With the issuance of Rev. Proc. 2013-12, the Internal Revenue Service (IRS) updated the Employee Plans Compliance Resolution System (EPCRS). There were few surprises in the long-awaited guidance. However, a number of updates warrant mention.

One significant update was to the forms used for Voluntary Correction Program (VCP) submissions. New IRS Forms 8950 (Application for VCP) and 8951 (Compliance Fee for Application for VCP Submission Under the EPCRS) are required to be used for VCP submissions made on or after April 1, 2013. Together with the model compliance statement and accompanying schedules found in new EPCRS Appendix C, the Forms 8950 and 8951 should allow for a more efficient submission process.

The preceding version of EPCRS under Rev. Proc. 2008-50 was issued prior to the requirement that 403(b) plans be maintained pursuant to a written plan document. To the extent the written plan document requirement for a 403(b) plan was not timely met, the updated EPCRS provides that a VCP submission regarding this failure submitted no later than December 31, 2013, may be eligible for a 50 percent reduced VCP fee. In addition, the new EPCRS is updated to generally permit plan sponsors of 403(b) plans to correct a failure in the same manner that the same failure could be corrected for a qualified retirement plan.

Submissions for governmental 457(b) plans continue to be accepted by the IRS on a provisional basis outside of EPCRS, albeit through standards that are similar to EPCRS. The IRS generally will not accept submissions for tax-exempt 457(b) plans. However, the IRS indicates that it may consider a submission if a plan was erroneously established to benefit the tax-exempt entity’s non-highly compensated employees, and the plan has been operated in a manner similar to a qualified retirement plan.

With respect to 401(k) plans, in the case of an employee who was eligible for but did not receive an allocation of employer matching contributions under a non-safe harbor plan because he or she was not given the opportunity to make elective deferrals, the updated EPCRS allows an employer to make a corrective employer matching contribution that remains subject to the plan’s vesting schedule. Rev. Proc. 2008-50 had previously required an employer to make a qualified nonelective contribution (QNEC) on behalf of an employee in this circumstance. Employees are required to be 100 percent vested in QNECs at all times.

In the case of single employer defined benefit plans, the funding-based limitations under Internal Revenue Code Section 436 and Employee Retirement Income Security Act of 1974 (ERISA) Section 206(g) could act to block certain forms of correction that are otherwise available where a plan is underfunded. EPCRS addresses the issue and tracks the statute in requiring an employer to make a contribution to the plan in order for the otherwise-available method of correction to be available.