The Employee Plan Compliance Resolutions System Explained

Everyone knows mistakes happen, but what should you do when your employee plan is the guilty party? Chances are the fix lies within the IRS Employee Plan Compliance Resolution System, or EPCRS, a way to repair plan mistakes and avoid potential disqualification. There are three correction methods available under the system.

  • The Self-Correction Program (SCP) method allows a plan sponsor correct a mistake without having to contact the IRS or pay a fee. SCP is used to correct operational errors. If the error is insignificant, the correction can be completed at any time. If the error is deemed significant, however, the correction needs to be completed before the end of the second plan year following when the failure occurred.
  • The Voluntary Correction Program (VCP) method allows a plan sponsor to pay a fee and receive IRS approval for correction of a failure. Different from SCP, this method can be done at any time before a plan is audited by the IRS. VCP is used to correct egregious errors. When a failure is found, a report must be submitted to the IRS through VCP. The submission should include a description of the error and what will be done to correct it. Once the IRS reviews and approves the correction process, the plan sponsor needs to maintain all records of the correction being completed.
  • The Audit Closing Agreement Program (Audit CAP) method allows a plan sponsor to pay a sanction and correct plan failures while a plan is being audited. The plan sponsor enters into a closing agreement with the IRS, then pays a sanction that has been negotiated and is not less than the fee the plan sponsor would have paid under the VCP correction method.

With most mistakes, it’s easy to determine which correction method to use, but if you’re unsure you should discuss the procedure and mistakes with your TPA.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2021 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
SDWMA Named as one of the Nation's Top DC Advisor Teams in 2020 by NAPA
Construction Industry Opportunities for Extended Employee Retention Credit
Benefits, ERISA BY Lara Fuller
U.S. Department of Labor Issues Missing Participant Guidance
PA Unemployment Compensation Benefits Charges Update
Department of Labor Finalizes Electronic Disclosure Rules
2020 Retirement Plan Limitations
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.

×