Late last week and without fanfare, the Internal Revenue Service (IRS) issued an updated version of its Employee Plans Compliance Resolution System (EPCRS). The new EPCRS is set forth in Revenue Procedure 2016-51 (Rev. Proc. 2016-51) and takes effect January 1, 2017.
The current EPCRS, which was issued in 2013, was a bit "long in the tooth" because it contained outdated references (e.g., it references the Social Security letter forwarding program, which was eliminated in 2014) and had been modified several times through subsequent guidance. So now, helpfully, the IRS has updated the EPCRS and wrapped up all of these changes in a new package.
Among the more notable changes, Rev. Proc. 2016-51
- incorporates Revenue Procedure 2015-27, which generally clarified the correction of overpayments and permitted plans to not demand repayment from participants and beneficiaries in all instances;
- incorporates Revenue Procedure 2015-28, which addressed failures with respect to automatic contribution features and encouraged the early correction of employee elective deferral failures;
- clarifies that any correction method set out in the revenue procedure can be used to correct a failure, so long as the plan and the plan sponsor are eligible for the correction used;
- eliminates references to the use of the Social Security letter forwarding program for locating missing participants and beneficiaries;
- modifies or removes references to determination letter requirements in light of the curtailment of the determination letter program for individually designed plans;
- removes the user fee schedule from EPCRS, and explains that the IRS will provide the EPCRS user fees, including Voluntary Correction Program (VCP) user fees, as part of an annually published list;
- clarifies that Audit Closing Agreement Program sanctions will be based on facts and circumstances but generally not be less than the VCP user fee;
- clarifies that the IRS reserves the right to impose sanctions for VCP submissions in excess of the VCP user fee for "egregious" failures;
- eliminates the 50% refund of the user fee that was previously provided in the case of an anonymous submission that fails to reach resolution;
- clarifies that compliance statements and closing agreements (issued after a VCP or Audit CAP, respectively) do not constitute determinations that a plan is qualified in document or operation, but only that the plan has been timely adopted or that the specific operational failure has been corrected; and
- eliminates the "Appendix C" model form for a VCP submission; beginning January 1, 2017, the IRS will only provide model VCP forms (such as the model VCP compliance statement on Form 14568, the schedules on Forms 14568-A through 14568-I, and the IRS acknowledgement of the submission on Form 5265) through its website.
Rev. Proc. 2016-15 conveniently consolidates all EPCRS guidance into a single source and makes a number of smaller clarifying updates but does not significantly change EPCRS's substantive provisions.