ARA Suggests EPCRS Be Modified to Permit Use of SCP for Missed Pre-Approved Plan Restatement Deadlines

The American Retirement Association in an Oct. 4, 2021 letter to the IRS has recommended that the IRS continue its efforts to promote plan sponsor compliance and reduce the burden of plan sponsorship by modifying the Employee Plans Compliance Resolution System (EPCRS) to permit a sponsor that misses a pre-approved plan restatement deadline to correct that failure using the IRS self-correction program (SCP).

The letter is a follow-up to a May 27, 2021 letter in which the ARA provided input on IRS Notice 2021-28 concerning the 2021-2022 Priority Guidance Plan. The plan, which the IRS updated on Sept. 9, contains 193 guidance projects that are priorities for allocating Treasury Department and IRS resources during the period from July 1, 2021 through June 30, 2022.

In the May 27 letter, the ARA recommended that the IRS modify EPCRS by: 

• making permanent the temporary correction options for missed deferrals that expired on Dec. 31, 2020; and 
• providing that a missed preapproved plan restatement may be corrected using the SCP.

The ARA also said in the May 27 letter that it would provide comments to the IRS relating to the self-correction of late restatements of pre-approved plan documents under EPCRS. In the Oct. 4 letter, the ARA does so. 

The ARA thanked the IRS for expanding the SCP in Revenue Procedure (Rev. Proc.) 2021-30. “The ability to correct errors on a voluntary basis enhances compliance and encourages employers to sponsor retirement programs for their employees,” says the ARA, also expressing confidence that “this most recent expansion will promote sound tax administration and encourage plan adoption and maintenance by reducing the burdens of sponsoring a plan.”

The ARA further recommends that the IRS “continue its efforts to promote plan sponsor compliance and reduce the burden of plan sponsorship by modifying EPCRS to permit a sponsor that misses a pre-approved plan restatement deadline to correct that failure using SCP.”

More specifically, in the Oct. 4 letter the ARA recommends that the IRS modify the requirements of EPCRS by adding the following sentence to the end of the definition of “Favorable Letter for Pre-approved Plans” in Section 5.01(4) of Rev. Proc. 2021-30: 

In the case of a Pre-approved Plan, the plan is treated as having a favorable opinion letter or advisory letter during the correction period described in section 9.02 of the Revenue Procedure as long as the plan is amended no later than the end of such correction period to adopt a Pre-approved Plan with a favorable opinion or advisory letter issued with respect to the most recently expired six-year remedial amendment cycle. For this purpose, the 3 correction period would begin with the expiration of the most recently expired six-year remedial amendment cycle. 

The ARA argues that treating pre-approved plans as having a favorable letter during the SCP correction period will address two concerns: 

1. it will permit pre-approved plans to self-correct a missed plan restatement during the SCP correction period; and 

2. it will ensure those plans can self-correct other significant errors occurring before the missed plan restatement is adopted (as long as such restatement is also adopted by the end of the SCP correction period). 

The ARA tells the IRS that it “believes this revision to EPCRS will promote sound tax administration by encouraging voluntary compliance by plan sponsors, encourage rapid correction of errors, resolve a significant issue relevant to many retirement plan sponsors, and improve economic efficiency by reducing the complexity and burdens on the plan sponsor.”