Keeping your company’s retirement plan tax-qualified means you must remain in compliance, or face the adverse tax consequences affecting both your business and your employees. New procedures effective April 1, 2013, under Employee Plans Compliance Resolutions Systems (EPCRS) can help you comply through new correction measures that address:

  • Ability for self-correction of insignificant failures in your plan
  • Filling procedures for the Voluntary Correction Program (VCP)
  • Sanctions related to Audit CAPs
  • Section 403(b) changes
  • 401(k) plan contribution matching
  • Delinquent fillings with Department of Labor (DOL)

What Is EPCRS?

Working together, the Internal Revenue Service and DOL initially designed the EPCRS to help companies sponsoring retirement plans stay in compliance by making corrections to errors, while protecting the plan’s participants and maintaining the tax benefits for all. The program set out to address the four major types of failure to comply:

  1. Document – failure to include required provision, or the inclusion of a provision that violates qualification rules
  2. Operational – failure to follow the terms of the plan
  3. Demographic – failure to meet/correct coverage and non-discrimination requirements
  4. Employer eligibility – failure to comply with employee eligibility based on employment status

Taking into consideration the most commonly found errors in plan compliance, the programs helps companies rectify situations before their sponsored plan becomes disqualified by developing opportunities for corrective action.

Impact and Benefits of the New Procedures

With the new corrective opportunities in place, keeping your sponsored plan qualified is much easier than before. With any errors comes a small price to pay – but it outweighs the alternative. The new corrective steps now available include:

  • Self-Correction Program (SCP) – If your company has established compliance practices and procedures, you will be permitted to self-correct any insignificant operational failures at any given time, free of charge. Additionally you aren’t required to report these errors to the IRS.
  • Voluntary Correction Program (VCP) – For all errors that aren’t considered valid under the Self-Correction Program, companies with sponsored plans can submit an application to the IRS to become part of this program and pay a limited compliance fee.
  • Delinquent Filer Voluntary Compliance Program – Plan sponsors can avoid higher penalties of delinquently filed Form 5500s with the DOL by becoming part of the program. A per-plan cap of late fees will be issued equaling $750 for smaller plans (fewer than 100 participants) and $2,000 for larger plans, which is nearly half the regular fee amount.

In addition to the above programs, there are some new rules in place related to specific failures to be aware of, including:

  • Audit CAPs – In the event the IRS identifies an error while auditing the plan, your company will be required to make the correction and additionally pay a sanction based on the severity of failures.
  • 401(k) plan contribution matching – As a plan administrator, if you have failed to make matching contributions on behalf of a participant, you may now correct this with no repercussions.
  • Section 403(b) – These plans are now eligible for the same types of corrective action as qualified plans.

Check out more information on the IRS website.

To ensure you keep your benefit plans in compliance, contact Doeren Mayhew’s dedicated Employee Benefit Plans Group, with Michigan CPAs, Houston CPAs and Ft. Lauderdale CPAs.