Relief for 403(b) Plan Compliance Failures

November 2011Newsletters For Your Benefit

The IRS maintains the Employee Plans Compliance Resolution System (EPCRS), which affords to retirement plan sponsors several avenues of relief for compliance failures. These include self-correction, voluntary correction by application to the IRS and resolution of failures discovered on audit.

For qualified retirement plans, including pension, profit sharing and 401(k) plans, EPCRS extends to document failures, including failure to have amended on a timely basis, operational failures and demographic failures. However, the correction program is not as extensive when it comes to tax-deferred annuity programs under Internal Revenue Code Section 403(b). Although 403(b) operational and demographic failures can be resolved through EPCRS, 403(b) plan sponsors are prohibited from correcting document failures, including the failure to have adopted a written plan document by December 1, 2009, and obtaining relief from adverse tax consequences through the program.

In the course of an IRS teleconference on August 25, in which a number of the members of our practice group participated, the IRS confirmed that an update and expansion of EPCRS is expected in the “near future” so as to extend all correction opportunities, including remediation of document failures, to 403(b) plan sponsors. In the meantime, the IRS made it clear that if a sponsor of a 403(b) plan has not yet adopted a written plan document as required by law or if that document is deficient, the sponsor immediately should adopt a written plan document and then submit an application under EPCRS when the new procedures are issued. If your 403(b) plan has not been reduced to writing or if you have any concerns about the adequacy of your written plan document, please contact us for guidance.

For more information regarding this topic, please contact Susan Foreman Jordan at 412.391.1334 or [email protected] or any member of Fox Rothschild’s Employee Benefits & Compensation Planning Practice Group.

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