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August 16, 2017

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Without Fanfare: IRS Issues New Revenue Procedure on Employee Plans Compliance Resolution System

Late last week and without fanfare, the Internal Revenue Service (IRS) issued an updated version of its Employee Plans Compliance Resolution System (EPCRS). The new EPCRS is set forth in Revenue Procedure 2016-51 (Rev. Proc. 2016-51) and takes effect January 1, 2017.

The current EPCRS, which was issued in 2013, was a bit “long in the tooth” because it contained outdated references (e.g., it references the Social Security letter forwarding program, which was eliminated in 2014) and had been modified several times through subsequent guidance. So now, helpfully, the IRS has updated the EPCRS and wrapped up all of these changes in a new package.

Among the more notable changes, Rev. Proc. 2016-15

  • incorporates Revenue Procedure 2015-27, which generally clarified the correction of overpayments and permitted plans to not demand repayment from participants and beneficiaries in all instances;

  • incorporates Revenue Procedure 2015-28, which addressed failures with respect to automatic contribution features and encouraged the early correction of employee elective deferral failures;

  • clarifies that any correction method set out in the revenue procedure can be used to correct a failure, so long as the plan and the plan sponsor are eligible for the correction used;

  • eliminates references to the use of the Social Security letter forwarding program for locating missing participants and beneficiaries;

  • modifies or removes references to determination letter requirements in light of the curtailment of the determination letter program for individually designed plans;

  • removes the user fee schedule from EPCRS, and explains that the IRS will provide the EPCRS user fees, including Voluntary Correction Program (VCP) user fees, as part of an annually published list;

  • clarifies that Audit Closing Agreement Program sanctions will be based on facts and circumstances but generally not be less than the VCP user fee;

  • clarifies that the IRS reserves the right to impose sanctions for VCP submissions in excess of the VCP user fee for “egregious” failures;

  • eliminates the 50% refund of the user fee that was previously provided in the case of an anonymous submission that fails to reach resolution;

  • clarifies that compliance statements and closing agreements (issued after a VCP or Audit CAP, respectively) do not constitute determinations that a plan is qualified in document or operation, but only that the plan has been timely adopted or that the specific operational failure has been corrected; and

  • eliminates the “Appendix C” model form for a VCP submission; beginning January 1, 2017, the IRS will only provide model VCP forms (such as the model VCP compliance statement on Form 14568, the schedules on Forms 14568-A through 14568-I, and the IRS acknowledgement of the submission on Form 5265) through its website.

Rev. Proc. 2016-15 conveniently consolidates all EPCRS guidance into a single source and makes a number of smaller clarifying updates but does not significantly change EPCRS’s substantive provisions.

Copyright © 2017 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

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About this Author

Matthew H. Hawes, Morgan Lewis, Qualified Pensions Lawyer, ERISA, Profit Sharing Plans Attorney
Partner-Elect

Matthew H. Hawes helps clients navigate every aspect of employee benefits, executive compensation, and equity compensation; including the drafting and design of qualified pension and profit-sharing plans, health and welfare arrangements, deferred compensation plans, and employee agreements. He also performs employee benefits due diligence reviews in the mergers and acquisitions context, and he advises companies on regulatory compliance with the US Internal Revenue Code, ERISA, COBRA, and HIPAA.

412.560.7740
Partner

R. Randall Tracht is a partner in Morgan Lewis's Employee Benefits and Executive Compensation Practice. Mr. Tracht's clients include those in the energy, manufacturing, construction, and healthcare industries. Mr. Tracht's practice encompasses all aspects of employee benefits work, including the design, drafting, and operation of tax-qualified retirement benefit plans, health and welfare plans, and 403(b) plans. He advises clients on compliance with the Internal Revenue Code, ERISA, COBRA, and other federal and state laws affecting employee benefit plans, and represents clients before the Internal Revenue Service, the Department of Labor, and the Pension Benefit Guaranty Corporation under the agencies' remedial correction programs and within the context of agency-initiated audits.

Mr. Tracht's practice also includes work with executive compensation arrangements—including the design, drafting, and operation of nonqualified deferred compensation plans and equity compensation plans and the drafting and negotiation of executive employment agreements. He advises clients on compliance with 409A, 162(m), and other requirements affecting executive compensation arrangements.

Mr. Tracht is a leading member of Morgan Lewis's Workforce Change Taskforce and he has experience working with clients to address the employee benefits issues that arise within the context of mergers, acquisitions, restructurings, reductions in force, and other corporate transactions. He has drafted and negotiated transaction document provisions relating to employees and employee benefit plans; drafted employment, severance, retention, change in control, and other agreements and plans; advised clients on 280G "golden parachute" issues; evaluated the impact of a particular transaction on the parties' employee benefit plans and revised existing employee benefit plans or established new plans to facilitate the parties' objectives; and worked with clients to identify and resolve issues impacting collectively bargained employee benefit plans.

412.560.3352
Stefanie Ray, Morgan Lewis Law Firm, Employee Benefits Attorney
Senior Client Employee Benefits Advisor

Stefanie Ray assists clients in complying with the requirements of the Internal Revenue Code, ERISA, and other employee benefits laws. Stefanie prepares plan documents, amendments, summary plan descriptions, participant notices, and election packages, along with reviewing QDROs for qualified plans. She also assists in researching and resolving issues related to the design, implementation, and operation of employee benefits plans. Prior to joining Morgan Lewis, Stefanie served as a benefits, advisory, and compliance consultant at a leading international consulting firm....

412-560-7447