FAQ: Employee Plans Compliance Resolution System (EPCRS)1

Multnomah Group, Inc.


What is the EPCRS?

The Internal Revenue Service maintains the Employee Plans Compliance Resolution System (EPCRS) to provide plan sponsors with the opportunity and ability to self-correct most instances of noncompliance in a specified way. Most often, the prescribed corrective action will place affected participants in the position they would have been in had the error not occurred. The EPCRS supports three foundational programs

Self-Correction Program (SCP): The SCP is used to correct insignificant operational problems at any time. For qualified plans with favorable determination letter and 403(b) plans, even significant operational problems generally may also be corrected within two years of the problem year. The SCP requires no application and no fee is required to use it. Relief under the SCP is limited to Operational Failures (i.e. not following plan document provisions).

Voluntary Correction Program (VCP): The VCP is used to correct Qualification Failures (i.e. any failure to comply with Code section 401(a) or 403(a)/(b)) prior to the plan being selected for an IRS examination. The IRS requires an extensive application and the completion of special forms, and plan sponsors must pay a fee determined per instance with reference to variables such as number of participants, the type of error being corrected, the type of plan that is being corrected, etc. The IRS’s VCP fee can be as little as $375 or as much as $25,000.

Audit Closing Agreement Program (Audit CAP): The Audit CAP is used in conjunction with an IRS examination. The corrective action prescribed will depend on the error(s) discovered during the examination.

Complete current rules and procedures under EPCRS may be found at Revenue Procedure 2013-12. Revenue Procedure 2013-12 replaces the prior iteration of EPCRS in Revenue Procedure 2008-50 effective January 1, 2013 for all 403(b) plans and effective April 1, 2013 for all other EPCRS-covered plan types.

Does the EPCRS apply to all types of retirement plans?

The EPCRS applies to plans intending to be qualified under 401(a) and 403(a), SEPs and SARSEPs, and SIMPLE IRAs. The prior version of EPCRS did not adequately cover 403(b) plans, but the version of EPCRS published in Revenue Procedure 2013-12 provides due consideration to the more complete corrective needs of 403(b) plans.

Does EPCRS apply to corrections of ERISA compliance issues?

No. The IRS enforces the provisions of the Internal Revenue Code, whereas the Department of Labor (DOL) enforces the provisions of ERISA. Error correction as it relates to ERISA’s provisions is accomplished through the Voluntary Fiduciary Correction Program or the Delinquent Filers Voluntary Compliance Program, depending upon the issue. A plan sponsor should note that correcting plan errors using EPCRS will satisfy the IRS, but it may not satisfy the DOL.

Should a plan sponsor document the error and the corrective action taken under the SCP?

Plan sponsors may be reluctant to document errors, even when they are properly corrected under the SCP. However, documentation of the error and the manner of correction demonstrates a plan sponsor’s ability to spot and correct an error under the plan and is likely to come in handy for the annual independent plan audit, if required, and any IRS examination activity.

If it is necessary to use the VCP to correct a qualification failure, should the plan sponsor engage counsel to assist with the VCP process?

Most often, a plan sponsor in need of the VCP will engage the assistance of counsel to help navigate the complex procedures and requirements of the VCP. While the Multnomah Group strongly recommends the engagement of counsel for this purpose, it is not legally required that a plan sponsor consult with an attorney regarding the VCP submission.

A plan sponsor has found an error affecting the retirement plan. What should the plan sponsor do next?

There is an appropriate corrective solution for every problem that could face a plan sponsor. Ideally, errors are discovered and corrected quickly after they occur such that the liability clock stops ticking as soon as possible. The worst thing a plan sponsor can do when they find an error is nothing.

Upon discovery of a potential error, plan sponsors are urged to immediately contact their Multnomah Group consultant to determine the best corrective route to take considering all of the applicable circumstances.


¹ This FAQ is not intended to be legal advice and should not be construed as such. Information relayed herein is representative of the Multnomah Group’s current understanding of the law. While the Multnomah Group has made every reasonable effort to ensure that the information contained herein is factual, we do not warrant its accuracy. Additionally, this FAQ does not embody a comprehensive legal study, but rather reflects the information most often sought by our clients. As the information contained herein is general in nature, you are urged to contact your legal adviser with questions related to the specific application of these rules to your plan.