On August 14, , Revenue Procedure was published updating the Employee Plans. Compliance Resolution System (EPCRS). Rev. Proc. , section (1)(a), modified and amplified. Rev. Proc. 9 clarified , I.R.B., , Chart of Significant Changes to EPCRS. Rev. Proc. Section. Topic. Changes from Rev. Proc. (new). VCP submission.
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Streamlined application procedures are available for failures such as certain late amendments, plan loans, employer eligibility, excess elective deferrals and minimum required distributions.
The suspense account must be adjusted for earnings, and as long as the suspense account maintains unallocated amounts, the employer may only make elective deferrals to the plan. For example, overpayments that are rolled into an IRA are subject to an excise tax.
In a welcomed clarification, Rev. That means we may disclose unsolicited emails and attachments to third parties, and your unsolicited communications will not prevent any lawyer in our firm from representing a party and using the unsolicited communications against you. According prox IRS representatives, a streamlined application often can be processed in a matter of weeks, rather than the six to nine months common with other VCP applications.
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IRS Updates Correction Program for Qualified Plans | McGuireWoods
Plan amendments under 20085-0 can also be used to provide for hardship rec or loans where such distributions were made but no plan provision authorizing them existed. Exclusions from catch-up contributions may be corrected through an employer contribution equal to 25 percent of the catch-up contribution limit for the year in which the employee was excluded plus applicable matching contributions and missed earnings.
For situations that require a regular VCP filing not covered by the streamlined application, Rev. Certain Code Section a 17 compensation limit violations and errors involving the early inclusion of certain eligible employees may be corrected in this manner.
When the correction is made tev the correction period for as little as 65 percent of the affected participants with the remaining corrections made in a diligent manner; or When an employer has initiated a irw during the correction period in a way that shows the employer ris committed to completing the correction as expeditiously as practicable and the correction is completed within days after the end of the correction period.
We may not respond to unsolicited emails and do not consider them or attached information confidential. Simplified Correction Procedures Calculating appropriate earnings is often a problem when correcting a plan failure. When it is not possible to make a precise calculation of the correction amount that the participant actually would have received, EPCRS allows reasonable estimates.
IRS Updates Correction Program for Qualified Plans
Calculating appropriate earnings is often a problem when correcting a plan failure. The suspense account is then used to offset employer contributions in the current year and succeeding years.
However, the IRS has the discretion to not impose this excise tax going forward if an overpayment plus applicable earnings is returned to the plan from the IRA by the recipient. To use SCP, an employer corrects the failure as specified by IRS procedures and then documents the peoc in a detailed memorandum.
Correction of Common Failures Under Rev. Another small but welcome change in Rev. But when an error occurs requiring IRS involvement, the updated EPCRS should generally make it simpler and faster to get a plan back into legal compliance.
EPCRS is a collection of three programs for correcting errors in the form and operation of qualified plans. For example, EPCRS now provides guidance on how to correct exclusions from catch-up contributions where eligible employees were denied the opportunity to make deferrals.
In particular, EPCRS now provides that matching contributions or non-elective contributions plus any earnings that are forfeited because they would constitute excess annual additions should be placed in a suspense account.
Although corrections of plan loan failures must still be made using VCP, Rev. The revised EPCRS provides specific guidance on how to report deemed distributions on Form R where the employer desires specific treatment e. VCP requires filing an application to seek IRS approval of the correction and the payment of a user fee.
Please note that unsolicited emails and attached information sent to McGuireWoods or a firm attorney via this website do not create an attorney-client relationship. EPCRS now also permits defaulted loans with terms less than the maximum permitted usually five years to be reamortized over the remaining portion of the maximum permissible term. The updated procedures are designed to be more irx and recognize some of the practical realities of plan administration.
Regardless of which program an employer uses, EPCRS generally requires full correction of the failure, which means that the impacted participants and the plan must be made whole.
Periodically reviewing plan administration and procedures, and annually reviewing plan documentation and updating pric necessary, are still the keys to ensuring that a qualified plan maintains its tax-advantaged status. If you are not a McGuireWoods client, do not send us any confidential information.