Masuda Funai Benefits Newsflash - Internal Revenue Service Updates 401(k) Plan Correction Program - Employment and HR

July 27, 2021


United States:

Masuda Funai Benefits Newsflash - Internal Revenue Service Updates 401(k) Plan Correction Program


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On July 16, 2021, the Internal Revenue Service ("IRS")
published Revenue Procedure 2021-30, which makes significant
improvements to the Employee Plans Compliance Resolution System
("EPCRS").  Recognizing that mistakes (late
enrollments, missed elective deferrals, loan failures, etc.)
frequently occur in the day-to-day administration of 401(k) plans,
the EPCRS permits 401(k) plan sponsors to correct certain plan
failures under a Self-Correction Program ("SCP"), a
Voluntary Correction Program ("VCP"), or under Audit CAP
for failures discovered during an IRS audit.

For 401(k) plan sponsors, Revenue Procedure 2021-30, expands the
Self-Correction Program's correction period for significant
operational failures from two to three years, makes it easier to
use retroactive plan amendments to correct operational failures,
eliminates the use of anonymous VCP submissions effective January
1, 2022, adds an anonymous pre-submission conference for plan
sponsors to confer with IRS representatives about a proposed
correction, extends the sunset of the safe harbor correction method
to correct for missed elective deferrals for employees subject to
an automatic contribution feature to December 31, 2023, and
increases from $100 to $250 the threshold for certain de minimis
amounts for which the plan sponsor is not required to implement a
correction.

These latest enhancements to the EPCRS clearly benefit 401(k)
plan sponsors.  More importantly, these enhancements reinforce
the IRS' continued efforts to encourage plan sponsors to
voluntarily correct 401(k) plan failures to maintain their 401(k)
plan's continued favorable tax treatment. 

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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