After a long wait, an updated Revenue Procedure for the Employee Plans Compliance Resolution System (EPCRS) was released in the form of Rev. Proc. 2013-12. The new Revenue Procedure makes some important changes to the EPCRS.
As many plan sponsors know, the EPCRS includes the self-correction program (SCP), which requires prescribed corrections but does not require submission to the IRS; the voluntary correction program (VCP), which requires both prescribed corrections and submission to and approval by the IRS; and correction of problems discovered on audit (Audit CAP).
The purpose of the updated Revenue Procedure is to improve some features of the EPCRS and clarify others, based in large part on comments from the employee benefits community. The IRS expects to make more changes of this type in the future, also based on comments from the employee benefits community. Generally speaking, the IRS was responsive to many of the concerns raised by the employee benefits community and addressed them in a helpful manner in the revised EPCRS.
The biggest news is that 403(b) plans, are now eligible for EPCRS. In particular, 403(b) plan sponsors can now use VCP to correct failure to adopt a written 403(b) plan on time.
Correction procedures are also provided on an experimental basis for 457(b) plans, primarily for governmental 457(b) plans, in a new program separate from the EPCRS.
Other new or revised procedures in the EPCRS include:
- § SCP correction of recurring excess annual additions under Section 415(c) of the Internal Revenue Code in plans with elective deferrals and non-elective non-matching employer contributions.
- § Correction of ADP and ACP test failures.
- § Correction of matching contributions and improper exclusions from safe harbor plans. (Including, in some circumstances, the ability to make corrective matching contributions subject to vesting.)
- § Correction of mistakes and other problems that occur in administering distributions from single-employer defined benefit plans subject to Section 436 of the Code.
- § Correction of overpayments from defined benefit and defined contribution plans. Additionally, in some cases, if a participant fails to repay the amount of an overpayment from a defined contribution plan, the plan sponsor does not have to make the plan whole.
- § Procedures for trying to locate lost plan participants. (Which needed to be updated after the IRS closed its letter-forwarding program for VCP applications, as we previously discussed.)
- § Revamped forms and procedures for VCP applications, including two new mandatory VCP forms, Forms 8950 and 8951, that are currently only available in draft form from the IRS.
- § Reduced fees for late plan amendments discovered in the determination letter process.
The IRS also requested comments on the potential for EPCRS revisions to address additional topics, such as:
- § Administrative errors in implementing Roth contribution elections.
- § Administrative errors in implementing automatic deferral elections under 401(k) plans.
The effective date of the new rules is April 1, 2013, but plan sponsors can elect to apply them any time after December 31, 2012.
What do you think is the most helpful change made by the new EPCRS?
Revenue Procedure 2013-12
Brief IRS Summary of Changes Made by Rev. Proc. 2013-12
IRS 14-Page Summary of Changes Made by Rev. Proc 2013-12
IRS Topical Index of Rev. Proc. 2013-12
IRS Webpage on Correcting Plan Errors