To err is human. To fix complex errors is, well, complex.
I’ve received several phone calls over the past couple of days about the recent procedure issued by the Internal Revenue Service that impacts the system for correcting retirement plan compliance mistakes. That system is called the Employee Plans Compliance Resolution System (EPCRS).
Fortunately, the government understands that mistakes happen; that it is good public policy to encourage retirement savings, and bad policy to punish individuals with tax consequences for human errors that are often beyond their control. That is why we have this compliance resolution system, the EPCRS. It is a series of highly technical rules and procedures for correcting certain errors so that the plan can remain in compliance and favorable taxation is not lost. All of the compliance rules are complex in the first place, so it is not unreasonable—or surprising—to expect that correction methods will be even more complex.
Although a plan sponsor can go through the corrective processes themselves, it typically makes sense to involve experts who understand the rules and who are authorized to practice before the IRS. Similar to a mistake on your personal income tax return, or a problem found on audit, you could represent yourself with the IRS, but it usually makes much more sense to hire a qualified tax advisor.