EPCRS: Hot Topics & Rev. Proc. Updates Rules of the Road

Transcription

1 EPCRS: Hot Topics & Rev. Proc. Updates Rules of the Road Presented by Jewell Lim Esposito, Esq. Jackson Lewis & Adam C. Pozek, ERPA, QPA, CPFA DWC ERISA Consultants 1

2 Why Do We Care? EPCRS A History APRS established in 1991 VCR established in 1992 SVP established in 1993 TVC established in 1995 Consolidated and updated into EPCRS in 1998 Has been updated and reissued 9 times since 2

3 EPCRS A History Current full version is Revenue Procedure Rev. Proc Rev. Proc Rev. Proc Operational Plan Document Employer Eligibility Demographic Types of Failures 3

4 Programs within Programs SCP No formal submission Operational failures only Limited duration depending on significance of failure Available during examination VCP Formal application to IRS All failure types Unlimited duration Not available when under examination Different Than DOL DOL Programs Specific errors No self-correction Their way or the highway EPCRS Any error Self-correction Pre-approved methods or create your own 4

5 General Correction Principals Corrections should Restore plan to position it would have been in had error not occurred; Resemble pre-approved methods; Keep assets in the plan; Provide benefits to NHCEs Not violate other rules Be consistent and complete Self Correction Program Available for operational failures only Unlimited timeframe for insignificant failures 2 years from occurrence for significant failures Available under examination Correction by plan amendment in very limited circumstances Early entry by otherwise eligible employee Add loans Add hardship distributions 5

6 Determining Significance Existence of other failures Percentage of plan assets and/or contributions involved Percentage of participants affected Duration of the failure Reason for the failure Timeliness of correction after discovery Voluntary Correction Program Available for any failure at any time Not available under audit Increased fees for egregious failures Correction by plan amendment permitted subject to cutback restrictions 6

7 Voluntary Correction Program Streamlined corrections for certain common failures Non-amenders Loan failures RMD failures SEPs and SIMPLEs Anonymous I have a friend who program Group submissions VCP User Fees Based on participant count from most recent Form 5500 Participant Count User Fee 20 or fewer $ to 50 $ to 100 $1, to 1,001 $5,000 1,001 to 10,000 $10,000 Over 10,000 $15,000 7

8 VCP User Fees - Discounts Non-amenders corrected within 1 year of RAP 50% SEPs and SIMPLEs $300 Loans Based on number of failures rather than participants RMD failures Group submission $20,000 Quick Fixes For Common Failures Non-amender failures Improper exclusion from profit sharing Top-heavy minimum contribution failures Loan failures Forfeiture failures Annual match but pay-period deposits 8

9 Uncorrected ADP/ACP Failures Re-run tests without using the otherwise excludable rule Make QNEC One-to-one correction method Refunds QNEC to actively employed NHCEs equal to refund amount Missed Deferral Opportunity Any time the correct deferrals are not withheld Correction Determine how much participant would have deferred Calculate QNEC Calculate missed match Adjust items 2 and 3 for investment gains. Deposit into the participant s account 9

10 Missed Deferral Opportunity Description Missed Deferral Opportunity Traditional 401(k) Plan Average deferral rate of participant s group Highly Compensated or Non-HC 403(b) Plan Greater of 3% or the deferral rate subject to 100% match Catch-Up 50% of catch-up limit in effect for the year of the failure Safe Harbor Match Greater of 3% or the deferral rate subject to 100% match Safe Harbor NEC 3% Automatic Enrollment Safe Harbor (QACA) Based on automatic deferral escalation schedule Automatic Enroll (non QACA) Greater of the default deferral rate or the average rate of the participant s group. Calculating the QNEC Depends on timing of correction and notice Within 3 months: 0% Within 2 plan years: 25% More than 2 plan years: 50% Automatic enrollment plans No QNEC if correct deferrals begin no later than 9 ½ months following the close of the plan year No notice of failure to participant = 50% QNEC 10

11 Miscellaneous Determine project scope Setting clear expectations with clients Timing Fees Alternatives Document in a service agreement CONTACT INFORMATION Adam C. Pozek, ERPA, QPA, CPFA DWC ERISA Consultants, LLC x. 107 Adam.Pozek@DWCconsultants.com Jewell Lim Esposito, Esq. Jackson Lewis Jewell.Esposito@JacksonLewis.com 11