Internal Revenue Service Updates 401(k) Plan Correction Program

On July 16, 2021, the Internal Revenue Service (“IRS”) published Revenue Procedure 2021-30, which makes significant improvements to the Employee Plans Compliance Resolution System (“EPCRS”).  Recognizing that mistakes (late enrollments, missed elective deferrals, loan failures, etc.) frequently occur in the day-to-day administration of 401(k) plans, the EPCRS permits 401(k) plan sponsors to correct certain plan failures under a Self-Correction Program (“SCP”), a Voluntary Correction Program (“VCP”), or under Audit CAP for failures discovered during an IRS audit.

For 401(k) plan sponsors, Revenue Procedure 2021-30, expands the Self-Correction Program's correction period for significant operational failures from two to three years, makes it easier to use retroactive plan amendments to correct operational failures, eliminates the use of anonymous VCP submissions effective January 1, 2022, adds an anonymous pre-submission conference for plan sponsors to confer with IRS