The IRS has updated the Employee Plans Compliance Resolution System (EPCRS) with the release of Revenue Procedure 2021-30. The EPCRS is used to correct certain plan qualification failures. EPCRS contains the Self-Correction Program (SCP), the Voluntary Correction Program (VCP), and the Audit Closing Agreement Program (Audit CAP).
The EPCRS has expanded the period of time through correcting through the SCP Program by one year. The new deadline is the last day of the third plan year (instead of the second plan year) following the plan year for which the failure occurred.
Effective January 1, 2022, the current anonymous submission procedure will be eliminated. However, on that date, the IRS will have the discretion to make anonymous VCP pre-submission conferences available to discuss correction methods not described as safe harbor methods in the Revenue Procedure.
Plan sponsors can now provide overpayment recipients with the option of repaying an overpayment 1) in a single sum payment, 2) through an installment agreement, or 3) through an adjustment in future payments.
EPCRS usually requires the full correction of operational errors but makes an exception for certain de minimis amounts. Effective July 16, 2021, the de minimis threshold increases from $100 to $250, and erroneous contributions (plus earnings) of $250 or less will not need to be pulled from a participant’s account or recouped after distribution to a participant.
The Revenue Procedure also expands the self-correction of certain operational failures through a plan amendment that retroactively reflects how a plan has been operated. Such retroactive amendments have to increase benefits, rights, or features under the plan, rather than reduce them. In the past, it has been required that the benefits increase or enhancement apply to all eligible participants under the plan, which made many proposed corrections unaffordable. The new Revenue Procedure lifts the universality requirement, so that a retroactive amendment may increase benefits only for those participants affected by the operational error.