCP pre-submission conference |
