Employee Plans Compliance Program Expanded

In another recent Revenue Procedure (Rev. Proc. 2019-19), the Employee Plans Compliance Resolution System (“EPCRS”) program was expanded to permit the correction of certain additional failures through the Self-Correction Program (“SCP”). Before this new ruling, the ability to use SCP was more limited The expanded EPCRS provides the following:

  • Plan sponsors can now self-correct certain loan defaults without having to report the failure as a deemed taxable distribution to the participant. A correction may be made by either reamortizing the outstanding loan balance or making a single catch-up payment.
  • In cases where spousal consent is required for a loan, the failure to obtain spousal consent can now be self-corrected by obtaining spousal consent retroactively.
  • If an error occurred allowing more loans to a participant than permitted by the plan terms, SCP can be used to adopt a retroactive amendment for the permissible number of loans.
  • SCP may be used for the retroactive amendment to a plan for the untimely adoption of compliance amendments.

Operational errors that result in plan participants receiving benefits, rights or features that were in excess of that provided by the plan can also now be corrected through a retroactive amendment. The retroactive amendment must provide the increased benefit, right or feature for all eligible employees, it must not violate any other plan qualification requirement and the correction must “satisfy the corrections principles” of the EPCRS.

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