The IRS recently updated its voluntary compliance program for tax-qualified retirement plans.  The Employee Plans Compliance Resolution System (“EPCRS”) allows plan sponsors to correct many operational and plan document errors that otherwise might jeopardize the plan’s tax-qualified status.  The updated version of EPCRS appears in Revenue Procedure 2013-12.  Plan sponsors will be required to follow the new procedures starting on April 1, but sponsors may choose to rely on the procedures sooner.

The IRS did not change the overall structure of EPCRS.  Depending on the nature of the error and the correction, the sponsor of a tax-qualified plan can still make corrections under (1) the Self-Correction Program (“SCP”); (2) the Voluntary Correction Program (“VCP”); or (3) the Audit Closing Agreement Program (“Audit CAP”).

The IRS has provided a topical index and a chart of the significant changes.  Many of the changes are procedural: a plan sponsor making a VCP submission now must complete Forms 8950 and 8951, and the IRS has clarified—and limited—the circumstances in which it requires determination letter applications with a VCP submission.  The IRS has also altered some of the correction methods endorsed by EPCRS.  For example, when a plan sponsor uses qualified nonelective contributions to correct certain nondiscrimination testing failures, the sponsor must make new contributions rather than draw the necessary amounts from the plan’s forfeiture account.

The IRS has expanded the correction procedures for section 403(b) plans.  In addition, the revenue procedure states that IRS will accept submissions relating to governmental section 457(b) plans “outside of EPCRS through standards that are similar to EPCRS.”

The IRS continues to request comments on correction methods for failures to implement automatic enrollment, to timely provide a safe harbor notice, and to designate a Roth contribution.

In related news, the IRS also recently updated its voluntary settlement program for employers that have misclassified employees as independent contractors.  See our post here for a description of the expanded Voluntary Classification Settlement Program (“VCSP”).