IRS Announces Update to EPCRS

At long last, the IRS has released their much-anticipated updated Employee Plans Compliance Resolution System (“EPCRS”) guidance, that allows, among other things, 403(b) plans to fully participate in the correction opportunities that program provides.  Revenue Procedure 2013-12 was released late in the afternoon on New Year’s Eve.  The 148-page document provides welcome guidance to 403(b) plan sponsors that have been unable to correct errors under existing guidance with any certainty.

In general, the Rev. Proc. allows 403(b) plans to correct operational errors in the same manner as qualified plans.  It specifically allows these plans to self-correct significant operational errors within specified time frames although they do not have determination letters.  It provides a mechanism for plan sponsors who failed to timely adopt a written plan document in compliance with the 2007 regulations to do so under VCP.  The Rev. Proc. further notes that it is available to correct failures of plans to comply with section 403(b) prior to 2009, but since there was no written plan document requirement prior to that time (under the Internal Revenue Code, ERISA being another story entirely), there is no need to provide relief for failure to follow plan terms earlier than 2009.

In general this guidance is a gift to the retirement plan community, especially 403(b) plan sponsors who have been in limbo with regard to correcting errors.  The IRS will now be able to consider corrections that may involve plan document amendments.   If you think that you may benefit from voluntary correction of known errors, we suggest discussing the new guidance with ERISA counsel, and your auditors, if applicable.

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