Guidance on Section 305 of the SECURE 2.0 Act of 2022 with Respect to

Guidance on Section 305 of the SECURE 2.0 Act of 2022 with Respect to

Expansion of the Employee Plans Compliance Resolution System

Notice 2023-43

I. PURPOSE

This notice provides guidance in the form of questions and answers with respect to

section 305 of Division T of the Consolidated Appropriations Act, 2023,

Pub. L. 117-328, 136 Stat. 3559 (2022), known as the SECURE 2.0 Act of 2022

(SECURE 2.0 Act), enacted on December 29, 2022. Section 305 provides for the

expansion of the Employee Plans Compliance Resolution System (EPCRS), currently

set forth in Rev. Proc. 2021-30, 2021-31 IRB 172, and directs the Secretary of the

Treasury or the Secretary’s delegate (Secretary) to revise Rev. Proc. 2021-30, or any

successor guidance, to take into account the provisions of section 305 not later than the

date that is two years after the date of enactment of the SECURE 2.0 Act.

This notice is intended to assist taxpayers by providing interim guidance in advance

of an update to Rev. Proc. 2021-30 and is not intended to provide comprehensive

guidance with respect to section 305 of the SECURE 2.0 Act. Among other issues

addressed, this notice (1) provides that a plan sponsor may self-correct an eligible

inadvertent failure (as defined in section 305(e) of the SECURE 2.0 Act) before Rev.

Proc. 2021-30 is updated if certain conditions are satisfied and certain exceptions do

not apply, (2) provides that a custodian of an individual retirement account described in

section 408(a) of the Internal Revenue Code (Code) or an individual retirement annuity

described in section 408(b) (IRA) may not correct an eligible inadvertent failure under

EPCRS before Rev. Proc. 2021-30 is updated, and (3) provides interim interpretive

guidance that applies with respect to corrections of eligible inadvertent failures. This

notice does not address section 301 of the SECURE 2.0 Act, which relates to the

recovery of plan overpayments, or section 350 of the SECURE 2.0 Act, which relates to

correcting automatic contribution errors in a plan described in section 401(a), 403(b),

408, or 457(b) of the Code. This notice also does not address any elements of section

305 of the SECURE 2.0 Act over which the Department of Labor has authority. 1

The Department of the Treasury (Treasury Department) and the Internal Revenue

Service (IRS) invite comments on the guidance in this notice and any other aspect of

section 305 of the SECURE 2.0 Act.

See generally Amendment and Restatement of Voluntary Fiduciary Correction Program, 88 FR 9408

(Feb. 14, 2023).

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II. BACKGROUND

Rev. Proc. 2021-30 sets forth EPCRS, a system of correction programs for sponsors

of qualified plans, section 403(b) plans, SEPs, and SIMPLE IRA plans that have failed

to satisfy the requirements of section 401(a), 403(a), 403(b), 408(k), or 408(p) of the

Code, as applicable. The components of EPCRS are: (1) the Self-Correction Program

(SCP), under which a plan sponsor that has established compliance practices and

procedures may self-correct certain plan failures without payment of any fee or

sanction, provided certain conditions are satisfied; (2) the Voluntary Correction Program

(VCP), under which a plan sponsor, at any time before examination, may pay a limited

fee and receive the IRS's approval for correction of a plan failure; and (3) the Audit

Closing Agreement Program, under which a plan sponsor may correct certain plan

failures identified on examination and pay a sanction. In addition to setting forth the

requirements of the correction programs, Rev. Proc. 2021-30 sets forth correction

principles, rules of general applicability, and certain acceptable correction methods

under EPCRS.

Rev. Proc. 2021-30 provides that, under SCP, a plan sponsor of a qualified plan or a

section 403(b) plan generally may self-correct certain significant operational failures and

plan document failures by the last day of the third plan year following the plan year for

which the failure occurred and may correct certain insignificant plan failures even if they

are discovered on examination. A plan sponsor of a SEP or SIMPLE IRA plan may selfcorrect certain insignificant operational failures in the SEP or SIMPLE IRA plan, even if

the failures are discovered on examination, but may not self-correct a significant plan

failure in the SEP or SIMPLE IRA plan under SCP. To be eligible to self-correct a failure

in a plan eligible for correction under EPCRS, section 4.04 of Rev. Proc. 2021-30

provides that a plan sponsor must have established practices and procedures designed

to promote and facilitate overall compliance with applicable Code requirements. In

addition, to be eligible for correction of significant plan failures under SCP, a qualified

plan or a section 403(b) plan must, as of the date of correction, be the subject of a

favorable letter, as defined in section 5.01(4) or 5.02(5) of Rev. Proc. 2021-30, as

applicable, and, to be eligible for correction of insignificant operational failures in a SEP

or SIMPLE IRA, the plan must meet the document requirements set forth in section

4.03(2) of Rev. Proc. 2021-30. Under SCP, a plan sponsor must self-correct a failure in

accordance with the principles and rules of general applicability set forth in section 6 of

Rev. Proc. 2021-30.

Under Rev. Proc. 2021-30, certain failures (for example, certain plan document

failures, certain loan failures, employer eligibility failures, and demographic failures) are

not eligible for correction under SCP; to obtain reliance on the correction of those

failures, a plan sponsor must seek approval from the IRS by filing an application under

VCP. Section 6.07 of Rev. Proc. 2021-30 sets forth permitted correction methods for

loan failures and identifies the loan failures that may not be corrected under SCP.

Section 305(a) of the SECURE 2.0 Act provides that, except as otherwise provided

in the Code, regulations, or other guidance of general applicability prescribed by the

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Secretary of the Treasury or the Secretary’s delegate (Secretary), any eligible

inadvertent failure to comply with the rules applicable under section 401(a), 403(a),

403(b), 408(p), or 408(k) of the Code may be self-corrected under EPCRS, except to

the extent that the failure was identified by the Secretary prior to any actions that

demonstrate a specific commitment to implement a self-correction with respect to such

failure, or the self-correction is not completed within a reasonable period after

identification of the failure. Section 305(a) of the SECURE 2.0 Act also provides that, for

purposes of self-correction of an eligible inadvertent failure, the correction period under

section 9.02 of Rev. Proc. 2021-30 (or any successor guidance), except as otherwise

provided in the Code, regulations, or other guidance of general applicability prescribed

by the Secretary, is indefinite and has no last day, other than with respect to failures

identified by the Secretary prior to any actions that demonstrate a specific commitment

to implement a self-correction with respect to the failure or with respect to a selfcorrection that is not completed within a reasonable period, as described in the

preceding sentence.

Section 305(b)(1) of the SECURE 2.0 Act provides that an eligible inadvertent failure

relating to a loan from a plan to a participant may be self-corrected under section 305(a)

according to the rules of section 6.07 of Rev. Proc. 2021-30, or any successor

guidance, including the provisions related to whether a deemed distribution must be

reported on Form 1099-R.

Section 305(c) of the SECURE 2.0 Act provides that the Secretary shall expand

EPCRS to allow custodians of IRAs to address eligible inadvertent failures with respect

to an IRA, including, but not limited to: (a) waivers of the excise tax that would otherwise

apply under section 4974 of the Code, and (b) rules permitting a non-spouse beneficiary

to return distributions to an inherited IRA described in section 408(d)(3)(C) in a case

where, due to an inadvertent error by a service provider, the beneficiary had reason to

believe that the distribution could be rolled over without inclusion in income of any part

of the distributed amount.

Section 305(d) of the SECURE 2.0 Act provides that the Secretary shall issue

guidance on correction methods required to be used to correct eligible inadvertent

failures, including general principles of correction if a specific correction method is not

specified by the Secretary.

Section 305(e) of the SECURE 2.0 Act defines an eligible inadvertent failure as a

failure that occurs despite the existence of practices and procedures that satisfy (a) the

standards set forth in section 4.04 of Rev. Proc. 2021-30 (or any successor guidance),

or (b) similar standards in the case of an IRA. Under section 305(e), an eligible

inadvertent failure does not include any failure that is egregious, relates to the diversion

or misuse of plan assets, or is directly or indirectly related to an abusive tax avoidance

transaction.

Section 305(f) of the SECURE 2.0 Act provides that section 305 of the SECURE 2.0

Act shall not apply to any failure unless the correction of the failure is made in

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conformity with the general principles that apply to corrections of such failures under the

Code, including regulations or other guidance issued thereunder, and including

principles and corrections set forth in Rev. Proc. 2021–30 (or any successor guidance).

Section 305(g) of the SECURE 2.0 Act provides that the Secretary shall revise Rev.

Proc. 2021-30, or any successor guidance, to take into account the provisions of section

305 not later than the date that is two years after the date of enactment of the SECURE

2.0 Act.

III. INTERIM GUIDANCE REGARDING SECTION 305(a) AND (b) OF THE SECURE

2.0 ACT – EXPANSION OF SELF CORRECTION

Q-1. May a plan sponsor self-correct an eligible inadvertent failure, as defined in

section 305(e) (Eligible Inadvertent Failure), including an Eligible Inadvertent Failure

relating to a loan from a plan to a participant that is corrected in accordance with section

6.07 of Rev. Proc. 2021-30, before Rev. Proc. 2021-30 is updated pursuant to section

305(g) of the SECURE 2.0 Act?

A-1. Except as provided in Q&A-2 of this notice and subject to additional guidance in

this notice, a plan sponsor may self-correct an Eligible Inadvertent Failure, including an

Eligible Inadvertent Failure relating to a loan from a plan to a participant that is

corrected in accordance with section 6.07 of Rev. Proc. 2021-30, before

Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the SECURE 2.0 Act, if the

following conditions are satisfied:

(1) The failure was not identified by the Secretary prior to any actions demonstrating

a specific commitment to implement a self-correction with respect to the failure.

(2) The self-correction is completed within a reasonable period after the failure was

identified.

(3) The failure is not egregious, as described in section 4.10 of Rev. Proc. 2021-30,

does not directly or indirectly relate to an abusive tax avoidance transaction, as

described in section 4.12(2) of Rev. Proc. 2021-30, and does not relate to the

diversion or misuse of plan assets.

(4) The self-correction satisfies all of the provisions applicable to self-correction set

forth in Rev. Proc. 2021-30 (other than the provisions listed in Q&A-3 of this

notice), including that –

• A plan sponsor must have established practices and procedures reasonably

designed to promote and facilitate overall compliance with applicable Code

requirements, as described in section 4.04 of Rev. Proc. 2021-30;

• A plan sponsor must apply the correction principles and rules of general

applicability set forth in section 6 of Rev. Proc. 2021-30;

• A plan sponsor may, but is not required to, self-correct using a correction

method set forth in Appendix A or B of Rev. Proc. 2021-30 (and correction

methods described in Appendices A and B are deemed to be reasonable and

appropriate methods of correcting a failure); and

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•

A plan sponsor may not use a correction method that is prohibited under Rev.

Proc. 2021-30.

Q-2. Before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act, are there any Eligible Inadvertent Failures that a plan sponsor may

not self-correct?

A-2. Yes. Before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act, a plan sponsor may not self-correct the following Eligible Inadvertent

Failures:

(1) A failure to initially adopt a written plan under section 401(a), 403(a), 403(b),

408(k), or 408(p) of the Code, including the failure to adopt a written section

403(b) plan timely to meet the requirements of the final regulations under section

403(b).

(2) A failure in an orphan plan (as defined in section 5.03(1) of Rev. Proc. 2021-30).

(3) A significant failure (that is, a failure that is not an insignificant failure, as

determined in accordance with the factors set forth in section 8.02 of Rev. Proc.

2021-30) in a terminated plan.

(4) A failure that involves excess contributions to a SEP or SIMPLE IRA plan and

that is corrected by permitting the excess contributions to remain in an affected

participant’s IRA.

(5) A demographic failure that is corrected using a method other than a method set

forth in Treas. Reg. § 1.401(a)(4)-11(g) (for example, a demographic failure

under section 401(a)(4) may not be corrected by using a special testing provision

set forth in §1.401(a)(4)-8 or §1.401(a)(4)-9, or by providing benefits primarily to

short-service or low-paid employees).

(6) An operational failure that is corrected by a plan amendment that conforms the

terms of the plan to the plan’s prior operations in a manner that is less favorable

for a participant or beneficiary than the original terms of the plan.

(7) A failure occurring in a SEP with a plan document that does not consist of either

(a) a valid Model Form 5305-SEP or 5305A-SEP adopted by an employer in

accordance with the instructions on the applicable form, or (b) a prototype SEP

that has a current favorable opinion letter and that has been amended in

accordance with the procedures set forth in Rev. Proc. 2002-10, 2002-1 CB 401.

(8) A failure occurring in a SIMPLE IRA plan with a plan document that does not

consist of either (a) a Model Form 5305-SIMPLE or 5304-SIMPLE adopted by

the plan sponsor in accordance with the instructions on the applicable form, or

(b) a prototype SIMPLE IRA Plan that has a current favorable opinion letter and

that has been amended in accordance with the procedures set forth in Rev. Proc.

2002-10.

(9) A failure in an ESOP that involves section 409 in which tax consequences other

than plan disqualification are associated with the failure, for example, a failure

under section 409(p).

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Q-3. Before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act, are there any provisions of Rev. Proc. 2021-30 relating to selfcorrection that do not apply with respect to a self-correction of an Eligible Inadvertent

Failure?

A-3. Yes. Before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act, the following provisions of Rev. Proc. 2021-30 relating to selfcorrection do not apply with respect to a self-correction of an Eligible Inadvertent

Failure:

(1) The requirement that a qualified plan or section 403(b) plan be the subject of a

favorable letter, as defined in sections 5.01(4) and 5.02(5), respectively.

(2) The prohibition of self-correction of demographic failures and employer eligibility

failures, as set forth in section 4.06.

(3) The prohibition of self-correction of significant failures under SEPs and SIMPLE

IRA plans, as set forth in section 4.01(c).

(4) The prohibition of self-correction of certain loan failures, as set forth in section

6.07.

(5) The provisions relating to self-correction of significant failures that have been

substantially completed before the plan or plan sponsor is under examination, as

set forth in sections 4.02(2) and 9.02(3).

(6) The requirement set forth in section 9 that a significant failure must be completed

or substantially completed by the end of a specified correction period (in general,

the last day of the third plan year following the plan year for which the failure

occurred).

Q-4. Before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act, when is an Eligible Inadvertent Failure under a plan treated as having

been identified by the Secretary and therefore no longer eligible for self-correction?

A-4. Before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act, an Eligible Inadvertent Failure is treated as having been identified by

the Secretary when the plan or plan sponsor comes under examination, as defined in

section 5.08 of Rev. Proc. 2021-30. Accordingly, before Rev. Proc. 2021-30 is updated

pursuant to section 305(g) of the SECURE 2.0 Act, once the plan or plan sponsor

comes under examination, the Eligible Inadvertent Failure is no longer eligible for selfcorrection unless the plan sponsor has, before the plan or plan sponsor comes under

examination, demonstrated a specific commitment to implement a self-correction with

respect to the Eligible Inadvertent Failure. However, see Q&A-5 of this notice relating to

self-correction of an insignificant failure after a plan or plan sponsor comes under

examination.

Q-5. Before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act, may a plan sponsor self-correct a failure (including an Eligible

Inadvertent Failure) that is insignificant, determined in accordance with the factors set

forth in section 8.02 of Rev. Proc. 2021-30, even if the plan or plan sponsor is under

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examination, as defined in section 5.08 of Rev. Proc. 2021-30, and even if the failure is

discovered on examination?

A-5. Yes.

Q-6. Before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act, how will a determination be made as to whether actions taken by a

plan sponsor demonstrate a specific commitment to implement the self-correction of an

identified Eligible Inadvertent Failure?

A-6. Before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act, a determination as to whether actions taken by a plan sponsor

demonstrate a specific commitment to implement the self-correction of an identified

Eligible Inadvertent Failure will be made based on all the facts and circumstances.

However, these actions must generally demonstrate that the plan sponsor is actively

pursuing correction of the specific identified failure. The mere completion of an annual

compliance audit or adoption of a general statement of intent to correct failures when

they are discovered are not actions demonstrating a specific commitment to implement

the self-correction of an identified failure.

Q-7. Before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act, how will a reasonable period be determined for purposes of

ascertaining whether the self-correction of an Eligible Inadvertent Failure has been

completed within a reasonable period after it is identified by the plan sponsor?

A-7. Before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act, for purposes of ascertaining whether the self-correction of an Eligible

Inadvertent Failure has been completed within a reasonable period after it is identified

by the plan sponsor, a reasonable period is determined by considering all relevant facts

and circumstances. Except with respect to an employer eligibility failure described in

this Q&A-7, a failure that has been corrected by the last day of the 18th month following

the date the failure is identified by the plan sponsor will be treated as having been

completed within a reasonable period after it is identified. A self-correction of an Eligible

Inadvertent Failure that is an employer eligibility failure (as defined, for qualified plans

and 403(b) plans, in sections 5.01(2)(d) and 5.02(2)(d) of Rev. Proc. 2021-30,

respectively, or, as determined for SEPs and SIMPLE IRA plans under similar

principles) will be treated as having been corrected within a reasonable period after it is

identified by the plan sponsor only if the plan sponsor ceases all contributions to the

plan as soon as reasonably practicable after the failure is identified and, in no event,

later than the last day of the 6th month following the date the failure is identified.

Q-8. Before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act, is a plan sponsor prevented from self-correcting an Eligible

Inadvertent Failure on or after December 29, 2022, merely because the Eligible

Inadvertent Failure occurred prior to December 29, 2022?

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A-8. No.

Q-9. Before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act, does self-correction of an Eligible Inadvertent Failure with respect to

which an excise tax or additional tax applies automatically result in a waiver of the tax?

A-9. No. Before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act, self-correction of an Eligible Inadvertent Failure with respect to which

an excise tax or additional tax applies does not automatically result in the waiver of the

tax. However, a plan sponsor may request that the IRS not pursue certain excise taxes

or additional taxes that apply with respect to the Eligible Inadvertent Failure through a

VCP submission to the IRS, as provided in section 6.09 of Rev. Proc. 2021-30. For an

income tax or excise tax issue that cannot be corrected under EPCRS, IRS Employee

Plans will accept a request for a closing agreement through the Voluntary Closing

Agreement Procedure. See section 4.04 of Rev. Proc. 2023-4, 2023-1 IRB 162

(updated annually).

Q-10. May a plan sponsor submit a VCP application under Rev. Proc. 2021-30 to

correct an Eligible Inadvertent Failure (including an Eligible Inadvertent Failure that is a

loan failure)?

A-10. Yes.

Q-11. Does section 305 of the SECURE 2.0 Act impose any new IRS recordkeeping

requirements with respect to the self-correction of an Eligible Inadvertent Failure?

A-11. No. Section 305 of the SECURE 2.0 Act does not impose any new IRS

recordkeeping requirements with respect to the self-correction of an Eligible Inadvertent

Failure; however, current IRS recordkeeping requirements continue to apply.

Accordingly, if requested upon an examination, a plan sponsor must be able to provide

documentation substantiating the self-correction, such as documentation that: (1)

identifies the failure, including the years of occurrence, the number of employees

affected, and the date the failure was identified; (2) explains how the failure occurred

and demonstrates there were established practices and procedures (formal or informal)

reasonably designed to promote and facilitate overall compliance that were in effect

when the failure occurred; (3) identifies and substantiates the correction method and the

date of the completion of the correction; and (4) identifies any changes made to those

established practices and procedures to ensure that the same failure would not recur.

IV. GUIDANCE REGARDING SECTION 305(c) OF THE SECURE 2.0 ACT -- EPCRS

FOR IRA CUSTODIANS

Q-12. May an IRA custodian correct an Eligible Inadvertent Failure under EPCRS

before Rev. Proc. 2021-30 is updated pursuant to section 305(g)?

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A-12. No. An IRA custodian may not correct an Eligible Inadvertent Failure under

EPCRS before Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the

SECURE 2.0 Act.

V. RELIANCE AND FUTURE GUIDANCE

Plan sponsors may rely on this notice beginning on the date it is issued and ending

on the date Rev. Proc. 2021-30 is updated pursuant to section 305(g) of the SECURE

2.0 Act. If a self-correction is completed by a plan sponsor on or after

December 29, 2022, and before the date this notice is issued, the plan sponsor may

apply a good faith, reasonable interpretation of section 305 of the SECURE 2.0 Act in

completing the self-correction. A plan sponsor that completes a self-correction during

this period in a manner that accords with this notice will be treated as having applied a

good faith, reasonable interpretation of section 305 of the SECURE 2.0 Act.

VI. REQUEST FOR COMMENTS

The Treasury Department and the IRS invite comments on the guidance in this

notice and any other aspect of section 305 of the SECURE 2.0 Act. In particular, the

Treasury Department and IRS seek comments relating to –

(1) Additional correction methods that are required to be used to correct Eligible

Inadvertent Failures, including general principles of correction if a specific

correction method is not specified by the Secretary; and

(2) A description of common IRA failures and suggested correction methods for

those failures, and the possibility of expanding EPCRS to be available for both

IRA custodians and IRA owners.

Comments should be submitted in writing on or before August 23, 2023, and should

include a reference to Notice 2023-43. Comments may be submitted electronically via

the Federal eRulemaking Portal at www.regulations.gov (type “IRS Notice 2023-43” in

the search field on the Regulations.gov home page to find this notice and submit

comments). Alternatively, comments may be submitted by mail to:

Internal Revenue Service

Attn: CC:PA:LPD:PR (Notice 2023-43), Room 5203

P.O. Box 7604

Ben Franklin Station

Washington, D.C. 20044.

The Treasury Department and the IRS will publish for public availability any

comment submitted electronically or on paper to its public docket.

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VII. DRAFTING INFORMATION

The principal author of this notice is Amy Moskowitz of the Office of the Associate

Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes).

However, other personnel from the Treasury Department and the IRS participated in the

development of this guidance. For further information regarding this notice, contact Ms.

Moskowitz at (202) 317-5257 (not a toll-free number).

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