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Retirement Plan Correction Programs.  To order copies, call toll-free 866-444-3272.

Retirement Plan Correction Programs

Minimize the effects of plan errors
Comply with the law
Protect participant benefits

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Mistakes in benefit plans can – and do – happen. These Federal agencies have programs ready to help:

  • Internal Revenue Service
  • U.S. Department of Labor

Read on to learn more.

Internal Revenue Service
Tax Exempt & Government Entities Division, Employee Plans

The IRS system of retirement plan correction programs, the Employee Plans Compliance Resolution System (EPCRS), helps plan sponsors of various types of qualified retirement plans protect participant benefits and keep their plans compliant with the Internal Revenue Code requirements. The EPCRS encourages plan sponsors to correct plan errors earlier rather than later. More information is available from the IRS.

Is there a way to correct mistakes myself?

Yes! Under the Self-Correction Program (SCP), many plan errors can be corrected without IRS involvement.

  • No notification to the IRS is required;
  • No fees need to be paid to IRS; and
  • Your plan and its participants will retain favorable tax benefits. Of course, you can also ask for IRS assurance about correcting these mistakes, too, through the Voluntary Correction Program.

What if our mistakes can't be corrected in this “Do-It-Yourself” program?

The Voluntary Correction Program (VCP) works for plan errors that are not eligible for self-correction or for any error in which you want IRS assurance about the methods used to fix the error.

  • You must make a written submission and pay a compliance fee to the IRS.
  • Errors are corrected and the plan’s tax benefits are preserved for plan participants and the plan sponsor with IRS help and approval.

And what happens if the IRS audits my plan?

  • Errors corrected appropriately under SCP or VCP will not jeopardize the plan’s tax-favored status when the IRS audits your plan.
  • For other errors found during an IRS examination, help is available through the Audit Closing Agreement Program (Audit CAP). This program also permits you to correct errors and preserve the tax benefits for plan participants and sponsors. However, your fee to the IRS will be greater than the fee required under VCP but less than the tax, interest and penalties due if the plan lost its tax-favored status.

U.S. Department of Labor
Employee Benefits Security Administration (EBSA)

EBSA protects the assets of employee benefit plans (both retirement and health) under Title I of the Employee Retirement Income Security Act (ERISA). Among the key areas EBSA oversees are the critical responsibilities of those who exercise discretion over retirement and health plans.

EBSA has two voluntary self-correction programs for plan administrators who need help in meeting ERISA requirements:

The Delinquent Filer Voluntary Compliance Program (DFVCP) assists late or missed Form 5500 filers in coming up to date with corrected filings.

  • Participation is a two-part process. For more information, including a calculator to help you accurately determine the penalty payment needed to participate in the DFVCP and the convenient option of paying the penalty electronically, visit www.dol.gov/ebsa and select Correction Programs.
  • View the Form 5500.
  • To speak with a DOL representative, call EBSA’s Office of the Chief Accountant at (202) 693-8360 (not a toll-free number).

The Voluntary Fiduciary Correction Program (VFCP) affords plan sponsors and officials the chance to identify and fully correct certain transactions such as prohibited purchases, sales and exchanges, improper loans, delinquent participant contributions and improper plan expenses. The VFCP includes 19 specific transactions.

  • The VFCP also provides immediate relief from payment of excise taxes under a class exemption which covers six transactions.
  • Violations can be fully and correctly resolved in four easy steps. For a list of violations and corrective actions, and the addresses of EBSA Regional Offices that can help with applications, visit www.dol.gov/ebsa and select Correction Programs.
  • There are a number of tools online to assist applicants in using the Program, including an online calculator, model application, and checklist.

Here are some examples of common errors and the correction program that you can use to bring your plan into compliance.

Plan Error

Apply to

Form 5500 Late or Missed Filing

DFVCP

Late or Missed Deposits of Employee Salary Reduction Contributions

VFCP

Participant Loan Failures (for example, loans that exceed the maximum permitted dollar amount)

EPCRS
VFCP (for certain failures – after using the EPCRS)

Failure to Timely Amend Plan to Keep it Updated with Changes in the Law

EPCRS

Plan Operational Errors arising from the failure to follow plan terms (for example, an employee who meets the plan’s eligibility requirements but is not allowed to participate)

EPCRS

Specified Plan Prohibited Transactions (for example, sales or loans between the plan and a party in interest)

 VFCP

For More Information

Internal Revenue Service
Tax Exempt and Government Entities, Employee Plans

For information on the Employee Plans Compliance Resolution System, visit  the IRS website and select Correcting Plan Errors under Retirement Plans Community Topics. Subscribe to the IRS’s free retirement plan newsletters, Employee Plans News and Retirement News for Employers.

U.S. Department of Labor
Employee Benefits Security Administration

Visit the EBSA website for fact sheets on the agency’s two self-correction programs, guides to ERISA compliance, calculators, and more. Call toll-free 1-866-444-3272 for copies of many of the publications featured on the Website.