The IRS Employee Plans Compliance Resolution System (EPCRS) allows retirement plan sponsors to correct certain plan failures while maintaining their tax status. Recently, the IRS has made changes to EPCRS to expand the plan errors that are allowed to be corrected through the self-correction program. The self-correction program allows plan sponsors to correct certain plan issues without paying user fees or requesting IRS approval.
The update will make it easier and less expensive for plan sponsors to correct certain plan failures related to loans and amendments. Some of the errors that are now eligible for self-correction are:
- A failure to limit the number of participant loans based on the plan document or loan procedure. For example, if the plan document doesn’t allow for multiple participant loans but the plan sponsor allows a participant to receive more than one participant loan.
- A failure to repay the loan according to the plan loan terms
- A failure to obtain spousal consent for a loan when the plan document requires spousal consent assuming the spouse agrees to give the plan sponsor consent currently.
- A failure to operate the plan in accordance with the current plan document as long as certain conditions are met.