The American Retirement Association is asking Congress to expand the self-correction program (SCP) within the IRS’ Employee Plans Compliance Resolution System (EPCRS) to enable businesses with retirement plans to more easily correct common mistakes.
The request – in the form of a June 26 letter to Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) – notes that expanding the SCP to address common mistakes enables businesses to fix these problems without having to make a submission to the IRS and pay a user fee.
Timely and efficient correction also protects participating employees by providing them with their expected retirement benefits, including favorable tax treatment, according to the request, which was also signed by the American Benefits Council, the ERISA Industry Committee, the Investment Company Institute, the Small Business Council of America, the Society for Human Resource Management, the SPARK Institute, and the U.S. Chamber of Commerce.
The letter explains that Congress recognized the benefits of expanding self-correction programs in 2006 when it included a provision in the Pension Protection Act of 2006 authorizing EPCRS. That provision included specific language directing the IRS to expand the SCP under EPCRS in order to foster retirement plan compliance. However, the June 26 letter explains that further action is needed by Congress to ensure that the self-correction program is expanded and works most effectively.
“Plan sponsors favor clear rules and reasonable procedures to correct common mistakes,” the letter states. “Without the ability to voluntarily correct errors at a reasonable cost, such ‘foot faults’ can put pressure on the system and discourage interest in plan sponsorship. Expanding the self-correction program, as intended in the 2006 Pension Protection Act, will be a common sense improvement to the current plan administration procedures.”
The letter was accompanied by proposed legislative language.