Source: http://ebn.benefitnews.com
On the last day of 2012 the IRS updated the Employee Plans Compliance Resolution System (EPCRS), published as Rev. Proc 2013-12. The program allows plan sponsors to declare, fix and pay penalties (where applicable) for certain operational or demographic missteps under the “voluntary correction program” (VCP).
The revisions, effective April 1, “include changes and additional guidance with respect to correction methods as well as procedural changes for VCP submissions,” according to a client bulletin by the law firm Drinker Biddle. According to that document, authored by Sharon L. Klingelsmith and Heather B. Abrigo, changes to the program include the following:
Corrective contributions for excluded employees in 401(k) plans. “Previously all corrective matching contributions and, if the plan used nonelective contributions to satisfy a safe harbor, all corrective nonelective contributions, related to missed deferrals for an excluded employee were required to be made in the form of a qualified nonelective contribution ‘(QNEC)’ which is a nonforfeitable (i.e., fully vested) contribution. Except for corrective matching and nonelective contributions used to satisfy the safe harbor requirements under section 401(k)(12) of the Code, contribution in the form of a QNEC is no longer required for corrective matching and nonelective contributions,” according to the authors.
Overpayments from defined contribution plans. “If a defined contribution plan overpays benefits, in most cases, the plan sponsor must request that the participant return the overpayment to the plan. Rev. Proc. 2008-50 provided that the participant should repay the overpaid amount with appropriate interest but that the employer was required to make up any amount not repaid by the employee with interest at the plan’s earnings rate. Rev. Proc. 2013-12 now also requires the plan’s earnings rate to be used for participant repayments. In addition, if the reason for the overpayment is the lack of a distributable event, the plan sponsor is not required to make a contribution to the plan even if the participant does not repay the overpayment,” Klingelsmith and Abrigo write.
Finding Missing Participants. “The IRS has discontinued the IRS Letter Forwarding Program as a method for finding lost plan participants who are owed retirement plan benefits. Rev. Proc. 2013-12 provides the following methods to locate missing participants should certified mail not result in success: (i) Social Security letter forwarding program; (ii) a commercial locator service; (iii) a credit reporting agency; or (iv) Internet search tools.”
These changes offer a glimpse of the complete Drinker Biddle report, which advisers may wish to call the attention of their clients.
