New 90-Day IRS Compliance Program
In their June 3rd Employee Plans Newsletter, the IRS announced a new 90-day Pre-Examination Compliance Pilot Program. Under the program, which is now active, the IRS will inform a plan sponsor that their plan is subject to an audit while also furnishing that business with 90 days to recognize any potential compliance issues/failures and to take steps to correct them.
The IRS established the Employee Plans Compliance Resolution System (EPCRS) in light of a legitimate concern for empowering plan sponsors to self-identify and correct compliance failures. The last update on the process was defined in Revenue Procedure 2021-30. EPCRS incorporates three unique revision programs: (I) Self-Correction Program (SCP), (ii) Voluntary Correction Program with IRS Approval (VCP), and (iii) Audit Closing Agreement Program (Audit CAP).
Through SCP, plan sponsors may self-correct specific errors without having to file for IRS approval. At the point when self-correction isn’t allowed, the business may submit the failure and proposed correction through VCP along with the applicable fee. However, when a plan is already under examination, the Audit CAP is the only way to correct it.
The new program provides a better potential outcome to plan sponsors to evaluate (inside the 90-day pre-review period) their plan administration and recognize any blunders of the sort that could be remediated through SCP or VCP. Any issues that would be qualified for revision under SCP, yet for the forthcoming review, might be amended and reported to the IRS, without causing additional penalties. In the event that the business finds issues that wouldn’t be qualified for SCP, these errors and the proposed rectifications could be disclosed deliberately to the IRS. In return for the self-audit and disclosure of any failures, the IRS would utilize the VCP fee structure (which maxes out at $3,500), as opposed to the typical Audit CAP rules, where penalties can exceed the VCP max.
Each business that gets a 90-day notice ought to promptly participate in a far-reaching review of its retirement plan with its service providers and implement any corrections needed ASAP.
Please contact the GVA 401k Solutions Team for more information or with any questions.
