On April 19, 2019, the Internal Revenue Service (IRS) released Revenue Procedure 2019-19 (the Revenue Procedure) which modifies and supersedes the most recent Employee Plans Compliance Resolution System (EPCRS) set forth in Revenue Procedure 2018-52.

The Revenue Procedure, which is effective immediately, expands eligibility for EPCRS’ Self-Correction Program (SCP) to make it easier for plan sponsors to correct (1) certain plan document failures; (2) certain plan loan failures; and (3) certain other operational failures. Under SCP, plan sponsors may correct failures without contacting the IRS, or paying a fee or sanction. Expansion of the use of SCP in these circumstances may significantly reduce the costs and burdens associated with plan compliance, and permit plan errors to be corrected more quickly.


EPCRS is a comprehensive system of correction programs for sponsors of retirement plans that are intended to satisfy the requirements of section 401(a), 403(a), 403(b), 408(k) or 408(p) of the Internal Revenue Code (the Code), but that have not met these requirements for a period of time. Depending on the circumstances, plan sponsors may correct a failure under (1) SCP, (2) the Voluntary Correction Program (VCP) or (3) the Audit Closing Agreement Program (Audit CAP). Unlike SCP, both VCP and Audit CAP require negotiation with the IRS and payment by the plan sponsor of fees or sanctions. Historically, the ability of plan sponsors to utilize SCP has been limited, particularly via retroactive amendment and in the context of loan failures.

Impact of the Revenue Procedure

Plan Document Failures: In the past, failure to timely amend a plan document for changes in law could only be corrected by a VCP filing. The Revenue Procedure permits self-correction via retroactive adoption of the required amendment, provided the amendment is adopted by the end of the SCP correction period for significant failures (generally the end of the second plan year following the year of the failure). This correction method is only available if the plan has a favorable determination, opinion or advisory letter. SCP is not available for a failure to timely adopt a plan.

Plan Loan Failures: The following issues with respect to plan loans may now be addressed under SCP: (i) failure to repay a loan according to loan terms (i.e., a defaulted loan), which now can be restructured without filing a VCP application or deeming the loan to be a taxable distribution to the participant; (ii) failure to obtain spousal consent for a plan loan, where required (not required for most 401(k) plans), provided spousal consent is obtained upon discovery of the error; and (iii) granting a number of plan loans that exceeds the number of loans permitted under the plan, which now can be corrected through a retroactive plan amendment if certain conditions are met. Failures related to plan loans in excess of the Code’s dollar limits may not be corrected through SCP.

One potential drawback is that although the Department of Labor (DOL) generally provides a no-action letter under its Voluntary Fiduciary Correction Program (VFCP) for defaulted loan failures corrected under VCP, the DOL has indicated that it will not issue a no-action letter under VFCP for failures corrected under SCP.

The Revenue Procedure also provides that in the event of a deemed loan distribution (i.e., a defaulted loan that is not corrected under EPCRS), the distribution may be reported on a Form 1099-R for the current year (instead of the year of the failure).

Operational Failures: Plan sponsors now may correct the failure to operate a plan in accordance with its terms (i.e., operational failures) by a retroactive plan amendment that conforms the written plan to the plan’s operation if (i) the plan amendment would result in an increase of a benefit, right or feature; (ii) the increase in the benefit, right or feature is available to all eligible employees; and (iii) the increase is permissible under the Code and satisfies EPCRS’ general correction principles.