When I was kid, I used to love Schoolhouse Rock during the commercial breaks of Saturday morning cartoons. Even now, I have them all on DVD as well as a CD of covers by various rock musicians, and I still sing along with all of them word-for-word!
What does this have to do with 401(k) plans? Well, one of my favorite installments describes how a bill becomes a law. What “I’m Just A Bill” doesn’t mention, however, is what a plan sponsor must do when that law includes changes to retirement plan rules.
In short, plan sponsors must amend their plan documents so that provisions are consistent with the new law. Sometimes, a simple amendment is all that is required, but a full plan restatement is generally required every 5 to 6 years. A list of some past mandatory amendments and restatements is available here.
Congress (as well as the IRS and DOL when regulations are involved) usually includes a grace period, but sometimes a plan will miss a deadline. Although it might seem like a minor oversight, the IRS has been known to assess significant penalties if they discover a non-amender failure during an audit.
Fortunately, the Employee Plans Compliance Resolution System (“EPCRS”) includes a voluntary correction path for sponsors who missed an amendment or restatement deadline. The process is relatively straight-forward - simply adopt the missed amendment and submit to the IRS for their review and approval. There are specific forms and documents that must be included, so it is highly recommended that you work with a professional who has experience with such matters.
EPCRS has seen more than 30,000 correction applications since its inception. Since non-amender failures are among the more common errors, the IRS created a streamlined application that can expedite the preparation and review processes. The IRS charges a user fee for the program. It is tied to the number of plan participants reported on the most recent Form 5500 and starts at $750 for plans with 20 or fewer participants.
I have been invited to lead workshops on EPCRS, including correction of non-amendment failures, in a few locations throughout the remainder of the year. If you are in the neighborhood and have an interest, I encourage you to attend and stop by to say hello.
• May 29th – ASPPA Benefits Council (“ABC”) of Cleveland (Cleveland, OH)
• September 10th – ABC of Central Texas (Austin, TX)
• October 17th - ABC of the Great Northwest (Seattle, WA)
• November 12th - ABC of Northern Indiana (Ft. Wayne, IN)
In the meantime, here is a quick walk down memory lane…