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

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- **Document type:** Agency decision

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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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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A520c32b883ce9951. Public record. Not legal advice.