IRS Updates Retirement Plan Correction Procedure (Part 1)

The Internal Revenue Service (IRS) has revised its correction procedures to simplify correction of overpayments in defined benefit plans, make it cheaper to correct plan loan and minimum distribution errors, and provide more time to correct excess annual contributions. Through Revenue Procedure 2015-27, the IRS has modified its program called the Employee Plans Compliance Resolutions System or EPCRS.

The key substantive and fee-related changes are summarized below:

• Overpayments in Defined Benefit Plans. When there is an overpayment from a defined benefit plan, EPCRS generally requires the employer to take reasonable steps to have the overpayment returned to the plan. However, employers are often reluctant to try to recover the overpayment, particularly when the overpayments were made over a long period of time. Revenue Procedure 2015-27 permits two additional methods of correction. Depending on the nature of the overpayment failure (for example, an overpayment