Internal Revenue Service Confirms the Expansion of Self-Correction under the SECURE 2.0 Act of 2022

June 8, 2023 | Insights

By Greta E. Cowart

The expansion of the time period during which inadvertent errors in a tax qualified retirement plan under section 305 of Division T of the Consolidated Appropriations Act, 2023 provided welcome relief. Under the last iteration of the Employee Plans Compliance Resolution System (“EPCRS”) in Revenue Procedure 2021-30, plan sponsors were limited to self-correction of such errors within the correction period (sec. 9.02), which ended on the last day of the third plan year following the plan year in which the operational error occurred. The SECURE 2.0 Act eliminated the limit on the correction period.

The Internal Revenue Service confirmed that the correction period is no longer limited as provided in EPCRS and that inadvertent operational errors may be corrected, provided the error and the correction otherwise comply with the requirements of EPCRS, and the correction may be done for any year in which the error and the correction otherwise meet the EPCRS requirements as amended by SECURE 2.0. This is one of the changes that did not have a delayed effective date, and which could be immediately used by employers.

This expansion of EPCRS provides welcome relief to plan sponsors who discover operational errors in earlier years and want to correct the error without the need to file for approval of the correction with the Internal Revenue Service or to pay the fees for such filing. Plan sponsors desiring to use self-correction, as modified, should still consider the requirements of EPCRS and document the date the operational error was discovered, how it is corrected, and when it is corrected, so that the plan sponsor can demonstrate that the operational error was promptly corrected upon discovery and that steps to prevent the recurrence of the operational error have been implemented.

For additional information on the changes in SECURE 2.0 Act, please see A Timeline for SECURE 2.0 and Health Act Changes to Group Health and ERISA-Covered Retirement Plans.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice. For additional assistance related to SECURE 2.0 Act, please contact Greta E. Cowart or a member of the Employee Benefits & Executive Compensation (ERISA) practice.

Meet Greta

Greta E. Cowart has counseled employers for more than 30 years on best practices in human resources and employee relations related to benefits and executive compensation. In her practice, Greta routinely develops strategies for effective administration of claims and other disputes, including defense of grievances, and in ERISA claim litigation, while also considering applicable labor and employment laws. Greta also provides fiduciary training and review of fiduciary operations to improve the documentation of the fiduciary process.