EPCRS (Employee Plans Compliance Resolution System)

What EPCRS is

Under the Self-Correction Program, the employer fixes an error on its own, with no filing and no IRS fee. Under the Voluntary Correction Program (VCP), the employer describes the error and the proposed fix to the IRS, pays a user fee and receives written approval. Under the Audit Closing Agreement Program, an error found on audit is corrected and a sanction is negotiated. The SECURE 2.0 Act widened self-correction to most inadvertent errors, as long as the plan has compliance procedures and corrects within a reasonable time.

Why it matters to employers

The employer, not the provider, is responsible for correcting plan errors. The guiding idea is to put participants where they would have been if the mistake had not happened. EPCRS does not cover everything. Late deposits and other fiduciary breaches are corrected through the Department of Labor’s Voluntary Fiduciary Correction Program.

Example

An eligible employee earning $50,000 is left out of the plan for a year. The other employees in her group deferred 4% on average, so her missed deferral is $2,000. The standard correction is an employer contribution of 50% of that, or $1,000, plus the full match she missed, plus earnings. The percentage can be lower when the error is found and fixed quickly.

Common mistakes

• Fixing the problem going forward without making affected participants whole.

• Keeping no record of what went wrong and how it was corrected.

• Waiting for an IRS audit, when correction costs more.