On July 16, 2021, several key changes to the Internal Revenue Service’s original Employee Plans Compliance Resolution System (EPCRS) went into effect. The amendment contains updated protocol that is designed to provide employers with expanded support for correcting errors found in their organization’s Employee Retirement Plan. 

We know that completely avoiding errors in the administration of any retirement plan is a challenge. This is because of the complexity of both the applicable tax laws and the documentation process. As a result, the Internal Revenue Service (IRS) has recently issued an updated version of the EPCRS to help employers and Plan Administrators address the most commonly occurring obstacles in significant ways, including: 

  • Timing – As of July 21, insignificant errors will be allowed to be corrected at any time under the Self-Correction Program while significant errors must be corrected within a three-year period after the end of the plan year when the error occurred (previously this was two years)
  • Flexibility – The process for correcting operational failures will be managed more efficiently under this retroactive amendment. Small changes, adjustments and admissions will be allowed without the need to file under the IRS’ Voluntary Correction Program (VCP)
  • Creating a Pre-submission process – Going forward as of January 1, 2022, there will be a no-fee VCP pre-submission procedure in order to eliminate having the company pay a VCP user fee that would otherwise be lost if the VCP application is withdrawn
  • Increasing minimal standards for error correction - Under the new amendment, the minimal standard for recovering overpayments or allocating funds for errors found in a participant’s account, has increased from $100 to $250  
  • Reinstating Safe Harbor – the Safe Harbor rule expired on December 31, 2020 but has been extended by three years under the updated IRS Procedure 2021-03, commencing on January 1, 2021

Being proactive can help business leaders manage the administration of their Employee Retirement Plan more efficiently and within the appropriate guidelines - before the IRS or the Department of Labor (DOL) audit! 

With that in mind, we suggest keeping a watchful eye on this list of most common circumstances:   

  • Including employees who have not satisfied all eligibility requirements
  • Excluding eligible employees
  • Failing to properly define compensation
  • Failing to properly monitor and utilize forfeiture accounts 

As noted, the administration of a company’s Employee Retirement Plan is often a burdensome process. It is anticipated, though, that the IRS’ newest effort will help employers and their Plan Sponsors and Plan Administrators successfully and quickly identify and correct frequently made errors. 

If you have any questions, we will be happy to help clarify your concerns. Please email us for a confidential conversation: Elizabeth.harper@SobelCoLLC.com 

Elizabeth Harper (Liz), Member of the Firm, Director of Quality Control and Employee Benefit Plan Audit Group at SobelCo.  Liz is dedicated to ensuring that the firm complies with its internal quality standards. This includes involvement with the engagement teams during all phases of the work, personnel training and development, and monitoring of engagement quality.  Liz is also responsible for client service of service organization control (SOC) reports, employment benefit plan (EBP) engagements and other audits.