In the event that a plan discovers a practice breach based on IRS or DOL regulations, they may be well advised to attempt to apply for one of the self-correction programs identified below. It is typically advantageous to self-correct prior to the error being discovered by the IRS or DOL, as penalties and consequences may be significantly more severe.
IRS Self-Correction Programs
Plan errors can be corrected though the IRS Employee Plans Compliance Resolution System (EPCRS) to avoid the consequences of plan disqualification. There are three ways to correct mistakes under EPCRS:
- Self-Correction Program (SCP) – permits a plan sponsor to correct certain plan mistakes without contacting the IRS or paying any fee.
- Voluntary Correction Program (VCP) – permits a plan sponsor to, any time before audit, pay a fee and receive IRS approval for correction of plan failures.
- Audit Closing Agreement Program (Audit CAP) – permits a plan sponsor to pay a sanction and correct a plan failure while the plan is under audit.
Department of Labor Self-Correction Programs
DOL programs for correcting reporting and fiduciary issues;
The Delinquent Filer Voluntary Compliance Program (DFVCP) assists late or missed Form 5500 filers in coming up to date with corrected filings.
The Voluntary Fiduciary Correction Program (VFCP) affords plan sponsors 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.