April 2, 2015

IRS Addresses Overpayment and Loan Corrections under EPCRS

The Internal Revenue Service (IRS) recently released Revenue Procedure 2015-27, making several modifications to its correction program, the Employee Plans Compliance Resolution System (EPRCS) for qualified pension plans and 403(b) plans. Under EPCRS, a plan sponsor may correct certain document and operational errors through a self-correction program (in limited cases) or by means of a submission to the IRS under the voluntary correction program (VCP).

The most significant modification relates to the recovery of overpayment amounts. The guidance clarifies that plan sponsors are not necessarily required to correct overpayments by requesting repayment (with interest) from participants and beneficiaries (also known as recoupment). Depending upon the facts and circumstances, other correction options can be available including repayment by the plan sponsor or a plan amendment conforming the document to plan operations. The guidance also asks for comments on further changes to the treatment of overpayments, including with respect to the calculation of interest.

The modifications include an expansion of the availability of reduced submission fees to correct certain required minimum distribution failures: the $500 fee is now available to correct a failure that affects up to 150 participants (instead of up to 50), and a new reduced fee of $1,500 is available to correct a failure that affects up to 300 participants. There also is a change in how the fee is determined for loan violations in large plans with only limited loan violations.

Revenue Procedure 2015-27 modifies but does not supersede Revenue Procedure 2013-12, the primary EPCRS guidance. Revenue Procedure 2015-27 is effective July 1, 2015, but plan sponsors may apply it as of the date of its issuance (March 27, 2015) if they wish to do so.

If you have any questions, please contact your Sibson consultant or send us a note.

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