IRS Updates Employee Plans Compliance Resolution System
The IRS has updated its Employee Plan Compliance Resolution
System (EPCRS) in Rev. Proc. 2016-51, generally effective January 1,
2017. Rev. Proc. 2016-51 incorporates the prior consolidated statement of
EPCRS (Rev. Proc. 2013-12), and also includes interim modifications such as
those made by Rev. Proc. 2015-27, chiefly addressing overpayments, and Rev.
Proc. 2015-28, chiefly addressing certain automatic contribution
failures. Rev. Proc. 2016-51 also reflects sweeping changes made to the
IRS’s determination letter program whereby the IRS eliminated the staggered
5-year remedial amendment cycle for individually designed plans and limited the
scope of its determination letter program to initial plan qualification,
qualification upon termination and certain other broadcasted
Most notable changes reflected in the updated EPCRS include
- The sanction for Audit Cap is no longer a
negotiated percentage of the maximum payment amount, but instead is determined
based on the totality of the facts and circumstances. However, in
general, the sanction will not be less than the VCP user fee applicable to the
- The sanction for failing to timely adopt an
amendment that is corrected within three months after the expiration of the remedial
amendment period is reduced to $750 without regard to the number of plan
- User fees are no longer contained in the EPCRS
procedure. Beginning in 2017, all user fees and rules relating to user
fees for VCP submission will be published in the annual EP revenue procedure
that sets forth user fees, including VCP user fees.
- The user fee for a terminating orphan plan may
be waived at the discretion of the IRS. A request for a waiver should be
made at the time of the original submission.
- The term plan document failure now includes
certain Good Faith Amendments, Interim Amendments and Nonamender Failures.
- Clarification that a sanction, in addition to
the user fee, equal to 10% of any Excess Amount will apply when a failure
involves an Excess Amount under a SEP or a SIMPLE IRA Plan and the plan sponsor
retains the Excess Amount in such plan.
- In the case of a failure to reach a resolution
with regard to an Anonymous Submission, the IRS will no longer refund 50% of
the applicable user fee.
- Clarification that the correction of Interim
Amendment and Nonamender Failures must be made by the date of submission and
that corrective plan amendments required as part of a VCP submission must be
adopted no later than 150 days after the date of the compliance
- An applicant who wishes to obtain an
acknowledgement of receipt of a VCP submission must use IRS Letter 5265 and
attach it to the VCP submission.
- The Model Compliance
Statement and Schedules that were previously provided in Appendix C are now
Forms 14568 and 14569-A through 14568-I.
- The Acknowledgement Letter
previously provided in Appendix D is now Letter 5265.
- Language in Appendix A
clarifies that a plan sponsor can choose any correction method in the
appendices to correct a failure, as long as the plan satisfies the eligibility
requirements for that correction method.
should find the consolidated EPCRS procedure to be of useful value now that it
incorporates all applicable law and removes confusing references to outdated
determination letter procedures that no longer apply.