SECURE 2.0’s retirement plan correction provision: IRS issues interim guidance

The IRS is allowing a higher percentage of errors made by plan sponsors to be reported using the Employee Plans Compliance Resolution System, under an interim rule issued by the agency. The new rule is meant to provide interim guidance on SECURE 2.0, which significantly expanded self-correction under the EPCRS.

The interim guidance became effective on May 25 and the agency is accepting comments on the proposal until Aug. 23. The guidance was issued as the agency implements the SECURE 2.0, which includes a provision that expands the EPCRS self-correction provision by allowing retirement plans to self-correct “eligible inadvertent failures.” These include when plan sponsors failed to adopt a written plan or when there is a significant error in a plan that was terminated.

The IRS is particularly interested in learning about additional correction methods that should be used to correct Eligible Inadvertent Failures, including general principles of correction if a specific correction method is not specified and a description of common IRA failures and suggested correction methods for those failures. The IRS also want to know whether EPCRS should be expanded for both IRA custodians and IRA owners.