Errors can sometimes occur in the course of administering an employee retirement plan. The IRS’s Employee Plans Compliance Resolution System (EPCRS) offers programs to help employers that sponsor retirement plans correct errors in a timely and cost-effective manner.


Failure to timely correct plan administration errors can cause a plan to lose its tax-favored status. To reduce this risk, the IRS makes EPCRS available to sponsors of a wide variety of plans, including 401(k), 403(b), SEP and SIMPLE IRA plans.

EPCRS allows employers to correct a range of mistakes and avoid the harsh tax consequences associated with plan disqualification. Fees to use the program, if any, vary depending on the type of problem identified and when it is discovered.

Three Different Programs

EPCRS consists of three different correction programs — two that are voluntary and one for use during a plan audit.

  1. Self-Correction Program (SCP) – permits a plan sponsor to correct certain “operational” failures — those related to following the terms of the plan — without contacting the IRS or paying a fee. The IRS has issued guidance describing specific types of operational failures, along with the appropriate methods for fixing each.Some examples of common operational errors include the failure to distribute excess 401(k) elective deferrals, failure to satisfy either the ADP (actual deferral percentage) or ACP (actual contribution percentage) tests, and failure to properly administer hardship distributions or plan loans.
  2. Voluntary Correction Program (VCP) – a pre-audit program that permits a plan sponsor to request IRS approval for proposed corrections. The plan sponsor also has to pay a compliance fee and make any approved corrections within 150 days of the date that the IRS issues its Compliance Statement. Although the VCP is available to correct a broader range of mistakes than the SCP, compliance fees can be significant — particularly for larger plans.
  3. Audit Closing Agreement Program (Audit CAP) – allows a plan sponsor to pay a sanction and correct a plan failure discovered by the IRS on audit.

If you believe your plan requires corrective action, please contact Doeren Mayhew’s employee benefit plan specialists in Michigan, Houston and Ft. Lauderdale to review your plan’s correction options.