Employers and retirement plan administrators have more flexibility when participating in the IRS's Employee Plans Compliance Resolution System (EPCRS), the voluntary correction program for employee retirement plans, according to new IRS guidance (Revenue Procedure 2008-50).
"EPCRS helps employers and plan administrators take a proactive role in identifying and fixing mistakes," said Michael Julianelle, director of the IRS's Employee Plans division.
Three correction programs are included in EPCRS: the Self-Correction Program (SCP), the Voluntary Correction Program (VCP), and the Audit Closing Agreement Program.
The new guidance:
- expands the availability of the SCP in situations where operational mistakes have been partially corrected when the plan comes under examination and adds examples regarding the exclusion of employees from 401(k) plans;
- creates streamlined application procedures under the VCP; and
- makes it easier to correct loan failures under the VCP.
"The improved correction for participant loans should enable many more participants to bring delinquent loans from retirement plans back into compliance without incurring the tax consequences resulting from those loans being treated as taxable distributions under Section 72(p)," said Joyce Kahn, who directs to VCP.
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