A retirement plan is a great employee benefit. The flipside is that most types of plans are subject to numerous government regulations. So many, in fact, that it’s easy to see how an employer might fail to dot every “i” and cross every “t” in operating its plan. Since noncompliance can result in a loss of plan-related tax benefits, an employer that discovers problems with its plan should consider taking advantage of the IRS’s Employee Plans Compliance Resolution System (EPCRS).
Two EPCRS programs allow employers to correct errors voluntarily, before they are potentially uncovered in an IRS audit. A third program is restricted to the correction of failures that the IRS has identified during an audit of the plan.
- The Self-Correction Program
- allows an employer to identify a mistake that was made in the operation of its plan and correct the error without notifying the IRS or paying a fee.
- The Voluntary Correction Program
- requires the employer to submit proposed corrections to the IRS for approval and obtain the IRS’s written consent before making the corrections. There is a fee for using this program.
- The Audit Closing Agreement Program
- is restricted to violations discovered on audit. In lieu of disqualifying the plan, the IRS requires the employer to pay a negotiated monetary sanction.
If you have a concern about whether your organization’s retirement plan is in full compliance, EPCRS is worth a closer look. Let us know if you need more information.