We do not live in an error-free world. While it would be great if all retirement plans could be amended one time, and one time only, it is not reality. The IRS recognizes this and designed the Employee Plans Compliance Resolution System (EPCRS) to address plan correction issues. EPCRS lets plan sponsors correct some common plan failures to satisfy the plan qualification requirements. These corrections may be made without suffering the severe penalty of plan disqualification.

Over the years, EPCRS has had many changes. A few weeks ago, the IRS announced Revenue Procedure 2016-51, which blends in most changes from several sections, as well as updating the determination letter program. The new rules take effect January 1, 2017. The most notable changes include:

Audit Closing Agreement Program (Audit CAP) Sanctions

Audit CAP sanctions will no longer be a negotiated percentage of the “maximum payment amount”. Instead, sanctions will be determined on a facts-and-circumstances basis. However, in general, the sanction will not be less than the Voluntary Correction Program (VCP) user fee of the plan.

Interim Amendment and Nonamender Failures

Currently, proposed corrective amendments for these failures are turned in with the VCP application. The corrective amendments are then adopted after a Compliance Statement is received. Under the new program, these amendments must be adopted by the date of submission. In contrast, other corrective plan amendments that are required as part of a VCP submission must be adopted no later than 150 days after the date of the compliance statement.

No Determination Letter Filings for Self-Correction Program (SCP) or Voluntary Correction Program (VCP)

Determination letter filing requirements following a correction made by a plan amendment are gone.

Anonymous Applications

The 50% fee refund for an unresolved Anonymous Submission is gone. There is no refund of the fee under the new program.


The term “plan document failure” now includes certain Good Faith Amendments, Interim Amendments, and Nonamender Failures. Also, the IRS clarified that a sanction, in addition to the user fee, equal to 10% of any Excess Amount will apply when a failure involves an Excess Amount under a SEP or a SIMPLE IRA Plan. The plan sponsor retains the Excess Amount in such plan.

If you have questions about the program changes or if it’s possible that your plan needs a correction, please contact your Nyhart consultant.