Update to Employee Plans Compliance Resolution System (EPCRS)


Two of the most common errors in 401(k) and 403(b) plan administration is failure to update an employee’s change in deferral elections in the company’s payroll system and the failure of the employer to inform an employee of his eligibility once he meets the plan’s eligibility requirements. Fortunately, the Internal Revenue Service (IRS) has provided relief for these errors via the Employee Plans Compliance Resolution System (“EPCRS”). The EPCRS is a system of IRS approved corrections that allow sponsors of retirement plans to resolve various types of failures and still continue to maintain the plan’s tax-favored status. 

There are three components to the correction program: 

  • Self-correction (SCP) – insignificant errors that the employer can correct without any reporting obligations, fees or sanctions;
  • Voluntary correction (VCP) – errors that may be corrected by paying a limited fee; and
  • Correction on Audit (Audit CAP) – errors that are identified on audit, but may still be corrected by paying a sanction.

The most recent EPCRS update was release in April 2019 (https://www.irs.gov/pub/irs-drop/rp-19-19.pdf ) and expanded self-corrections to include certain plan document failures, correction options and possible relief from deemed distributions associated with certain failures involving plan loans made to participants, and created additional opportunities for correcting certain operational failures by plan amendment. These added options will make it easier to fix certain plan document and operational failures without having to file a VCP submission with the IRS.

In order to fix plan document failures, they must meet the following requirements:

  • Applies only to IRC 401(a) plan which include 401(k) and 403(b) retirement plans.
  • Plan document failures are considered a significant failure and must be corrected within the two-year period.  For example, in the case of a plan document failure that happened in 2020, the failure must be corrected in 2021.
  • Plan must have a favorable letter.

Please note that, SCP is not available to correct a failure to timely adopt an initial IRC 401(a) plan document. The late adoption of discretionary amendments is not considered a plan document failure. It is also required that a corrective amendment results in an increase to a participant’s benefit, right or feature and the increase in benefit, right or feature is provided to all employees eligible to participate in the plan.

I have compiled a chart  of the various failures and corrections of plans under EPCRS, incorporating the modified rules of 2019.  Remember, you the plan sponsor/employer are responsible for keeping the plan in compliance with the regulations and tax laws. That is why it is so important to partner with vendors and tax professionals to aid you with keeping your plan in compliance.


Leisha Gosling has worked for over 30 years in the field of Defined Contribution Plan Administration. She graduated from University of Louisville with a Bachelor of Science in Business Management and from Sullivan University with a Master’s degree in Business Administration. Leisha joined RMS as a New Business Consultant in 2020. Her areas of expertise include qualified retirement plan administration and consulting, plan document underwriting, and compliance. She focuses the majority of her time at RMS on new client implementation and onboarding as well as assisting with marketing and new business initiatives. She also maintains the plan document used by the firm and performs special research projects. Leisha has been awarded the designations of Qualified 401(k) Administrator and Qualified 401(k) Consultant from the American Society of Pension Professionals & Actuaries and Certified Employee Benefits Specialist from the International Foundation of Employee Benefit Plans.

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