New IRS procedures for correcting retirement plan errors add important new correction methods for 403(b) plans. (See Rev. Proc. 2013-12 at http://www.irs.gov/Retirement-Plans/New-Revenue-Procedure-Updates-EPCRS ) This is good news for employers who sponsor 403(b) retirement plans. Here are some key points regarding the application of this correction program (which the IRS calls EPCRS) to 403(b) plans:
- Failure to Adopt Plan Document by December 31, 2009. If an employer did not adopt a 403(b) plan document by December 31, 2009 (as required by IRS Notice 2009-3), the employer should take advantage of new IRS procedures to correct this error. To encourage employers to make such corrections this year, the IRS offers a 50% discount in filing fees if the 403(b) plan document is filed under the “EPCRS” program by December 31, 2013.
- Failure to Follow the Terms of a 403(b) Plan Document. If the operation of an employer’s 403(b) plan document did not follow the terms of the document, the employer may use the new “EPCRS” program to correct the operational error. A checklist of common 403(b) errors appears at:
- Errors in Plan Document. The new “EPCRS” program permits employers to submit corrections for errors in 403(b) plan documents. However, the IRS will also permit corrections of 403(b) plan documents within a “remedial amendment period” to be announced in the future. Because the IRS has not developed a system for reviewing 403(b) plan documents for compliance with all tax law requirements, the IRS allows employers who timely adopted written 403(b) plan documents to wait for future IRS guidance before submitting plan documents for detailed IRS approval. This new “EPCRS” program states that it should be used to correct a 403(b) “plan provision (or the absence of a plan provision) that, on its face, violates the requirements of section 403(b).” For example, a 403(b) plan document that states incorrect limits on contributions or compensation could be corrected under the new “EPCRS” program.
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