What is EPCRS?

The Employee Plans Compliance Resolution System (EPCRS) is a program developed by the IRS to allow retirement plan sponsors to correct mistakes in their plans and avoid the severe consequences that can arise from plan disqualification. EPCRS is designed to keep retirement plans in compliance with the law by providing a structured process for error correction.

EPCRS consists of three sub-programs:

1. Self-Correction Program (SCP)

2. Voluntary Correction Program (VCP)

3. Audit Closing Agreement Program (Audit CAP)

Self-Correction Program (SCP)

SCP is designed to correct operational errors without any IRS fees. This program is only available for operational errors, and to use SCP, plans must have established procedures that demonstrate ongoing compliance with the law. If an operational error is deemed insignificant, SCP can be used at any time. However, if the error is significant, it can be corrected using SCP if the correction is made within three years of the end of the plan year in which the error occurred. It is important to document all corrective actions in case of future audits.

Voluntary Correction Program (VCP)

When SCP is not available—such as when a failure is not eligible for self-correction or the correction window has closed—VCP provides a method to voluntarily correct errors with IRS approval. The plan sponsor submits documentation to the IRS describing the failure and the proposed correction method. A user fee applies based on plan size, as outlined in Rev. Proc. 2022-4 and subsequent updates. Upon review, the IRS issues a Compliance Statement confirming the failure and approving the correction method.

Audit Closing Agreement Program (Audit CAP)

Audit CAP applies when a plan is under IRS examination and a compliance failure is discovered. Under this program, the Plan Sponsor corrects the error and enters into a Closing Agreement with the IRS. A sanction is negotiated and paid, with fees dependent on the type of plan and the severity of errors. Sanctions in the Audit CAP process can be substantial, which is why it is best to correct errors using SCP or VCP when possible.

For Assistance with Plan Errors

If you need help correcting a plan error, contact Ekon Benefits at (314) 367-6555 or info@ekonbenefits.com.

Straight From the Source

EPCRS Overview. Internal Revenue Service. 29 August 2014, http://www.irs.gov/Retirement-Plans/EPCRS-Overview