PART I. INTRODUCTION TO EMPLOYEE PLANS COMPLIANCE RESOLUTION

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Rev. Proc. 2021-30

TABLE OF CONTENTS

PART I. INTRODUCTION TO EMPLOYEE PLANS COMPLIANCE RESOLUTION

SYSTEM ........................................................................................................................ 6

SECTION 1. PURPOSE AND OVERVIEW ................................................................... 6

.01 Purpose ......................................................................................................... 6

.02 General principles underlying EPCRS ........................................................... 6

.03 Overview........................................................................................................ 7

SECTION 2. EFFECT OF THIS REVENUE PROCEDURE ON PROGRAMS .............. 7

.01 Effect on programs ........................................................................................ 7

.02 Correction of Overpayment (defined benefit plans) ....................................... 8

.03 Description of other modifications................................................................ 10

.04 Future enhancements .................................................................................. 11

PART II. PROGRAM EFFECT AND ELIGIBILITY ....................................................... 11

SECTION 3. EFFECT OF EPCRS; RELIANCE .......................................................... 11

.01 Effect of EPCRS on retirement plans .......................................................... 11

.02 Compliance statement ................................................................................. 12

.03 Excise and other taxes ................................................................................ 12

.04 Reliance....................................................................................................... 12

SECTION 4. PROGRAM ELIGIBILITY ........................................................................ 12

.01 EPCRS Programs........................................................................................ 12

.02 Effect of examination ................................................................................... 13

.03 SCP eligibility requirements relating to plan documents .............................. 13

.04 Established practices and procedures ......................................................... 14

.05 Correction by plan amendment.................................................................... 15

.06 Availability of correction for Employer Eligibility Failures and Demographic

Failures .............................................................................................................. 16

.07 Availability of correction for a terminated plan ............................................. 16

.08 Availability of correction for an Orphan Plan ................................................ 16

.09 Availability of correction for § 457(b) plans .................................................. 17

.10 Egregious failures ........................................................................................ 17

.11 Diversion or misuse of plan assets .............................................................. 17

.12 Abusive tax avoidance transactions ............................................................ 18

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PART III. DEFINITIONS, CORRECTION PRINCIPLES, AND RULES OF GENERAL

APPLICABILITY ........................................................................................................... 19

SECTION 5. DEFINITIONS ......................................................................................... 19

.01 Definitions for Qualified Plans...................................................................... 19

.02 Definitions for § 403(b) Plans ...................................................................... 23

.03 Definitions for Orphan Plans ........................................................................ 26

.04 Earnings ...................................................................................................... 26

.05 IRA .............................................................................................................. 26

.06 SEP ............................................................................................................. 26

.07 SIMPLE IRA Plan ........................................................................................ 27

.08 Under Examination ...................................................................................... 27

SECTION 6. CORRECTION PRINCIPLES AND RULES OF GENERAL

APPLICABILITY ........................................................................................................... 28

.01 Correction principles; rules of general applicability ...................................... 28

.02 Correction principles .................................................................................... 28

.03 Correction of an Employer Eligibility Failure ................................................ 35

.04 Correction of a failure to obtain spousal consent ......................................... 36

.05 Determination letter application not permitted ............................................. 37

.06 Special rules relating to Excess Amounts .................................................... 38

.07 Correction of plan loan failures .................................................................... 43

.08 Correction under statute or regulations ....................................................... 45

.09 Matters subject to excise or other taxes ...................................................... 46

.10 Correction for § 403(b) Plans....................................................................... 47

.11 Correction for SEPs and SIMPLE IRA Plans ............................................... 48

.12 Confidentiality and disclosure ...................................................................... 50

.13 No effect on other law .................................................................................. 50

PART IV. SELF-CORRECTION (SCP) ....................................................................... 51

SECTION 7. AVAILABILITY OF SCP FOR CERTAIN OPERATIONAL FAILURES

AND PLAN DOCUMENT FAILURES ........................................................................... 51

.01 In general..................................................................................................... 51

.02 Operational Failures .................................................................................... 51

.03 Plan Document Failures .............................................................................. 51

SECTION 8. SELF-CORRECTION OF INSIGNIFICANT OPERATIONAL FAILURES 52

.01 Requirements .............................................................................................. 52

.02 Factors......................................................................................................... 52

.03 Multiple failures............................................................................................ 52

.04 Examples ..................................................................................................... 52

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SECTION 9. SELF-CORRECTION OF CERTAIN SIGNIFICANT OPERATIONAL

FAILURES AND PLAN DOCUMENT FAILURES ......................................................... 54

.01 Requirements .............................................................................................. 54

.02 Correction period ......................................................................................... 54

.03 Substantial completion of correction ............................................................ 54

.04 Examples ..................................................................................................... 55

PART V. VOLUNTARY CORRECTION PROGRAM WITH IRS APPROVAL (VCP) ... 56

SECTION 10. VCP PROCEDURES ............................................................................ 56

.01 VCP pre-submission conference ................................................................. 56

.02 VCP requirements ....................................................................................... 57

.03 Identification of failures ................................................................................ 57

.04 Effect of VCP submission on examination ................................................... 57

.05 No concurrent examination activity .............................................................. 57

.06 Determination letter applications not related to a VCP submission ............. 58

.07 Processing of submission ............................................................................ 58

.08 Compliance statement ................................................................................. 61

.09 Effect of compliance statement on examination .......................................... 63

.10 Anonymous submissions not permitted ....................................................... 63

.11 Special rules relating to group submissions................................................. 63

.12 Multiemployer and multiple employer plans ................................................. 65

SECTION 11. SUBMISSION PROCEDURES FOR VCP ............................................ 65

.01 General rules ............................................................................................... 65

.02 Submission of model forms ......................................................................... 66

.03 Mandatory Submission Process using the Pay.gov website ........................ 67

.04 PDF file submission contents ...................................................................... 68

.05 User fee due at the time of VCP submission using the Pay.gov website ..... 71

.06 Additional user fee due for group submissions ............................................ 71

.07 Additional amounts due for certain submissions.......................................... 71

.08 Power of attorney requirements................................................................... 71

.09 Acknowledgement of filing ........................................................................... 72

.10 Maintenance of copies of submissions ........................................................ 72

.11 Assembling the submission ......................................................................... 72

SECTION 12. VCP USER FEES ................................................................................. 74

.01 User fees ..................................................................................................... 74

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PART VI. CORRECTION ON AUDIT (AUDIT CAP) .................................................... 74

SECTION 13. DESCRIPTION OF AUDIT CAP ........................................................... 74

.01 Audit CAP requirements .............................................................................. 74

.02 Payment of sanction .................................................................................... 74

.03 Additional requirements ............................................................................... 75

.04 Failure to reach resolution ........................................................................... 75

.05 Effect of closing agreement ......................................................................... 75

.06 Other procedural rules ................................................................................. 75

SECTION 14. AUDIT CAP SANCTION ........................................................................ 75

.01 Determination of sanction ............................................................................ 75

.02 Factors considered ...................................................................................... 75

.03 Transferred Assets ...................................................................................... 77

.04 Sanction for Nonamender Failures discovered during the determination letter

application process ............................................................................................ 77

PART VII. EFFECT ON OTHER DOCUMENTS; EFFECTIVE DATE; PAPERWORK

REDUCTION ACT ........................................................................................................ 78

SECTION 15. EFFECT ON OTHER DOCUMENTS.................................................... 78

SECTION 16. EFFECTIVE DATE ............................................................................... 78

SECTION 17. PUBLIC COMMENTS........................................................................... 79

SECTION 18. PAPERWORK REDUCTION ACT ........................................................ 79

DRAFTING INFORMATION ......................................................................................... 80

APPENDIX A ................................................................................................................ 81

OPERATIONAL FAILURES AND CORRECTION METHODS ..................................... 81

.01 General rule ................................................................................................. 81

.02 Failure to properly provide the minimum top-heavy benefit under § 416 to

non-key employees ........................................................................................... 82

.03 Failure to satisfy the ADP test set forth in § 401(k)(3), the ACP test set forth

in § 401(m)(2), or, for plan years beginning on or before December 31, 2001,

the multiple use test of § 401(m)(9) ................................................................... 82

.04 Failure to distribute elective deferrals in excess of the § 402(g) limit (in

contravention of § 401(a)(30)) ........................................................................... 82

.05 Exclusion of an eligible employee from all contributions or accruals under

the plan for one or more plan years. .................................................................. 83

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.06 Failure to timely pay the minimum distribution required under § 401(a)(9) .. 93

.07 Failure to obtain participant or spousal consent for a distribution subject to

the participant and spousal consent rules under §§ 401(a)(11), 411(a)(11), and

417 .................................................................................................................... 93

.08 Failure to satisfy the § 415 limits in a defined contribution plan ................... 94

.09 Orphan Plans; orphan contracts and other assets....................................... 95

APPENDIX B ................................................................................................................ 97

CORRECTION METHODS AND EXAMPLES; EARNINGS ADJUSTMENT METHODS

AND EXAMPLES ......................................................................................................... 97

SECTION 1. PURPOSE, ASSUMPTIONS FOR EXAMPLES AND SECTION

REFERENCES ............................................................................................................. 97

.01 Purpose ....................................................................................................... 97

.02 Assumptions for Examples .......................................................................... 97

.03 Designated Roth contributions..................................................................... 98

.04 Section references....................................................................................... 98

SECTION 2. CORRECTION METHODS AND EXAMPLES......................................... 98

.01 ADP/ACP Failures ....................................................................................... 98

.02 Exclusion of Otherwise Eligible Employees ............................................... 101

.03 Vesting Failures ......................................................................................... 117

.04 Section 415(c) Failures and Correction of Overpayments (Defined

Contribution Plans and § 403(b) Plans) ........................................................... 119

.05 Section 415(b) Failures and Correction of Overpayments (Defined Benefit

Plans) .............................................................................................................. 121

.06 § 401(a)(17) Failures ................................................................................. 129

.07 Correction by Amendment ......................................................................... 130

SECTION 3. EARNINGS ADJUSTMENT METHODS AND EXAMPLES .................. 133

.01 Earnings Adjustment Methods ................................................................... 133

.02 Examples ................................................................................................... 136

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PART I. INTRODUCTION TO EMPLOYEE PLANS COMPLIANCE RESOLUTION

SYSTEM

SECTION 1. PURPOSE AND OVERVIEW

.01 Purpose. This revenue procedure updates the comprehensive system of

correction programs for sponsors of retirement plans that are intended to satisfy the

requirements of § 401(a), 403(a), 403(b), 408(k), or 408(p) of the Internal Revenue

Code (the “Code”), but that have not met these requirements for a period of time. This

system, the Employee Plans Compliance Resolution System (“EPCRS”), permits Plan

Sponsors to correct these failures and thereby continue to provide their employees with

retirement benefits on a tax-favored basis. The components of EPCRS are the SelfCorrection Program (“SCP”), the Voluntary Correction Program (“VCP”), and the Audit

Closing Agreement Program (“Audit CAP”).

.02 General principles underlying EPCRS. EPCRS is based on the following

general principles:

•

Sponsors and other administrators of eligible plans should be encouraged to

establish administrative practices and procedures that ensure that these

plans are operated properly in accordance with the applicable requirements

of the Code.

•

Sponsors and other administrators of eligible plans should satisfy the

applicable plan document requirements of the Code.

•

Sponsors and other administrators should make voluntary and timely

correction of any plan failures, whether involving discrimination in favor of

highly compensated employees, plan operations, the terms of the plan

document, or adoption of a plan by an ineligible employer. Timely and

efficient correction protects participating employees by providing them with

their expected retirement benefits, including favorable tax treatment.

•

Voluntary compliance is promoted by establishing limited fees for voluntary

corrections approved by the Internal Revenue Service (“IRS”), thereby

reducing employers' uncertainty regarding their potential tax liability and

participants' potential tax liability.

•

Fees and sanctions should be graduated in a series of steps so that there is

always an incentive to correct promptly.

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•

Sanctions for plan failures identified on audit should be reasonable in light of

the nature, extent, and severity of the violation.

•

Administration of EPCRS should be consistent and uniform.

•

Sponsors should be able to rely on the availability of EPCRS in taking

corrective actions to maintain the tax-favored status of their plans.

.03 Overview. EPCRS includes the following basic elements:

•

Self-correction (SCP). A Plan Sponsor that has established compliance

practices and procedures may, at any time without paying any fee or

sanction, correct insignificant Operational Failures under a Qualified Plan, a

§ 403(b) Plan, a SEP, or a SIMPLE IRA Plan. For a SEP or SIMPLE IRA

Plan, SCP is available only if the SEP or SIMPLE IRA Plan is established

and maintained on a document approved by the IRS. In addition, in the case

of a Qualified Plan or § 403(b) Plan that satisfies the requirements of

sections 4.03 and 4.04, the Plan Sponsor generally may correct significant

Operational Failures and Plan Document Failures without payment of any

fee or sanction if the correction is made within the time specified in section

9.02.

•

Voluntary correction with IRS approval (VCP). A Plan Sponsor, at any time

before audit, may pay a limited fee and receive the IRS's approval for

correction of a Qualified Plan, § 403(b) Plan, SEP, or SIMPLE IRA Plan

failure. Under VCP, there are special procedures for anonymous

submissions and group submissions. However, effective January 1, 2022,

the anonymous submission procedure is eliminated. VCP submissions may

not be submitted on an anonymous basis on or after that date. Additionally,

an anonymous, no-fee, VCP pre-submission conference procedure is added,

effective January 1, 2022.

•

Correction on audit (Audit CAP). If a failure (other than a failure corrected

through SCP or VCP) is identified on audit, the Plan Sponsor may correct the

failure and pay a sanction. The sanction imposed will bear a reasonable

relationship to the nature, extent, and severity of the failure, taking into

account the extent to which correction occurred before audit.

SECTION 2. EFFECT OF THIS REVENUE PROCEDURE ON PROGRAMS

.01 Effect on programs. This revenue procedure modifies and supersedes Rev.

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Proc. 2019-19, 2019-19 I.R.B. 1086, the most recent prior consolidated statement of

the correction programs under EPCRS. This update to Rev. Proc. 2019-19 is a limited

update and is published primarily to:

(1) expand guidance on the recoupment of Overpayments;

(2) eliminate the anonymous submission procedure under VCP, effective

January 1, 2022;

(3) add an anonymous, no-fee, VCP pre-submission conference procedure,

effective January 1, 2022;

(4) extend the end of the SCP correction period for significant failures by one

year (which has the result of also extending the safe harbor correction

method for Employee Elective Deferral Failures lasting more than three

months but not beyond the extended SCP correction period for significant

failures);

(5) expand the ability of a Plan Sponsor to correct an Operational Failure under

SCP by plan amendment; and

(6) extend by three years the sunset of the safe harbor correction method

available for certain Employee Elective Deferral Failures associated with

missed elective deferrals for eligible employees who are subject to an

automatic contribution feature in a § 401(k) plan or § 403(b) Plan (from

December 31, 2020, to December 31, 2023).

.02 Correction of Overpayment (defined benefit plans). (1) In general. Rev.

Proc. 2015-27, 2015-16 I.R.B. 914, clarified the permissible methods for correcting

Overpayments under EPCRS by noting that, depending on the facts and

circumstances, correcting an Overpayment under EPCRS may not need to include

requesting that Overpayments be returned to the plan by plan participants and

beneficiaries. The Department of the Treasury (“Treasury Department”) and the IRS

also requested comments in Rev. Proc. 2015-27 on potential changes relating to the

recoupment of Overpayments. In light of comments received, the Treasury

Department and the IRS are modifying Rev. Proc. 2019-19 to further clarify and

expand options available for the recoupment of Overpayments.

(2) Modifications to current correction methods. Sections 6.06(3), 6.06(4), and

Appendix B, section 2.05, are revised to provide that Plan Sponsors may provide

Overpayment recipients the option of repaying an Overpayment in a single sum

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payment, through an installment agreement, or through an adjustment in future

payments.

(3) New correction methods. Section 6.06(3) is revised to provide two new

Overpayment correction methods, the funding exception correction method and the

contribution credit correction method. These methods reduce the need for defined

benefit plans to seek recoupment from Overpayment recipients and ease the process

for Overpayment recipients repaying Overpayments, while balancing the interest of

other participants in the plan.

(i) Funding exception correction method. Section 6.06(3)(d)(i) sets forth the new

funding exception correction method, which provides that corrective payments are not

required for a plan subject to § 436, provided that the plan’s certified or presumed

adjusted funding target attainment percentage (“AFTAP”) determined under § 436 that

is applicable to the plan at the date of correction is equal to at least 100 percent (or, in

the case of a multiemployer plan, the plan’s most recent annual funding certification

indicates that the plan is not in critical, critical and declining, or endangered status (as

defined in § 432), determined at the date of correction). Future benefit payments to an

Overpayment recipient must be reduced to the correct benefit payment amount. For

purposes of EPCRS, no further corrective payments from any party are required, no

further reductions to future benefit payments to an Overpayment recipient, or any

spouse or beneficiary of an Overpayment recipient, are permitted, and no further

corrective payments from an Overpayment recipient, or any spouse or beneficiary of an

Overpayment recipient, are permitted. See section 6.06(3)(d)(i) and Appendix B,

section 2.05(3).

(ii) Contribution credit correction method. Section 6.06(3)(d)(ii) sets forth the

new contribution credit correction method, which provides that the amount of

Overpayments required to be repaid to the plan is the amount of the Overpayments

reduced (but not below zero) by: (A) the cumulative increase in the plan’s minimum

funding requirements attributable to the Overpayments (including the increase

attributable to the overstatement of liabilities, whether funded through cash

contributions or through the use of a funding standard carryover balance, prefunding

balance, or funding standard account credit balance), beginning with (1) the plan year

for which the Overpayments are taken into account for funding purposes, through (2)

the end of the plan year preceding the plan year for which the corrected benefit

payment amount is taken into account for funding purposes; and (B) certain additional

contributions in excess of minimum funding requirements paid to the plan after the first

of the Overpayments was made. This reduction is referred to as a “contribution credit.”

Future benefit payments to an Overpayment recipient must be reduced to the correct

benefit payment amount. For purposes of EPCRS, if the amount of the Overpayments

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is reduced to zero after the contribution credit is applied, no further corrective

payments from any party are required, no further reductions to future benefit payments

to an Overpayment recipient, or any spouse or beneficiary of an Overpayment

recipient, are permitted, and no further corrective payments from an Overpayment

recipient, or any spouse or beneficiary of an Overpayment recipient, are permitted.

However, if a net Overpayment remains after the application of the contribution credit,

the Plan Sponsor or another party must take further action to reimburse the plan for the

remainder of the Overpayment. See section 6.06(3)(d)(ii) and Appendix B, section

2.05(4).

.03 Description of other modifications. The other modifications to Rev. Proc.

2019-19 that are made by this revenue procedure include the following -1. Eliminating the condition previously set forth in section 4.05(2)(a)(ii) (relating

to correction by plan amendment of Operational Failures under SCP for

Qualified Plans and § 403(b) Plans) that requires a plan amendment that

increases a benefit, right, or feature to apply to all participants eligible to

participate under the plan.

2. Increasing from $100 to $250 the threshold for certain de minimis amounts

for which a Plan Sponsor is not required to implement correction. See

sections 6.02(5)(c), 6.02(5)(e), and 6.11(5)(c).

3. Modifying the structure of section 6.06(4) and Appendix B, section 2.04, to

be more consistent with changes made to section 6.06(3) and Appendix B,

section 2.05, and to clarify the correction principles relating to Overpayments

from defined contribution plans and § 403(b) Plans.

4. Extending the end of the SCP correction period for significant failures (set

forth in section 9.02) from the last day of the second plan year following the

plan year for which the failure occurred to the last day of the third plan year

following the plan year for which the failure occurred (which has the result of

also extending the safe harbor correction method set forth in Appendix A,

section .05(9)(b) for Employee Elective Deferral Failures lasting more than

three months but not beyond the extended SCP correction period for

significant failures) and modifying the examples in section 9.04 to reflect this

extension.

5. Revising section 10.01 to add an option, effective January 1, 2022, for Plan

Sponsors to request a no-fee anonymous VCP pre-submission conference

under specified circumstances.

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6. Eliminating the anonymous submission procedure described in section 10.09

of Rev. Proc. 2019-19, which permits submission of a Qualified Plan,

§ 403(b) Plan, SEP, or SIMPLE IRA Plan under VCP without initially

identifying the applicable plan, the Plan Sponsor, or the Eligible

Organization, effective January 1, 2022, and making conforming revisions to

sections 11.04(16) and 11.08(2) to reflect the elimination of this procedure.

See section 10.10 of this revenue procedure.

7. Requiring that Audit CAP sanctions be paid through the Pay.gov website

(instead of by certified check or cashier’s check) beginning January 1, 2022.

See section 13.02.

8. Revising Appendix A, section .05(8), to extend by three years (from

December 31, 2020, to December 31, 2023) the sunset of the safe harbor

correction method available for certain Employee Elective Deferral Failures

associated with missed elective deferrals for eligible employees who are

subject to an automatic contribution feature in a § 401(k) plan or § 403(b)

Plan.

.04 Future enhancements.

It is expected that the Treasury Department and the IRS will continue to update

the EPCRS revenue procedure, in whole or in part, from time to time, including further

improvements to EPCRS based on comments received. Accordingly, the Treasury

Department and the IRS continue to invite further comments on how to improve

EPCRS. For information on how to submit comments, see section 17.

PART II. PROGRAM EFFECT AND ELIGIBILITY

SECTION 3. EFFECT OF EPCRS; RELIANCE

.01 Effect of EPCRS on retirement plans. For a Qualified Plan, a § 403(b) Plan,

a SEP, or a SIMPLE IRA Plan, if the eligibility requirements of section 4 are satisfied

and the Plan Sponsor corrects a failure in accordance with the applicable requirements

of SCP in section 7, VCP in section 10, or Audit CAP in section 13, the IRS will not

treat the plan as failing to satisfy the requirements of § 401(a), 403(b), 408(k), or

408(p), as applicable, because of the failure. For example, if the Plan Sponsor

corrects a failure in accordance with the requirements of this revenue procedure, the

plan will not thereby be treated as failing to satisfy § 401(a), 403(b), 408(k), or 408(p),

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as applicable, for purposes of applying §§ 3121(a)(5) (FICA taxes) and 3306(b)(5)

(FUTA taxes).

.02 Compliance statement. If a Plan Sponsor or Eligible Organization receives a

compliance statement under VCP, the compliance statement is binding upon the IRS

and the Plan Sponsor or Eligible Organization as provided in section 10.08.

.03 Excise and other taxes. See section 6.09 for rules relating to excise and

other taxes.

.04 Reliance. Taxpayers may rely on this revenue procedure, including the

relief described in section 3.01.

SECTION 4. PROGRAM ELIGIBILITY

.01 EPCRS Programs. (1) SCP. SCP is available to correct Operational

Failures and certain Plan Document Failures as follows:

(a) Operational Failures. A Plan Sponsor of a Qualified Plan or § 403(b) Plan

that is otherwise eligible for correction under SCP may use SCP to correct significant

and insignificant Operational Failures (including certain plan loan failures described in

section 6.07). Operational Failures that are significant may be corrected under SCP

only if the correction of the failure is completed or substantially completed (in

accordance with section 9.03) by the last day of the correction period described in

section 9.02.

(b) Plan Document Failures. A Plan Sponsor of a Qualified Plan or § 403(b)

Plan may use SCP to correct certain Plan Document Failures, as defined in section

5.01(2)(a) for a Qualified Plan and section 5.02(2)(a) for a § 403(b) Plan, that are

otherwise eligible for correction under SCP. A Plan Document Failure consisting of the

initial failure to adopt a Qualified Plan, or the failure to adopt a written § 403(b) Plan

timely in accordance with §1.403(b)-3(b)(3) and Notice 2009-3, 2009-2 I.R.B. 250, is

treated as a Plan Document Failure that is not eligible to be corrected under SCP. All

Plan Document Failures that are eligible to be corrected under SCP are treated as

significant; thus, the correction must be completed by the last day of the correction

period described in section 9.02.

be corrected under SCP only with respect to insignificant Operational Failures.

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(d) Demographic Failures and Employer Eligibility Failures. Demographic

Failures and Employer Eligibility Failures may not be corrected under SCP.

(2) VCP. Qualified Plans, § 403(b) Plans, SEPs, and SIMPLE IRA Plans are

eligible for correction under VCP. VCP provides general procedures for correction of

all Qualification Failures: Operational, Plan Document, Demographic, and Employer

Eligibility. VCP also provides general procedures for the correction of plan loan failures

(see section 6.07). Effective January 1, 2022, VCP submissions may not be submitted

on an anonymous basis.

(3) Audit CAP. Unless otherwise provided, Audit CAP is available for the

correction of Qualified Plans, § 403(b) Plans, SEPs, and SIMPLE IRA Plans for all

failures found on examination that have not been corrected in accordance with SCP or

VCP. Audit CAP also provides general procedures for the correction of plan loan

failures (see section 6.07).

(4) Eligibility for other arrangements. The IRS may extend EPCRS to other

arrangements.

(5) Appropriate use of programs. In a particular case, the IRS may decline to

make available one or more correction programs under EPCRS in the interest of sound

tax administration.

.02 Effect of examination. If the plan or Plan Sponsor is Under Examination,

VCP is not available. SCP is available only as follows:

(1) Insignificant Operational Failures. While the plan or Plan Sponsor is Under

Examination, insignificant Operational Failures may be corrected under SCP.

(2) Significant Operational Failures. If correction of significant Operational

Failures has been substantially completed (as described in section 9.03) before the

plan or Plan Sponsor is Under Examination, the Plan Sponsor may complete correction

of those failures under SCP.

.03 SCP eligibility requirements relating to plan documents. (1) Requirements

for Qualified Plans and § 403(b) Plans. The provisions of SCP relating to certain Plan

Document Failures, as described in section 4.01(1)(b), and significant Operational

Failures, as described in section 9, are available for a Qualified Plan that, as of the

date of correction, is the subject of a Favorable Letter. See section 5.01(4) for the

definition of Favorable Letter for a Qualified Plan. The provisions of SCP relating to

certain Plan Document Failures and significant Operational Failures are available for a

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§ 403(b) Plan if the conditions for being treated as having a Favorable Letter in section

6.10(2) are satisfied. See section 5.02(5) for the definition of Favorable Letter for a

§ 403(b) Plan.

(2) Requirements for SEPs and SIMPLE IRAs. The provisions of SCP relating

to insignificant Operational Failures (see section 8) are available for a SEP only if the

plan document consists of either (i) a valid Model Form 5305-SEP, Simplified

Employee Pension--Individual Retirement Accounts Contribution Agreement, or 5305ASEP, Salary Reduction Simplified Employee Pension--Individual Retirement Accounts

Contribution Agreement, adopted by an employer in accordance with the instructions

on the applicable form (see Rev. Proc. 2002-10, 2002-1 C.B. 401) or (ii) 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. The provisions of

SCP relating to insignificant Operational Failures are available for a SIMPLE IRA Plan

only if the plan document consists of either (i) a valid Model Form 5305-SIMPLE,

Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)--for Use

with a Designated Financial Institution, or 5304-SIMPLE, Savings Incentive Match Plan

for Employees of Small Employers (SIMPLE)--Not for Use with a Designated Financial

Institution, adopted by an employer in accordance with the instructions on the

applicable form (see Rev. Proc. 2002-10) or (ii) 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.

.04 Established practices and procedures. To be eligible for SCP, the Plan

Sponsor or administrator of a plan must have established practices and procedures

(formal or informal) reasonably designed to promote and facilitate overall compliance in

form and operation with applicable Code requirements. For example, the plan

administrator of a Qualified Plan that may be top-heavy under § 416 may include in its

plan operating manual a specific annual step to determine whether the plan is topheavy and, if so, to ensure that the minimum contribution requirements of the topheavy rules are satisfied. A plan document alone does not constitute evidence of

established procedures. In order for a Plan Sponsor or administrator to use SCP,

these established procedures must have been in place and routinely followed, and an

Operational Failure or Plan Document Failure must have occurred through an oversight

or mistake in applying them. SCP also may be used in situations in which the

Operational Failure or Plan Document Failure occurred because the procedures that

were in place, while reasonable, were not sufficient to prevent the occurrence of the

failure. A plan that provides for elective deferrals and nonelective employer

contributions that are not matching contributions is not treated as failing to have

established practices and procedures to prevent the occurrence of a § 415(c) violation

in the case of a plan under which excess annual additions under § 415(c) are regularly

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corrected by return of elective deferrals to the affected employee within 9½ months

after the end of the plan’s limitation year. The correction, however, should not violate

another applicable Code requirement. In the case of a failure that relates to

Transferred Assets or to a plan assumed in connection with a corporate merger,

acquisition, or other similar employer transaction between the Plan Sponsor and the

sponsor of the transferor plan or the prior Plan Sponsor of an assumed plan, the plan is

considered to have established practices and procedures for the Transferred Assets if

such practices and procedures are in effect for the Transferred Assets by the end of

the first plan year that begins after the corporate merger, acquisition, or other similar

transaction. (See section 6.10(2) for special rules regarding established practices and

procedures for § 403(b) Plans.)

.05 Correction by plan amendment. (1) Availability of correction by plan

amendment in VCP or Audit CAP. A Plan Sponsor of a Qualified Plan or § 403(b) Plan

may use VCP or Audit CAP to correct Plan Document, Demographic, and Operational

Failures by plan amendment, including to correct an Operational Failure by plan

amendment to conform the terms of the plan to the plan’s prior operations, provided

that the amendment complies with the applicable Code requirements (including the

requirements of §§ 401(a)(4), 410(b), 411(d)(6), and 403(b)(12), as applicable). In

addition, a Plan Sponsor may adopt a plan amendment to reflect corrective action. For

example, if the plan failed to satisfy the actual deferral percentage (“ADP”) test

required under § 401(k)(3) and the Plan Sponsor must make qualified nonelective

contributions not already provided for under the plan, the plan may be amended to

provide for qualified nonelective contributions. As explained further in sections 6.05

and 10.08(2), the issuance of a compliance statement constitutes a determination that

the failure identified has been corrected, but does not constitute a determination that

the terms of the plan, including the corrective plan amendment, satisfy the qualification

requirements in form.

(2) Availability of correction by plan amendment in SCP. SCP is available for

corrections made by plan amendment, as provided in section 4.05(2)(a), (b), and (c).

In addition, a Plan Sponsor may adopt a plan amendment to reflect corrective action.

For example, if the plan failed to satisfy the ADP test required under § 401(k)(3) and

the Plan Sponsor must make qualified nonelective contributions not already provided

for under the plan, the plan may be amended to provide for qualified nonelective

contributions.

(a) Correction of Operational Failure by plan amendment for a Qualified Plan or

§ 403(b) Plan. A Plan Sponsor of a Qualified Plan or § 403(b) Plan may correct an

Operational Failure by plan amendment in order to conform the terms of the plan to the

plan’s prior operations only if the following conditions are satisfied:

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(i) The plan amendment would result in an increase of a benefit, right, or feature.

(ii) The provision of the increase in the benefit, right, or feature to participants is

permitted under the Code (including the requirements of §§ 401(a)(4), 410(b),

411(d)(6), and 403(b)(12), as applicable), and satisfies the correction principles of

section 6.02 and any other applicable rules of this revenue procedure.

(b) Operational Failure correction methods in accordance with Appendix B. In

addition to correction by plan amendment as described in section 4.05(2)(a), a Plan

Sponsor of a Qualified Plan or § 403(b) Plan may use SCP to correct Operational

Failures listed in Appendix B, section 2.07, by plan amendment to conform the terms of

the plan to the plan’s prior operations. Under SCP, these failures must be corrected in

accordance with the correction methods set forth in Appendix B, section 2.07.

Plan may use SCP to correct an eligible Plan Document Failure, as described in

section 4.01(1)(b), only if the following conditions are satisfied:

(i) The Qualified Plan or § 403(b) Plan has been issued a Favorable Letter, as

respectively defined in sections 5.01(4) and 5.02(5).

(ii) The Plan Sponsor satisfies the requirements in section 9 relating to

correcting a Plan Document Failure. Thus, for example, the Plan Sponsor must adopt

a corrective plan amendment by the end the correction period set forth in section 9.02.

.06 Availability of correction for Employer Eligibility Failures and Demographic

Failures. SCP is not available for a Plan Sponsor to correct Employer Eligibility

Failures or Demographic Failures.

.07 Availability of correction for a terminated plan. Correction of Qualification

Failures and § 403(b) Failures in a terminated plan may be made under VCP or Audit

CAP, whether or not the plan trust or contract is still in existence.

.08 Availability of correction for an Orphan Plan. A failure in an Orphan Plan

that is terminating may be corrected under VCP or Audit CAP if the party acting on

behalf of the plan is an Eligible Party, as defined in section 5.03(2). See, generally,

section 6.02(2)(e)(i). SCP is not available for correcting failures in Orphan Plans. In

the case of a terminating Orphan Plan, the IRS may, in its discretion, waive the user

fee. In such a case, the submission must include a request for a waiver of the user

fee. See section 11.04(14).

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.09 Availability of correction for § 457(b) plans. The IRS will accept submissions

relating to § 457(b) plans on a provisional basis outside of EPCRS through standards

that are similar to those that apply with respect to VCP filings under sections 10 and

11, as applicable, including procedures for filing a submission on the Pay.gov website.

The availability of correction is generally limited to plans that are sponsored by

governmental entities described in § 457(e)(1)(A). In the case of a § 457(b) plan that is

an unfunded deferred compensation plan established for the benefit of top hat

employees of a tax-exempt entity described in § 457(e)(1)(B), the IRS generally will not

enter into an agreement to address problems associated with such a plan. However,

the IRS may consider a submission for such a plan where, for example, the plan was

erroneously established to benefit the entity’s nonhighly compensated employees and

the plan has been operated in a manner that is similar to a Qualified Plan.

.10 Egregious failures. (1) In general. Egregious failures include: (a) a plan that

has consistently and improperly covered only highly compensated employees; (b) a

plan that provides more favorable benefits for an owner of the employer based on a

purported collective bargaining agreement where there has in fact been no good faith

bargaining between bona fide employee representatives and the employer (see Notice

2003-24, 2003-1 C.B. 853, with respect to good faith bargaining and welfare benefit

funds); or (c) a defined contribution plan where a contribution is made on behalf of a

highly compensated employee that is several times greater than the dollar limit set

forth in § 415(c).

(2) SCP. SCP is not available to correct Operational Failures or Plan Document

Failures that are egregious.

(3) VCP. VCP is available to correct egregious failures. However, the IRS

reserves the right to impose a sanction that may be larger than the user fee described

in Rev. Proc. 2021-4, 2021-1 I.R.B. 157 (and its annual successors). For this purpose,

an egregious failure would include any case in which the IRS concludes that the parties

controlling the plan recognized that the action taken would constitute a failure and the

failure either involves a substantial number of participants or beneficiaries or involves

participants who are predominantly highly compensated employees.

(4) Audit CAP. Audit CAP is available to correct egregious failures.

.11 Diversion or misuse of plan assets. SCP, VCP, and Audit CAP are not

available to correct failures relating to the diversion or misuse of plan assets.

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.12 Abusive tax avoidance transactions. (1) Effect on Programs. (a) SCP. With

respect to SCP, in the event that the plan or the Plan Sponsor has been a party to an

abusive tax avoidance transaction (as defined in section 4.12(2)), SCP is not available

to correct any Operational Failure or Plan Document Failure that is directly or indirectly

related to the abusive tax avoidance transaction.

(b) VCP. With respect to VCP, if the IRS determines that a plan or Plan

Sponsor was, or may have been, a party to an abusive tax avoidance transaction (as

defined in section 4.12(2)), then the matter will be discussed and coordinated with

appropriate IRS personnel. The IRS may determine that the plan or the Plan Sponsor

has been a party to an abusive tax avoidance transaction, and that the failures

addressed in the VCP submission are related to that transaction. In those situations,

the IRS will conclude the review of the submission without issuing a compliance

statement and will refer the case for examination. However, if the IRS determines that

the plan failures are unrelated to the abusive tax avoidance transaction or that no

abusive tax avoidance transaction occurred, then the IRS will permit the VCP

submission to address the failures identified in the VCP submission, and may issue a

compliance statement with respect to those failures. In no event may a compliance

statement be relied on for the purpose of concluding that the plan or Plan Sponsor was

not a party to an abusive tax avoidance transaction. In addition, even if it is concluded

that the failures can be addressed pursuant to a VCP submission, the IRS reserves the

right to make a referral of the abusive tax avoidance transaction matter for

examination.

Examination, if the IRS determines that the plan or Plan Sponsor was, or may have

been, a party to an abusive tax avoidance transaction, the matter may be discussed

and coordinated with appropriate IRS personnel. With respect to plans Under

Examination, an abusive tax avoidance transaction includes a transaction described in

section 4.12(2) and any other transaction that the IRS determines was designed to

facilitate the impermissible avoidance of tax. Upon receiving a response from the

appropriate IRS personnel, (i) if the IRS determines that a failure is related to the

abusive tax avoidance transaction, the IRS reserves the right to conclude that neither

Audit CAP nor SCP is available for that failure, or (ii) if the IRS determines that

satisfactory corrective actions have not been taken with regard to the transaction, the

IRS reserves the right to conclude that neither Audit CAP nor SCP is available to the

plan.

(2) Abusive tax avoidance transaction defined. For purposes of section 4.12(1)

(except to the extent otherwise provided in section 4.12(1)(c)), an abusive tax

avoidance transaction means any listed transaction under §1.6011-4(b)(2) and any

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other transaction identified as an abusive transaction on the IRS website entitled “EP

Abusive Tax Transactions.”

PART III. DEFINITIONS, CORRECTION PRINCIPLES, AND RULES OF GENERAL

APPLICABILITY

SECTION 5. DEFINITIONS

The following definitions apply for purposes of this revenue procedure:

.01 Definitions for Qualified Plans. The definitions in this section 5.01 apply to

Qualified Plans.

(1) Qualified Plan. The term “Qualified Plan” means a plan intended to satisfy

the requirements of § 401(a) or 403(a).

(2) Qualification Failure. The term “Qualification Failure” means any failure that

adversely affects the qualification of a plan. There are four types of Qualification

Failures: (a) Plan Document Failures; (b) Operational Failures; (c) Demographic

Failures; and (d) Employer Eligibility Failures.

(a) Plan Document Failure. (i) In general. The term “Plan Document Failure”

means a plan provision (or the absence of a plan provision) that, on its face, violates

the requirements of § 401(a) or 403(a). A Plan Document Failure includes any

Qualification Failure that is a violation of the requirements of § 401(a) or 403(a) and

that is not an Operational Failure, Demographic Failure, or Employer Eligibility Failure.

This term includes a Nonamender Failure, a failure to adopt Good Faith Amendments,

and a failure to adopt Interim Amendments. A Plan Document Failure does not include

a failure to adopt a discretionary plan amendment by the plan amendment deadline set

forth in section 8.02 of Rev. Proc. 2016-37, 2016-29 I.R.B. 136, as modified by Rev.

Proc. 2017-41, 2017-29 I.R.B. 92, and Rev. Proc. 2020-40, 2020-38 I.R.B. 575 (or

section 5.05(2) of Rev. Proc. 2007-44, 2007-28 I.R.B. 54, as applicable). Pursuant to

section 4.01(1)(b), a Plan Document Failure consisting of the initial failure to adopt a

Qualified Plan may not be corrected under SCP.

(ii) Specific definitions relating to Plan Document Failures:

(A) “Good Faith Amendment” includes the EGTRRA good faith amendments

described in Notice 2001-42, 2001-2 C.B. 70, the amendment required for the plan to

comply with the final regulations under § 401(a)(9) (see Rev. Proc. 2002-29, 2002-1

C.B. 1176, as modified by Rev. Proc. 2003-10, 2003-1 C.B. 259), the amendment

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updating the mortality table to reflect the guidance in Rev. Rul. 2001-62, 2001-2

C.B. 632, and the amendment updating the definition of compensation, for purposes of

§ 415(c)(3), to include “deemed § 125 compensation” pursuant to Rev. Rul. 2002-27,

2002-1 C.B. 925. For rules relating to a failure to adopt a Good Faith Amendment, see

Rev. Proc. 2013-12.

(B) “Interim Amendment” means an amendment with respect to a disqualifying

provision that results in the failure of the plan to satisfy the qualification requirements of

the Code by reason of a change in those requirements that is effective after December

31, 2001, or that is integral to such disqualifying provision. See section 15.02 of Rev.

Proc. 2016-37, as modified, for Interim Amendment requirements for Pre-approved

Plans. For Interim Amendments required to be adopted in individually designed plans

before January 1, 2017 (or before February 1, 2017, for Cycle A plans), see section

5.04 of Rev. Proc. 2007-44.

a disqualifying provision described in §1.401(b)-1(b) within the applicable remedial

amendment period. In general, a disqualifying provision includes a provision in the

plan document that violates a qualification requirement of the Code or the absence of a

provision that causes the plan to fail to satisfy a qualification requirement of the Code.

A disqualifying provision also includes any provision designated by the Commissioner

as a disqualifying provision under §1.401(b)-1(b)(3). See sections 5 and 15 of Rev.

Proc. 2016-37, as modified. For an individually designed plan, a Nonamender Failure

includes the failure to timely amend for provisions that appear on the Required

Amendments List, as described in Rev. Proc. 2016-37, as modified. For purposes of

VCP, the initial failure to adopt a Qualified Plan is not considered a Nonamender

Failure.

(b) Operational Failure. The term “Operational Failure” means a Qualification

Failure (other than an Employer Eligibility Failure) that arises solely from the failure to

follow plan provisions. A failure to follow the terms of the plan providing for the

satisfaction of the requirements of § 401(k) and (m) is considered to be an Operational

Failure. A plan does not have an Operational Failure to the extent the plan is permitted

to be amended retroactively to reflect the plan's operations (for example, pursuant to

§ 401(b)). In the situation where a Plan Sponsor timely adopted an amendment and

the plan was not operated in accordance with the terms of such amendment, the plan

is considered to have an Operational Failure.

satisfy the requirements of § 401(a)(4), 401(a)(26), or 410(b) that is not an Operational

Failure or an Employer Eligibility Failure. The correction of a Demographic Failure

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generally requires a corrective amendment to the plan adding more benefits or

increasing existing benefits (see §1.401(a)(4)-11(g)).

(d) Employer Eligibility Failure. The term “Employer Eligibility Failure” means

the adoption of a plan intended to include a qualified cash or deferred arrangement

under § 401(k) by an employer that fails to satisfy the employer eligibility requirements

to establish a § 401(k) plan. An Employer Eligibility Failure is not a Plan Document,

Operational, or Demographic Failure.

(3) Excess Amount; Excess Allocations; Overpayment. (a) Excess Amount.

The term “Excess Amount” means a Qualification Failure due to a contribution,

allocation, or similar credit that is made on behalf of a participant or beneficiary to a

plan in excess of the maximum amount permitted to be contributed, allocated, or

credited on behalf of the participant or beneficiary under the terms of the plan or that

exceeds a limitation on contributions or allocations provided in the Code or regulations.

Excess Amounts include: (i) an elective deferral or after-tax employee contribution that

is in excess of the maximum contribution under the plan; (ii) an elective deferral or

after-tax employee contribution made in excess of the limitation under § 415; (iii) an

elective deferral in excess of the limitation of § 402(g); (iv) an excess contribution or

excess aggregate contribution under § 401(k) or (m); (v) an elective deferral or aftertax employee contribution that is made with respect to compensation in excess of the

limitation of § 401(a)(17); and (vi) any other employer contribution that exceeds a

limitation under § 401(m) (but only with respect to the forfeiture of nonvested matching

contributions that are excess aggregate contributions), 411(a)(3)(G), or 415, or that is

made with respect to compensation in excess of the limitation under § 401(a)(17).

However, an Excess Amount does not include a contribution, allocation, or other credit

that is made pursuant to a correction method provided under this revenue procedure

for a different Qualification Failure. Excess Amounts are limited to contributions,

allocations, or annual additions under a defined contribution plan, after-tax employee

contributions to a defined benefit plan, and contributions or allocations that are to be

made to a separate account (with actual Earnings) under a defined benefit plan. See

generally section 6.06 for the treatment and correction of certain Excess Amounts.

(b) Excess Allocation. The term “Excess Allocation” means an Excess Amount

for which the Code or regulations do not provide any corrective mechanism. Excess

Allocations include Excess Amounts as defined in section 5.01(3)(a)(i), (ii), (v), and (vi)

(except with respect to § 401(m) or 411(a)(3)(G) violations). Excess Allocations must

be corrected in accordance with section 6.06(2).

a payment being made to a participant or beneficiary (“Overpayment recipient”) that

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exceeds the amount payable to the Overpayment recipient under the terms of the plan

or that exceeds a limitation provided in the Code or regulations. Overpayments include

both payments from a defined benefit plan and payments from a defined contribution

plan that are either not made from the Overpayment recipient’s account under the plan

or not permitted to be paid under the Code, the regulations, or the terms of the plan.

However, an Overpayment does not include a payment that is made pursuant to a

correction method provided under this revenue procedure for a different Qualification

Failure. Overpayments must be corrected in accordance with section 6.06(3) for

defined benefit plans and section 6.06(4) for defined contribution plans.

(4) Favorable Letter. With respect to a Qualified Plan, the term “Favorable

Letter” is defined in the following manner.

(a) Favorable Letter for individually designed Qualified Plans. In the case of an

individually designed Qualified Plan, the term “Favorable Letter” means a

determination letter issued with respect to the plan.

(b) Favorable Letter for Pre-approved Plans. In the case of a Pre-approved

Plan, the term “Favorable Letter” means a favorable opinion or advisory letter issued

with respect to the most recently expired six-year remedial amendment cycle under

Rev. Proc. 2016-37, as modified. In the case of a terminated Pre-approved Plan, the

plan is treated as having a favorable opinion letter or advisory letter if the plan is

terminated prior to the expiration of the plan’s current remedial amendment cycle

determined under the provisions of Rev. Proc. 2016-37, as modified, and the plan was

amended to reflect the qualification requirements that applied as of the date of

termination.

(5) Maximum Payment Amount. The term “Maximum Payment Amount” means

a monetary amount that is approximately equal to the tax the IRS could collect upon

plan disqualification and is the sum for the open taxable years of the:

(a) tax on the trust (Form 1041, U.S. Income Tax Return for Estates and Trusts)

(and any interest or penalties applicable to the trust return);

(b) additional income tax resulting from the loss of employer deductions for plan

contributions (and any interest or penalties applicable to the Plan Sponsor's return);

plan (Form 1040, U.S. Individual Income Tax Return), including the tax on plan

distributions that have been rolled over to other qualified trusts (as defined in

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§ 402(c)(8)(A)) or eligible retirement plans (as defined in § 402(c)(8)(B)) and any

interest or penalties applicable to the participants’ returns;

(d) in the case of any participant loan that did not comply with the requirements

of § 72(p)(2), the tax the IRS could collect as a result of the loan not being excluded

from gross income under § 72(p)(2); and

(e) any other tax that results from a Qualification Failure that would apply but for

correction under this revenue procedure.

(6) Plan Sponsor. The term “Plan Sponsor” means the employer that

establishes or maintains a Qualified Plan for its employees.

(7) Transferred Assets. The term “Transferred Assets” means plan assets that

were received, in connection with a corporate merger, acquisition, or other similar

employer transaction, by the plan in a transfer (including a merger or consolidation of

plan assets) under § 414(l) from a plan sponsored by an employer that was not a

member of the same controlled group as the Plan Sponsor immediately prior to the

corporate merger, acquisition, or other similar employer transaction. If a transfer of

plan assets related to the same employer transaction is accomplished through several

transfers, then the date of the transfer is the date of the first transfer.

(8) Pre-approved Plan. For purposes of this revenue procedure, the term “Preapproved Plan” means:

(a) a master plan, a prototype plan, or a volume submitter plan as described in

Rev. Proc. 2015-36, 2015-27 I.R.B. 20, sections 4.01, 4.02 and 13.01, respectively;

and

(b) a pre-approved plan described in section 4.07 of Rev. Proc. 2017-41,

2017-29 I.R.B. 92.

.02 Definitions for § 403(b) Plans. The definitions in this section 5.02 apply to

§ 403(b) Plans. For § 403(b) Plans, the definitions under Rev. Proc. 2008-50 apply to

failures that occurred in taxable years beginning before January 1, 2009.

(1) Section 403(b) Plan. The term “§ 403(b) Plan” means a plan or program

intended to satisfy the requirements of § 403(b).

(2) Section 403(b) Failure. The term “§ 403(b) Failure” means a failure that

adversely affects the exclusion from income provided by § 403(b). There are four

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types of § 403(b) Failures: (a) Plan Document Failures; (b) Operational Failures; (c)

Demographic Failures; and (d) Employer Eligibility Failures.

(a) Plan Document Failure. The term “Plan Document Failure” means a plan

provision (or the absence of a plan provision) that, on its face, violates the

requirements of § 403(b). Thus, for example, the failure of a plan to be adopted in

written form or to be amended to reflect a new requirement within the plan's applicable

remedial amendment period is a Plan Document Failure. If a plan has not been timely

or properly amended during an applicable remedial amendment period with respect to

provisions required to maintain the status of the plan under § 403(b), the plan has a

Plan Document Failure. For purposes of this revenue procedure, a Plan Document

Failure includes any § 403(b) Failure that adversely affects the status of the plan under

§ 403(b) and that is not an Operational Failure, Demographic Failure, or Employer

Eligibility Failure. Pursuant to section 4.01(1)(b), a Plan Document Failure consisting

of the failure to adopt a written § 403(b) Plan timely in accordance with

§1.403(b)-3(b)(3) and Notice 2009-3 may not be corrected under SCP.

(b) Operational Failure. The term “Operational Failure” means a § 403(b)

Failure (other than an Employer Eligibility Failure) that arises solely from the failure to

follow plan provisions. A failure to follow the terms of the plan providing for the

satisfaction of the requirements of §§ 403(b)(12)(ii) (relating to the availability of

elective deferral contributions) and 401(m) (as applied to § 403(b) Plans pursuant to

§ 403(b)(12)(A)(i)) is an Operational Failure. A plan does not have an Operational

Failure to the extent the plan is permitted to be amended retroactively to reflect the

plan's operations.

satisfy the requirements of § 401(a)(4), 401(a)(26), or 410(b) (as applied to § 403(b)

Plans pursuant to § 403(b)(12)(A)(i)) that is not an Operational Failure or an Employer

Eligibility Failure. The correction of a Demographic Failure generally requires a

corrective amendment to the plan adding more benefits or increasing existing benefits

(see §1.401(a)(4)-11(g)).

(d) Employer Eligibility Failure. The term “Employer Eligibility Failure” means

the adoption of a plan intended to satisfy the requirements of § 403(b) by a Plan

Sponsor that is not a tax-exempt organization described in § 501(c)(3) or a public

educational organization described in § 170(b)(1)(A)(ii). An Employer Eligibility Failure

is not a Plan Document, Operational, or Demographic Failure.

(3) Excess Amount. The term “Excess Amount” means a contribution or other

credit that is made on behalf of a participant or beneficiary to a plan in excess of the

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maximum amount permitted to be contributed or credited on behalf of the participant or

beneficiary under the terms of the plan or that exceeds a limitation on contributions

provided in the Code or regulations. The term “Excess Amount” includes any amount

in excess of the amount permitted under the requirements of § 402(g), 401(m), or 415.

A contribution in excess of the limitation of § 415(c) is not an Excess Amount (or a

§ 403(b) Failure) if that excess is maintained in a separate account in accordance with

the rules in the regulations under §§ 403(b) and 415. Such separate account is

considered to be a § 403(c) annuity contract (or, if applicable, an amount to which § 61,

83, or 402(b) applies). A contribution in excess of the limitation of § 415(c) that is not

maintained in a separate account in accordance with the rules set forth in regulations

under §§ 403(b) and 415 is an Excess Amount. Thus, the correction principles in

section 6.06 apply.

(4) Overpayment. The term “Overpayment” means a § 403(b) Failure due to a

payment being made to a participant or beneficiary (“Overpayment recipient”) that

exceeds the amount payable to the Overpayment recipient under the terms of the plan

or that exceeds a limitation provided in the Code or regulations. Overpayments include

payments made from the Overpayment recipient’s § 403(b) custodial account or

annuity contract under the plan that are not permitted to be paid under the Code, the

regulations, or the terms of the plan. However, an Overpayment does not include a

payment that is made pursuant to a correction method provided under this revenue

procedure for a different § 403(b) Failure. Overpayments must be corrected in

accordance with section 6.06(4).

(5) Favorable Letter. The term “Favorable Letter” means a Favorable Letter as

described in section 6.10(2).

(6) Maximum Payment Amount. The term “Maximum Payment Amount” means

a monetary amount that is approximately equal to the tax the IRS could collect as a

result of the § 403(b) Failure and is the sum for the open taxable years of the:

(a) additional income tax resulting from income inclusion for employees or other

participants (Form 1040), including the tax on distributions that have been rolled over

to other qualified trusts (as defined in § 402(c)(8)(A)) or eligible retirement plans (as

defined in § 402(c)(8)(B)) and any interest or penalties applicable to the participants’

returns; and

(b) any other tax that results from a § 403(b) Failure that would apply but for

correction under this revenue procedure.

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(7) Plan Sponsor. The term “Plan Sponsor” means the employer that offers a

§ 403(b) Plan to its employees.

(8) Section 403(b) Pre-approved Plan. The term “§ 403(b) Pre-approved Plan”

means a plan described in section 3.17 of Rev. Proc. 2013-22, 2013-18 I.R.B. 985.

.03 Definitions for Orphan Plans.

(1) Orphan Plan. With respect to VCP and Audit CAP, the term “Orphan Plan”

means any Qualified Plan, § 403(b) Plan, or other plan with respect to which an

“Eligible Party” (defined in section 5.03(2)) has determined that the Plan Sponsor (a)

no longer exists, (b) cannot be located, or (c) is unable to maintain the plan. However,

the term “Orphan Plan” does not include any plan subject to Title I of the Employee

Retirement Income Security Act of 1974 (“ERISA”) that is terminated pursuant to

29 CFR 2578.1 of the Department of Labor regulations governing the termination of

abandoned individual account plans.

(2) Eligible Party. The term “Eligible Party” means:

(a) A court appointed representative with authority to terminate the plan and

dispose of the plan’s assets;

(b) In the case of an Orphan Plan under investigation by the Department of

Labor, a person or entity determined by the Department of Labor to have accepted

responsibility for terminating the plan and distributing the plan's assets; or

surviving spouse who is the sole beneficiary of a plan that provided benefits to a

participant who was (i) the sole owner of the business that sponsored the plan and (ii)

the only participant in the plan.

.04 Earnings. The term “Earnings” refers to the adjustment of a principal

amount to reflect subsequent investment gains and losses, unless otherwise provided

in a specific section of this revenue procedure.

.05 IRA. The term “IRA” means an individual retirement account (as defined in

§ 408(a)) or an individual retirement annuity (as defined in § 408(b)).

.06 SEP. The term “SEP” means a plan intended to satisfy the requirements of

§ 408(k). For purposes of this revenue procedure, the term SEP also includes a salary

reduction SEP (“SARSEP”) described in § 408(k)(6), if applicable.

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.07 SIMPLE IRA Plan. The term “SIMPLE IRA Plan” means a plan intended to

satisfy the requirements of § 408(p).

.08 Under Examination. (1) The term “Under Examination” means: (a) a plan

that is under an Employee Plans examination (that is, an examination of a Form 5500

series or other Employee Plans examination); (b) a Plan Sponsor that is under an

Exempt Organizations examination (that is, an examination of a Form 990 series or

other Exempt Organizations examination); or (c) a plan that is under investigation by

the Criminal Investigation Division of the IRS.

(2) A plan that is under an Employee Plans examination includes any plan for

which the Plan Sponsor, or an authorized representative, has received verbal or written

notification from Employee Plans of an impending Employee Plans examination, or of

an impending referral for an Employee Plans examination, and also includes any plan

that has been under an Employee Plans examination and is in Appeals or in litigation

for issues raised in an Employee Plans examination. A plan is considered to be Under

Examination if it is aggregated for purposes of satisfying the nondiscrimination

requirements of § 401(a)(4), the minimum coverage requirements of § 410(b), or the

requirements of § 403(b)(12)(A)(i), with any plan that is Under Examination. In

addition, a plan is considered to be Under Examination with respect to a failure of a

qualification requirement (other than those described in the preceding sentence) if the

plan is aggregated with another plan for purposes of satisfying that qualification

requirement (for example, § 401(a)(30), 415, or 416) and that other plan is Under

Examination. For example, assume Plan A has a § 415 failure, Plan A is aggregated

with Plan B only for purposes of § 415, and Plan B is Under Examination. In this case,

Plan A is considered to be Under Examination with respect to the § 415 failure.

However, if Plan A has a failure relating to the spousal consent rules under § 417 or

the vesting rules of § 411, Plan A is not considered to be Under Examination with

respect to the § 417 or 411 failure. For purposes of this revenue procedure, the term

aggregation does not include consideration of benefits provided by various plans for

purposes of the average benefits test set forth in § 410(b)(2).

(3) An Employee Plans examination also includes a case in which a Plan

Sponsor has submitted any Form 5300 (Application for Determination for Employee

Benefit Plan), Form 5307 (Application for Determination for Adopters of Modified

Volume Submitter Plans), or Form 5310 (Application for Determination for Terminating

Plan) and the Employee Plans agent notifies the Plan Sponsor, or an authorized

representative, of possible failures, whether or not the Plan Sponsor is officially notified

of an “examination.” This would include a case where, for example, a Plan Sponsor

has applied for a determination letter on plan termination, and an Employee Plans

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agent notifies the Plan Sponsor that there are partial termination concerns. In addition,

if, during the review process, the agent requests additional information that indicates

the existence of a failure not previously identified by the Plan Sponsor, the plan is

considered to be under an Employee Plans examination. If, in such a case, the

determination letter request under review is subsequently withdrawn, the plan is

nevertheless considered to be under an Employee Plans examination for purposes of

eligibility under SCP and VCP with respect to those issues raised by the agent

reviewing the determination letter application. The fact that a Plan Sponsor voluntarily

submits a determination letter application does not constitute a voluntary identification

of a failure to the IRS. In order to be eligible for VCP, the Plan Sponsor (or the

authorized representative) must identify each failure, in writing, to the reviewing agent

before the agent recognizes the existence of the failure or addresses the failure in

communications with the Plan Sponsor (or the authorized representative).

(4) A Plan Sponsor that is under an Exempt Organizations examination includes

any Plan Sponsor that has received (or whose authorized representative has received)

verbal or written notification from Exempt Organizations of an impending Exempt

Organizations examination or of an impending referral for an Exempt Organizations

examination and also includes any Plan Sponsor that has been under an Exempt

Organizations examination and is now in Appeals or in litigation for issues raised in an

Exempt Organizations examination.

SECTION 6. CORRECTION PRINCIPLES AND RULES OF GENERAL

APPLICABILITY

.01 Correction principles; rules of general applicability. The general correction

principles in section 6.02 and rules of general applicability in sections 6.03 through

6.13 apply for purposes of this revenue procedure.

.02 Correction principles. Generally, a failure is not corrected unless full

correction is made with respect to all participants and beneficiaries, and for all taxable

years (whether or not the taxable year is closed). Even if correction is made for a

closed taxable year, the tax liability associated with that year will not be redetermined

because of the correction. Correction is determined taking into account the terms of

the plan at the time of the failure. Correction should be accomplished taking into

account the following principles:

(1) Restoration of benefits. The correction method should restore the plan to the

position it would have been in had the failure not occurred, including restoration of

current and former participants and beneficiaries to the benefits and rights they would

have had if the failure had not occurred.

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(2) Reasonable and appropriate correction. The correction should be

reasonable and appropriate for the failure. Depending on the nature of the failure,

there may be more than one reasonable and appropriate correction for the failure. For

Qualified Plans and § 403(b) Plans, any correction method permitted under Appendix A

or Appendix B is deemed to be a reasonable and appropriate method of correcting the

related failure. Any correction method permitted under Appendix A or Appendix B

applicable to a SEP, or a SIMPLE IRA Plan is similarly deemed to be a reasonable and

appropriate method of correcting the related failure. If a plan has a different but

analogous failure to one set forth in Appendix A or B (such as the failure to provide a

matching contribution by a governmental plan that is not subject to § 401(m)), then the

analogous correction method under Appendix A or B is generally available to correct

the failure. Whether any other particular correction method is reasonable and

appropriate is determined taking into account the applicable facts and circumstances

and the following principles:

(a) The correction method should, to the extent possible, resemble one already

provided for in the Code, regulations, or other guidance of general applicability. For

example, for Qualified Plans and § 403(b) Plans, the correction method set forth in

§1.402(g)-1(e)(2) would be the typical means of correcting a failure under § 402(g).

(b) The correction method should keep plan assets in the plan, except to the

extent the Code, regulations, or other guidance of general applicability provide for

correction by distribution to participants or beneficiaries or return of assets to the

employer. For example, if an excess allocation (not in excess of the § 415 limits) made

under a Qualified Plan was made for a participant under a plan (other than a § 401(k)

plan), the excess should be reallocated to other participants or, depending on the facts

and circumstances, used to reduce future employer contributions.

provide benefits for nonhighly compensated employees. For example, for Qualified

Plans, the correction method set forth in §1.401(a)(4)-11(g) (rather than methods

making use of the special testing provisions set forth in §1.401(a)(4)-8 or

§1.401(a)(4)-9) would be the typical means of correcting a failure to satisfy

nondiscrimination requirements. Similarly, the correction of a failure to satisfy the

requirements of § 401(k)(3) or 401(m)(2), or, for plan years beginning on or before

December 31, 2001, the multiple use test of § 401(m)(9) (relating to nondiscrimination),

solely by distributing excess amounts to highly compensated employees would not be

the typical means of correcting such a failure.

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(d) The correction method should not violate another applicable specific

requirement of § 401(a) or 403(b) (for example, § 401(a)(4), 411(d)(6), or 403(b)(12),

as applicable), 408(k) for SEPs, or 408(p) for SIMPLE IRA Plans, or a parallel

requirement in Part 2 of Subtitle B of Title I of ERISA (for plans that are subject to Part

2 of Subtitle B of Title I of ERISA). If an additional failure is nevertheless created as a

result of the use of a correction method in this revenue procedure, then that failure also

must be corrected in conjunction with the use of that correction method and in

accordance with the requirements of this revenue procedure.

(e) If a correction method is one that another government agency has authorized

with respect to a violation of legal requirements within its interpretive authority and that

correction relates to a violation for which there is a failure to which this revenue

procedure applies, then the IRS may take the correction method of the other

governmental agency into account for purposes of this revenue procedure. For

example:

(i) If the plan is subject to ERISA, for a failure that results from the employer

having ceased to exist, the employer no longer maintaining the plan, or similar

reasons, the permitted correction is to terminate the plan and distribute plan assets to

participants and beneficiaries in accordance with standards and procedures

substantially similar to those set forth in 29 CFR 2578.1 of the Department of Labor

regulations (relating to abandoned plans). This correction must satisfy four conditions.

First, the correction must comply with standards and procedures substantially similar to

those set forth in 29 CFR 2578.1. Second, the qualified termination administrator,

based on plan records located and updated in accordance with the Department of

Labor regulations, must have reasonably determined whether, and to what extent, the

survivor annuity requirements of §§ 401(a)(11) and 417 apply to any benefit payable

under the plan and must take reasonable steps to comply with those requirements (if

applicable). Third, each participant and beneficiary must have been provided a

nonforfeitable right to his or her accrued benefits as of the date of deemed termination

under the Department of Labor regulations, subject to Earnings between that date and

the date of distribution. Fourth, participants and beneficiaries must receive notification

of their rights under § 402(f). In addition, notwithstanding correction under this revenue

procedure, the IRS reserves the right to pursue appropriate remedies under the Code

against any party who is responsible for the plan, such as the Plan Sponsor, plan

administrator, or owner of the business, even in its capacity as a participant or

beneficiary under the plan. See also Appendix A, section .09(1), for parallel rules for

plans that are not subject to ERISA.

(ii) In the case of a violation of the fiduciary standards imposed by Part 4 of

Subtitle B of Title I of ERISA, correction under the Voluntary Fiduciary Correction

Program (VFCP) established by the Department of Labor for a fiduciary violation for

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which there is a similar failure under this revenue procedure would generally be taken

into account as correction under this revenue procedure. (See also section 7.3(b) of

the Department of Labor’s VFCP under which correction of a defaulted participant loan

that provides for repayment in accordance with § 72(p)(2) requires only submission of

the correction under VCP and inclusion of the VCP compliance statement (with proof of

any required corrective payment).)

(3) Consistency requirement. Generally, if more than one correction method is

available to correct a type of failure for a plan year (or if there are alternative ways to

apply a correction method), the correction method (or one of the alternative ways to

apply the correction method) should be applied consistently in correcting all failures of

that type for that plan year. Similarly, Earnings adjustment methods generally should

be applied consistently with respect to corrective contributions or allocations for a

particular type of failure for a plan year. In the case of a group submission, the

consistency requirement applies on a plan-by-plan basis.

(4) Principles regarding corrective allocations and corrective distributions. The

following principles apply where an appropriate correction method includes the use of

corrective allocations or corrective distributions:

(a) Corrective allocations under a defined contribution plan should be based

upon the terms of the plan and other applicable information at the time of the failure

(including the compensation that would have been used under the plan for the period

with respect to which a corrective allocation is being made) and should be adjusted for

Earnings and forfeitures that would have been allocated to the participant's account if

the failure had not occurred. However, a corrective allocation is not required to be

adjusted for losses. Accordingly, corrective allocations must include gains and may be

adjusted for losses. For additional information, see Appendix B, section 3, Earnings

Adjustment Methods and Examples.

(b) A corrective allocation to a participant's account because of a failure to make

a required allocation in a prior limitation year is not considered an annual addition with

respect to the participant for the limitation year in which the correction is made, but is

considered an annual addition for the limitation year to which the corrective allocation

relates. However, the normal rules of § 404, regarding deductions, apply.

contributions (including forfeitures if the plan permits their use to reduce employer

contributions). For purpose of correcting a failed ADP, actual contribution percentage

(“ACP”), or multiple use test, any amounts used to fund qualified nonelective

contributions (“QNECs”) must satisfy the definition of QNEC in §1.401(k)-6.

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(d) In the case of a defined benefit plan, a corrective distribution for an individual

should be increased to take into account the delayed payment, in accordance with the

plan’s provisions for actuarial equivalence (after considering the applicable

requirements of §§ 417(e)(3) and 415(b) or any other applicable provision) that were in

effect on the date that the distribution should have been made. A corrective

distribution is not subject to the requirements of § 417(e)(3) if it is made to make up for

missed payments with respect to a benefit that is not subject to the requirements of

§ 417(e)(3).

(e)(i) In the case of a single employer defined benefit plan, a payment of

benefits that fails to satisfy the requirements of § 436(b), (c), or (e) can be corrected by

the Plan Sponsor (including another person acting on behalf of the Plan Sponsor)

making a contribution to the plan equal to the following amount (with interest up to the

date of the contribution): (A) in the case of a failure to satisfy § 436(b) with respect to

an unpredictable contingent event benefit, the amount described in § 436(b)(2) with

respect to that benefit; (B) in the case of a failure to satisfy § 436(c) with respect to an

amendment, the amount described in § 436(c)(2) with respect to that amendment; and

respect to that failure. See also section 6.06(3) for correction of an Overpayment

(including a payment of benefits that exceeds the limitations imposed by § 436(d) or

436(b), (c), or (e)).

(ii) A corrective distribution or a corrective amendment (where a correction is

accomplished through a plan amendment) is not subject to the requirements of § 436,

but, if the plan is subject to a restriction pursuant to § 436 at the time of the correction,

generally the Plan Sponsor must make a contribution to the plan at the time of the

correction in the following amount: (A) if a corrective distribution is made in a singlesum payment or other prohibited payment (as defined in § 436(d)(5)) at a time when

the plan is subject to a restriction pursuant to § 436(d), the Plan Sponsor must

generally contribute to the plan the amount of that corrective distribution (but only half

of the corrective distribution must be contributed if the payment is made at a time when

the plan is subject to a restriction pursuant to § 436(d)(3)); and (B) if a corrective

amendment is made at a time when the plan is subject to a restriction pursuant to

§ 436(c), the Plan Sponsor must generally contribute to the plan an amount equal to

the increase in the funding target of the plan (as defined in § 430) attributable to that

amendment. No contribution is required to be made under this paragraph (e)(ii) if the

corrective distribution is made in a form that is not a prohibited payment (for example, if

the correction is made by actuarially increasing future payments that are made in a

form that is not a prohibited payment).

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(iii) Any contribution made by the Plan Sponsor pursuant to this paragraph (e) is

treated in the same manner as a “section 436 contribution” (as defined in

§1.436-1(j)(7)). Thus, the contribution is treated as separate from a minimum required

contribution under § 430 and is disregarded in determining the amount added to a

prefunding balance under § 430(f)(6). See §1.436-1(f)(2) generally for rules relating to

§ 436 contributions.

(f) In the case of a defined contribution plan, a corrective contribution or

distribution should be adjusted for Earnings from the date of the failure (determined

without regard to any Code provision which permits a corrective contribution or

distribution to be made at a later date).

(5) Special exceptions to full correction. In general, a failure must be fully

corrected. Although the mere fact that correction is inconvenient or burdensome is not

enough to relieve a Plan Sponsor of the need to make full correction, full correction

may not be required in certain situations if it is unreasonable or not feasible. Even in

these situations, the correction method adopted must be one that does not have

significant adverse effects on participants and beneficiaries or the plan, and that does

not discriminate significantly in favor of highly compensated employees. The

exceptions described below specify those situations in which full correction is not

required.

(a) Reasonable estimates. If either (i) it is possible to make a precise

calculation but the probable difference between the approximate and the precise

restoration of a participant's benefits is insignificant and the administrative cost of

determining precise restoration would significantly exceed the probable difference or

(ii) it is not possible to make a precise calculation (for example, where it is impossible

to provide plan data), reasonable estimates may be used in calculating appropriate

correction. If it is not feasible to make a reasonable estimate of what the actual

investment results would have been, a reasonable interest rate may be used. For this

purpose, the interest rate used by the Department of Labor’s VFCP Online Calculator

is deemed to be a reasonable interest rate. The calculator can be found at

https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-andcompliance/correction-programs/vfcp.

(b) Delivery of small benefits. If the total corrective distribution due a participant

or beneficiary is $75 or less, the Plan Sponsor is not required to make the corrective

distribution if the reasonable direct costs of processing and delivering the distribution to

the participant or beneficiary would exceed the amount of the distribution. This section

6.02(5)(b) does not apply to corrective contributions. Corrective contributions are

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required to be made with respect to a current or former participant, without regard to

the amount of the corrective contributions.

Overpayment to an Overpayment recipient is $250 or less, the Plan Sponsor is not

required to seek the return of the Overpayment from the Overpayment recipient. Also,

the Plan Sponsor is not required to notify the Overpayment recipient that an

Overpayment of $250 or less is ineligible for favorable tax treatment accorded to

distributions from the plan (and, specifically, is ineligible for tax-free rollover).

(d) Locating lost participants. (i) Reasonable actions must be taken to find all

current and former participants and beneficiaries to whom additional benefits are due,

but who have not been located after a mailing to the last known address. In general,

such actions include, but are not limited to, a mailing to the individual’s last known

address using certified mail, and, if that is unsuccessful, an additional search method,

such as the use of a commercial locator service, a credit reporting agency, or internet

search tools. Depending on the facts and circumstances, the use of more than one of

these additional search methods may be appropriate. A Plan Sponsor will not be

considered to have failed to correct a failure due to the inability to locate an individual if

reasonable actions to locate the individual have been undertaken in accordance with

this paragraph; provided that, if the individual is later located, the additional benefits

are provided to the individual at that time.

(ii) The IRS Letter Forwarding Program was modified to provide that the IRS

would no longer forward letters from individuals, companies or organizations that

control assets that may be due taxpayers. See Rev. Proc. 2012-35, 2012-37

I.R.B. 341. Therefore, the IRS Letter Forwarding Program is not available as a means

to search for participants and beneficiaries to whom benefits under the plan are due.

(e) Small Excess Amounts. Generally, if the total amount of an Excess Amount

with respect to the benefit of a participant or beneficiary is $250 or less, the Plan

Sponsor is not required to distribute or forfeit such Excess Amount. However, if the

Excess Amount exceeds a statutory limit, the participant or beneficiary must be notified

that the Excess Amount, including any investment gains, is not eligible for favorable tax

treatment accorded to distributions from the plan (and, specifically, is not eligible for

tax-free rollover). See section 6.06(1) for such notice requirements.

(f) Orphan Plans. The IRS retains the discretion to determine under VCP and

Audit CAP whether full correction will be required with respect to a terminating Orphan

Plan.

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(6) Correction principle for plan loan failures. In the case of a plan loan failure

corrected in accordance with section 6.07(3)(b), (c), or (d), the participant is generally

responsible for paying the corrective payment. However, with respect to the failure

listed in section 6.07(3)(d), the employer should pay a portion of the correction

payment on behalf of the participant equal to the interest that accumulates as a result

of such failure, generally determined at a rate equal to the greater of the plan loan

interest rate or the rate of return under the plan.

(7) Correction for exclusion of employees with respect to elective deferrals or

after-tax employee contributions. If a Qualified Plan or § 403(b) Plan has an

Operational Failure that consists of excluding an employee that should have been

eligible to make an elective deferral or an after-tax employee contribution, the employer

should contribute to the plan on behalf of the excluded employee an amount that

makes up for the value of the lost opportunity for the employee to have a portion of his

or her compensation contributed to the plan accumulated with earnings tax deferred in

the future. This correction principle applies solely to this limited circumstance. It does

not, for example, extend to the correction of a failure to satisfy a nondiscrimination test,

such as, the ADP test pursuant to § 401(k)(3) and the ACP test pursuant to

§ 401(m)(2). Specific methods and examples to correct this failure are provided in

Appendix A, section .05, and Appendix B, section 2.02. Similarly, the methods and

examples provided for correcting this failure do not extend to other failures. Thus, the

correction methods and the examples in Appendix A, section .05 and Appendix B,

section 2.02, cannot, for example, be used to correct ADP/ACP failures.

(8) Correction by plan amendment in VCP, Audit CAP, and SCP. For the

availability of correction by plan amendment, see section 4.05.

(9) Reporting. Any corrective distributions from the plan should be properly

reported.

.03 Correction of an Employer Eligibility Failure. (1) The permitted correction of

an Employer Eligibility Failure is the cessation of all contributions (including elective

deferrals and after-tax employee contributions). For VCP submissions, the cessation

must occur no later than the date the submission under VCP is filed. The assets in

such a plan are to remain in the trust, annuity contract, or custodial account and are to

be distributed no earlier than the occurrence of one of the applicable distribution

events, for example, for § 403(b) Plans, an event described in § 403(b)(7) (to the

extent the assets are held in custodial accounts) or § 403(b)(11) (for those assets

invested in annuity contracts that would be subject to § 403(b)(11) restrictions if the

employer were eligible).

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(2) Cessation of contributions is not required if continuation of contributions

would not be an Employer Eligibility Failure (for example, with respect to a tax-exempt

employer that may maintain a § 401(k) plan after 1996). In the case of a § 403(b)

Failure that is an Employer Eligibility Failure, correction may include treating

contributions as not being excluded under § 403(b) (and thus the contributions would

be treated as having been contributed, for example, to an annuity contract to which

§ 403(c) applies).

(3) A plan that is corrected through VCP or Audit CAP is treated as subject to all

of the requirements and provisions of §§ 401(a) for a Qualified Plan, 403(b) for a

§ 403(b) Plan, 408(k) for a SEP, and 408(p) for a SIMPLE IRA Plan (including Code

provisions relating to rollovers). Therefore, the Plan Sponsor must also correct all

other failures in accordance with this revenue procedure.

(4) If correction is accomplished under VCP or Audit CAP in accordance with the

requirements of this section 6.03, then any rollovers made from the plan pursuant to a

distributable event are deemed to have been made from an eligible retirement plan (as

defined in § 402(c)(8)(B)) for the purpose of determining whether the amounts qualify

as an eligible rollover distribution under § 402(c) or 403(b)(8) (including the

determination of excess contributions that are subject to the § 4973 excise tax).

.04 Correction of a failure to obtain spousal consent. (1) In general. Failures to

obtain spousal consent described in this section 6.04 may be corrected under VCP,

SCP, or Audit CAP. Normally, the correction method for a failure to obtain spousal

consent for a distribution that is subject to the spousal consent rules under

§§ 401(a)(11) and 417 is similar to the correction method described in Appendix A,

section .07. The Plan Sponsor must notify the affected participant and spouse (the

spouse to whom the participant was married at the time of the distribution), so that the

spouse can provide spousal consent to the distribution actually made or the participant

may repay the distribution and receive a qualified joint and survivor annuity.

(2) Alternative correction methods when spousal consent is not obtained. (a) In

general. As alternatives to the correction method in section 6.04(1), correction for a

failure to obtain spousal consent may be made under either section 6.04(2)(b) or

section 6.04(2)(c).

(b) QJSA option. In the event that spousal consent to the prior distribution is not

obtained (for example, because the spouse chooses not to consent, the spouse does

not respond to the notice, or the spouse cannot be located), the spouse is entitled to a

benefit under the plan equal to the portion of the qualified joint and survivor annuity that

would have been payable to the spouse upon the death of the participant had a

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qualified joint and survivor annuity been provided to the participant under the plan at

the annuity starting date for the prior distribution. Such spousal benefit must be

provided if a claim is made by the spouse.

consent to the prior distribution is not obtained, the plan may offer the spouse the

choice between (i) the survivor annuity benefit described in section 6.04(2)(b) or (ii) a

single-sum payment equal to the actuarial present value of that survivor annuity benefit

(calculated using the applicable interest rate and mortality table under § 417(e)(3)).

Any such single-sum payment is treated in the same manner as a distribution under

§ 402(c)(9) for purposes of rolling over the payment to an IRA or other eligible

retirement plan. In the event that the plan is subject to a restriction on the payment of

single sums pursuant to § 436(d) at the time the plan offers this choice to the spouse

and the spouse elects to receive a single-sum payment, the Plan Sponsor must

contribute to the plan the applicable amount under section 6.02(4)(e)(ii)(A).

.05 Determination letter application not permitted. (1) In general. A

determination letter application may not be submitted with a VCP submission.

(a) Issuance of compliance statement or closing agreement for Plan Document

Failures corrected through plan amendment under VCP or Audit CAP. The issuance of

a compliance statement or closing agreement for Plan Document Failures corrected

through plan amendment under VCP or Audit CAP does not constitute a determination

that the terms of the plan, including the corrective plan amendment, satisfy the

qualification requirements in form. See section 10.08(2)(a) and (b).

(b) Issuance of compliance statement or closing agreement for Operational

Failures corrected through plan amendment under VCP or Audit CAP. If a Plan

Sponsor submits a VCP filing correcting an Operational Failure through a plan

amendment or corrects such a failure under Audit CAP, and the plan amendment is

accepted as a proper correction, then the compliance statement under VCP or closing

agreement issued under Audit CAP constitutes a determination that the Operational

Failure has been corrected, but is not a determination that the terms of the plan,

including the corrective plan amendment, satisfy the qualification requirements in form.

See section 10.08(2)(c).

(2) Corrective amendments to Pre-approved Plans. (a) Effect of corrective

amendment. Generally, under VCP or Audit CAP, a Plan Sponsor that is an adopter of

a Pre-approved Plan or a § 403(b) Pre-approved Plan may amend its plan to correct a

Qualification Failure or a § 403(b) Failure (provided the requirements of EPCRS are

satisfied and the amendment satisfies the requirements of the Code). In some cases,

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the corrective amendment is not provided for among plan provision options that were

pre-approved when the opinion or advisory letter was issued with respect to the plan.

As a result, adopting such a corrective amendment would cause the Plan Sponsor to

lose reliance on the plan’s opinion or advisory letter, except in the limited

circumstances provided in section 6.05(2)(b).

(b) Exception for certain amendments. In the case of a Pre-approved Plan or a

§ 403(b) Pre-approved Plan, the adoption of a plan provision required to correct a

failure under VCP or Audit CAP that is not provided for in the adoption agreement will

not cause the Plan Sponsor to lose its reliance on the plan’s opinion or advisory letter,

provided that: (i) the corrective amendment would otherwise be permitted under the

rules for Pre-approved Plans or § 403(b) Pre-approved Plans, as applicable, and (ii) no

other modification has been made to the plan that would cause the plan to lose its

reliance on the opinion or advisory letter. If these conditions are satisfied, the Plan

Sponsor will be allowed to continue to rely on the plan’s opinion or advisory letter. In

addition, the adoption of the corrective amendment will not cause the Pre-approved

Plan to lose its eligibility to remain within the six-year remedial amendment cycle

provided for in Rev. Proc. 2016-37, as modified, on a continuing basis until the

expiration of the next six-year remedial amendment cycle described in section 16.01 of

Rev. Proc. 2016-37, as modified.

.06 Special rules relating to Excess Amounts. (1) Treatment of Excess

Amounts. A distribution of an Excess Amount is not eligible for the favorable tax

treatment accorded to distributions from Qualified Plans or § 403(b) Plans (such as

eligibility for tax-free rollover). Thus, for example, if such a distribution was contributed

to an IRA, the contribution is not a valid rollover contribution for purposes of

determining the amount of excess contributions (within the meaning of § 4973) to the

individual's IRA. A distribution of an Excess Amount is generally treated in the manner

described in section 3 of Rev. Proc. 92-93, 1992-2 C.B. 505 (relating to the corrective

disbursement of elective deferrals). The distribution must be reported on Form

1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans,

IRAs, Insurance Contracts, etc., for the year of distribution with respect to each

participant or beneficiary receiving such a distribution. Except as otherwise provided in

section 6.02(5)(c) with respect to recovery of small Overpayments, where an Excess

Amount has been or is being distributed, the Plan Sponsor must notify the recipient

that (a) an Excess Amount has been or will be distributed and (b) an Excess Amount is

not eligible for favorable tax treatment accorded to distributions from an eligible

retirement plan, as defined in § 402(c)(8)(B) (and, specifically, is not eligible for

rollover).

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(2) Correction of Excess Allocations. In general, an Excess Allocation is

corrected in accordance with the Reduction of Account Balance Correction Method set

forth in this paragraph. Under this method, the account balance of an employee who

received an Excess Allocation is reduced by the Excess Allocation (adjusted for

Earnings). If the Excess Allocation would have been allocated to other employees in

the year of the failure had the failure not occurred, then that amount (adjusted for

Earnings) is reallocated to those employees in accordance with the plan's allocation

formula. If the improperly allocated amount would not have been allocated to other

employees absent the failure, that amount (adjusted for Earnings) is placed in a

separate account that is not allocated on behalf of any participant or beneficiary (an

unallocated account) established for the purpose of holding Excess Allocations,

adjusted for Earnings, to be used to reduce employer contributions (other than elective

deferrals) in the current year or succeeding year. While such amounts remain in the

unallocated account, the employer is not permitted to make contributions to the plan

other than elective deferrals. Excess Allocations that are attributable to elective

deferrals or after-tax employee contributions (adjusted for Earnings) must be

distributed to the participant. For qualification purposes, an Excess Allocation that is

corrected pursuant to this paragraph is disregarded for purposes of §§ 402(g) and 415,

the ADP test of § 401(k)(3), and the ACP test of § 401(m)(2). If an Excess Allocation

resulting from a violation of § 415 consists of annual additions attributable to both

employer contributions and elective deferrals or after-tax employee contributions, then

the correction of the Excess Allocation is completed by first distributing the unmatched

employee’s after-tax contributions (adjusted for Earnings) and then the unmatched

employee’s elective deferrals (adjusted for Earnings). If any excess remains, and is

attributable to either elective deferrals or after-tax employee contributions that are

matched, the excess is apportioned first to after-tax employee contributions with the

associated matching employer contributions and then to elective deferrals with the

associated matching employer contributions. Any matching contribution or nonelective

employer contribution (adjusted for Earnings) which constitutes an Excess Allocation is

then forfeited and placed in an unallocated account established for the purpose of

holding Excess Allocations to be used to reduce employer contributions in the current

year and succeeding year. Such unallocated account is adjusted for Earnings. While

such amounts remain in the unallocated account, the employer is not permitted to

make contributions (other than elective deferrals) to the plan.

(3) Correction of Overpayments (defined benefit plans). An Overpayment from

a defined benefit plan is corrected in accordance with the rules set forth in this section

6.06(3) and Appendix B, section 2.05.

(a) In general, subject to the conditions set forth in section 4.05 (which permits

correction by plan amendment under VCP, Audit CAP, and, under limited

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circumstances, SCP), a Plan Sponsor may correct an Overpayment by adopting a

retroactive amendment to conform to the plan’s operation.

(b) If the Overpayment is not corrected by plan amendment, the Plan Sponsor

may correct the Overpayment in accordance with the correction methods set forth in

section 6.06(3)(c) and (d) and Appendix B, section 2.05. In those cases, the following

rules apply:

(i) With regard to Overpayments involving periodic payments, future payments

must be reduced as soon as practicable either to reflect the correct amount payable to

the Overpayment recipient under the terms of the plan, or to satisfy a limitation

provided in the Code or regulations;

(ii) Except as provided in section 6.02(5)(c) with respect to the recovery of small

Overpayments, the Plan Sponsor must notify the Overpayment recipient in writing that

the Overpayment is not eligible for favorable tax treatment accorded to distributions

from an eligible retirement plan, as defined in § 402(c)(8)(B) (and, specifically, is not

eligible for tax-free rollover); and

(iii) Except as provided in section 6.02(5)(c) with respect to the recovery of small

Overpayments, and except as otherwise provided in this section 6.06(3) and Appendix

B, section 2.05, to the extent the amount of an Overpayment adjusted for Earnings at

the plan’s earnings rate is not repaid to the plan, the Plan Sponsor or another person

must contribute the difference to the plan.

Overpayment correction method (including repayment through an installment

agreement) or the adjustment of future payments correction method, as described in

Appendix B, section 2.05(2). Plan Sponsors may permit an Overpayment recipient to

choose the method of repayment that will apply to the correction of the Overpayment.

(d) If the applicable requirements are satisfied, an Overpayment may be

corrected in accordance with the funding exception correction method described in

Appendix B, section 2.05(3), or the contribution credit correction method described in

Appendix B, section 2.05(4).

(i) In general, under the funding exception correction method, in the case of a

plan subject to § 436, no corrective payments are necessary with regard to an

Overpayment, provided that the certified or presumed AFTAP determined under § 436

that is applicable to the plan at the date of correction is equal to at least 100 percent

(or, in the case of a multiemployer plan, the plan’s most recent annual funding

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certification indicates that the plan is not in critical, critical and declining, or endangered

status, as defined in § 432, determined at the date of correction). As provided in

section 6.06(3)(b)(i), future benefit payments to an Overpayment recipient must be

reduced to the correct benefit payment amount. For purposes of EPCRS, no further

corrective payments from any party are required, no further reductions to future benefit

payments to an Overpayment recipient, or any spouse or beneficiary of an

Overpayment recipient, are permitted, and no further corrective payments from an

Overpayment recipient, or any spouse or beneficiary of an Overpayment recipient, are

permitted. See Appendix B, section 2.05(3), for additional details and eligibility

requirements regarding the funding exception correction method.

(ii) Under the contribution credit correction method, in general, the amount of

Overpayments required to be repaid to the plan is the amount of the Overpayments

reduced (but not below zero) by: (A) the cumulative increase in the plan’s minimum

funding requirements attributable to the Overpayments (including the increase

attributable to the overstatement of liabilities, whether funded through cash

contributions or through the use of a funding standard carryover balance, prefunding

balance, or funding standard account credit balance) beginning with (1) the plan year

for which the Overpayments are taken into account for funding purposes, through (2)

the end of the plan year preceding the plan year for which the corrected benefit

payment amount is taken into account for funding purposes; and (B) certain additional

contributions in excess of minimum funding requirements paid to the plan after the first

of the Overpayments was made. This reduction is referred to as a “contribution credit.”

As provided in section 6.06(3)(b)(i), future benefit payments to an Overpayment

recipient must be reduced to the correct benefit payment amount. For purposes of

EPCRS, if the amount of the Overpayments is reduced to zero after the contribution

credit is applied, no further corrective payments from any party are required, no further

reductions to future benefit payments to an Overpayment recipient, or any spouse or

beneficiary of an Overpayment recipient, are permitted, and no further corrective

payments from an Overpayment recipient, or any spouse or beneficiary of an

Overpayment recipient, are permitted. However, if a net Overpayment remains after

the application of the contribution credit, the Plan Sponsor or another party must take

further action to reimburse the plan for the remainder of the Overpayment. See

Appendix B, section 2.05(4), for additional details and eligibility requirements regarding

the contribution credit correction method.

(e) Depending on the nature of the Overpayment, other appropriate correction

methods may be used. An appropriate correction method may include using rules

similar to the correction methods described in Appendix B, section 2.05, but having the

Plan Sponsor or another person contribute the amount of the Overpayment (with

appropriate interest) to the plan instead of seeking recoupment from an Overpayment

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recipient. Any other correction method used must satisfy the correction principles of

section 6.02 and any other applicable rules in this revenue procedure.

(4) Correction of Overpayments (defined contribution plans and § 403(b) Plans).

An Overpayment from a defined contribution plan or § 403(b) Plan is corrected in

accordance with the rules set forth in this section 6.06(4) and Appendix B, section 2.04.

(a) Correction by plan amendment. In general, subject to the conditions set

forth in section 4.05 (which permits correction by plan amendment under VCP, Audit

CAP, and, under limited circumstances, SCP), a Plan Sponsor may correct an

Overpayment by amending the plan to conform to the plan’s operation.

(b) Rules relating to Overpayment correction methods. If the Overpayment is

not corrected by plan amendment, the Plan Sponsor may correct the Overpayment in

accordance with the correction methods set forth in sections 6.06(4)(c), (d), and (e),

and Appendix B, section 2.04. In those cases, the following rules apply:

(i) With regard to Overpayments involving periodic payments, future payments

must be reduced as soon as practicable either to reflect the correct amount payable to

the Overpayment recipient under the terms of the plan, or to satisfy a limitation

provided in the Code or regulations;

(ii) Except as provided in section 6.02(5)(c) with respect to the recovery of small

Overpayments, the Plan Sponsor must notify the Overpayment recipient in writing that

the Overpayment was not eligible for favorable tax treatment accorded to distributions

from an eligible retirement plan, as defined in § 402(c)(8)(B), (and, specifically, was not

eligible for tax-free rollover); and

(iii) Except as provided in section 6.02(5)(c) with respect to the recovery of small

Overpayments, to the extent the amount of an Overpayment adjusted for Earnings at

the plan’s earnings rate from the date of distribution to the date of the correction is not

repaid to the plan, the Plan Sponsor or another person must contribute the difference

to the plan. The preceding sentence does not apply when the failure arose solely

because a payment was made from the plan to an Overpayment recipient in the

absence of a distributable event (but was otherwise determined in accordance with the

terms of the plan (for example, an impermissible in-service distribution)).

corrected in accordance with the return of Overpayment correction method (including

repayment through an installment agreement). Under this method, the employer takes

reasonable steps to have the Overpayment repaid to the plan by the Overpayment

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recipient, adjusted for Earnings at the plan’s earnings rate from the date of the

distribution to the date of the correction of the Overpayment. Plan Sponsors may

permit an Overpayment recipient to choose the method of repayment that will apply to

the correction of the Overpayment.

(d) Unallocated account. Except as provided in section 6.06(4)(e), a corrected

Overpayment, adjusted for Earnings at the plan's earnings rate to the date of the

repayment, is to be placed in an unallocated account, as described in section 6.06(2),

to be used to reduce employer contributions (other than elective deferrals) in the

current year and succeeding year(s) (or, if the amount would have been allocated to

other eligible employees who were in the plan for the year of the failure if the failure

had not occurred, then that amount is reallocated to the other eligible employees in

accordance with the plan's allocation formula).

(e) Repayment by the Overpayment recipient. To the extent an Overpayment

results solely from a distribution of an Overpayment recipient’s benefit under the plan in

the absence of a distributable event but the Overpayment was otherwise determined in

accordance with the terms of the plan, any amount returned to the plan by the

Overpayment recipient is to be allocated to his or her account.

(f) Other appropriate correction methods. Depending on the nature of the

Overpayment, other appropriate correction methods may be used. An appropriate

correction method may include using rules similar to the correction method in section

6.06(4)(b) but having the employer or another person contribute the amount of the

Overpayment (with appropriate interest) to the plan instead of seeking recoupment

from an Overpayment recipient. Any other correction method used must satisfy the

correction principles of section 6.02 and any other applicable rules of this revenue

procedure.

.07 Correction of plan loan failures. (1) In general. Plan loan failures may be

corrected under VCP, SCP, or Audit CAP, unless otherwise specified in this section

6.07.

(2) Plan loan failures treated as deemed distributions under § 72(p). Unless

correction is made in accordance with section 6.07(3) (to the extent applicable), a

deemed distribution under § 72(p)(1) in connection with a failure relating to a plan loan

to a participant must be reported on Form 1099-R, Distributions From Pensions,

Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., with

respect to the affected participant, and any applicable income tax withholding amount

that was required to be paid in connection with the failure (see §1.72(p)-1, Q&A-15)

must be paid by the employer. In this case, the deemed distribution may be reported

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on Form 1099-R with respect to the affected participant for the year of correction

(instead of the year of the failure).

(3) Correction methods for certain § 72(p) plan loan failures. (a) In general. The

correction methods set forth in section 6.07(3)(b), (c), and (d) apply to plan loans that

do not comply with one or more requirements of § 72(p)(2); however, these correction

methods are not available if the maximum period for repayment of the loan pursuant to

§ 72(p)(2)(B) has expired. Further, the IRS reserves the right to limit the use of these

correction methods to situations that it considers appropriate, for example, if the loan

failure is caused by employer action. A deemed distribution corrected under section

6.07(3)(b), (c), or (d) is not required to be reported on Form 1099-R, and corrective

payments under section 6.07(3) do not result in the affected participant having

additional basis in the plan for purposes of determining the tax treatment of subsequent

distributions from the plan to the affected participant.

(b) Loans in excess of § 72(p)(2)(A). A failure of plan loan terms to satisfy

§ 72(p)(2)(A) may be corrected only under VCP or Audit CAP. The failure may be

corrected by a corrective payment to the plan based on the excess of the loan amount

over the maximum loan amount under § 72(p)(2)(A). In the event that loan repayments

were made in accordance with the amortization schedule for the loan before correction,

such prior repayments may be applied (i) solely to reduce the portion of the loan that

did not exceed the maximum loan amount under § 72(p)(2)(A) (so that the corrective

payment would equal the original loan excess plus interest thereon), (ii) to reduce the

loan excess to the extent of the interest thereon, with the remainder of the repayments

applied to reduce the portion of the loan that did not exceed the maximum loan amount

under § 72(p)(2)(A) (so that the corrective payment would equal the original loan

excess), or (iii) pro rata against the loan excess and the maximum loan amount under

§ 72(p)(2)(A) (so that the corrective payment would equal the outstanding balance

remaining on the original loan excess on the date that the corrective payment is made).

After the corrective payment is made, the loan may be reformed to amortize the

remaining principal balance as of the date of the corrective payment over the remaining

period of the original loan. This is permissible as long as the recalculated repayments

over the remaining loan period would not cause the loan to violate the maximum

repayment term requirement under § 72(p)(2)(B). The maximum repayment term is

determined from the date the original loan was made. In addition, the amortized

repayments determined for the remaining loan period must comply with the level

amortization requirement of § 72(p)(2)(C).

terms to satisfy the maximum repayment term requirement of § 72(p)(2)(B) or the level

amortization requirement of § 72(p)(2)(C) may be corrected only under VCP or Audit

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CAP. The failure may be corrected by a reamortization of the loan balance in

accordance with § 72(p)(2)(C) over the remainder of the maximum period that complies

with § 72(p)(2)(B), as measured from the original date of the loan.

(d) Defaulted loans. A failure to repay a loan in accordance with loan terms that

satisfy § 72(p)(2) may be corrected by (i) a single-sum corrective payment equal to the

amount that the affected participant would have paid to the plan if there had been no

failure to repay the plan, plus interest accrued on the missed payments, (ii)

reamortizing the outstanding balance of the loan, including accrued interest, over the

remaining payment schedule of the original term of the loan or the period remaining

had the loan been amortized over the maximum period that complies with

§ 72(p)(2)(B), as measured from the original date of the loan, or (iii) any combination of

(i) or (ii).

(e) No requirement for plan provisions. This section 6.07 applies even if the

plan does not require loans to satisfy the requirements of § 72(p)(2). However, under

the Department of Labor’s VFCP, to correct the ERISA fiduciary violations associated

with the failures described in section 6.07(3)(b), (c), and (d), the plan must include plan

provisions requiring that loans comply with § 72(p)(2)(A), (B), and (C).

(4) Failure to obtain spousal consent for a plan loan. (a) Spousal consent

obtained. The correction method for the failure to obtain spousal consent for a plan

loan is that the Plan Sponsor must notify the affected participant and spouse (the

spouse to whom the participant was married at the time of the plan loan), so that the

spouse can provide spousal consent to the plan loan.

(b) No spousal consent obtained. If spousal consent is not obtained, as

described in section 6.07(4)(a), the failure to obtain spousal consent for a plan loan

must be corrected under either VCP or Audit CAP.

(5) Number of loans exceeds a loan limitation established by plan. An

Operational Failure that results from a participant obtaining a number of loans that

exceeds the number of loans permitted under the terms of the plan may be corrected

by adopting a plan amendment in accordance with the correction method set forth in

Appendix B, section 2.07(3).

.08 Correction under statute or regulations. Generally, none of the correction

programs is available to correct failures that can be corrected under the Code and

related regulations. For example, as a general rule, a Plan Document Failure that is a

disqualifying provision for which the remedial amendment period under § 401(b) has

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not expired can be corrected under provisions of the Code through retroactive remedial

amendment.

.09 Matters subject to excise or other taxes. (1) General rule. Except as

provided in this revenue procedure, the correction programs are not available for

events for which the Code provides tax consequences other than plan disqualification

(such as the imposition of an excise tax or additional income tax). For example,

funding deficiencies (failures to make the required contributions to a plan subject to

§ 412), prohibited transactions, and failures to file the Form 5500 series cannot be

corrected under this revenue procedure.

(2) Section 4974. As part of VCP and Audit CAP, if a failure involves the failure

to satisfy the minimum required distribution requirements of § 401(a)(9), in appropriate

cases, the IRS will waive the excise tax under § 4974 applicable to plan participants or

beneficiaries. The waiver will be included in the compliance statement or in the closing

agreement in the case of Audit CAP. Under VCP, the Plan Sponsor, as part of the

submission, must request the waiver and, in cases where the participant subject to the

excise tax is either an owner-employee as defined in § 401(c)(3) or a 10 percent owner

of a corporation, the Plan Sponsor must also provide an explanation supporting the

request. Under Audit CAP, the Plan Sponsor must make a specific request for waiver

of the excise tax under § 4974. The Plan Sponsor should also provide an explanation

supporting the request for a waiver. Upon reviewing the request, the reasons for the

failure, and other facts or circumstances of the case under examination, the IRS will

determine whether it is appropriate to approve the waiver of the excise tax as part of

the closing agreement negotiated under Audit CAP.

(3) Section 4972. As part of VCP, if the failure involves a correction that

requires the Plan Sponsor to make a plan contribution that is not deductible, in

appropriate cases, the IRS will not pursue the excise tax under § 4972 on such

nondeductible contributions. The Plan Sponsor, as part of the submission must

request the relief and provide an explanation supporting the request.

(4) Section 4979. As part of VCP, if a failure results in excess contributions as

defined in § 4979(c) or excess aggregate contributions as defined in § 4979(d) under a

plan, in appropriate cases, the IRS will not pursue the excise tax under § 4979, for

example, where correction is made for any case in which the ADP test was timely

performed but, due to reliance on inaccurate data, resulted in an insufficient amount of

excess elective deferrals having been distributed to HCEs. The Plan Sponsor, as part

of the submission, must request the relief and provide an explanation supporting the

request.

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(5) Section 4973. Subject to section 6.03(4), as part of VCP, in appropriate

cases, the IRS will not pursue the excise tax under § 4973 relating to excess

contributions made to a § 403(b) Plan or IRA under any of the following circumstances:

(a) As part of the proposed correction for Overpayments, the Overpayment

recipient removes the Overpayment (adjusted for Earnings) from the Overpayment

recipient’s § 403(b) Plan or IRA and returns that amount to the plan.

(b) As part of the proposed correction for Excess Amounts, the recipient

removes the Excess Amount (adjusted for Earnings) from the recipient’s § 403(b) Plan

or IRA and reports that amount (reduced by any applicable after-tax employee

contribution) as a taxable distribution for the year in which the Excess Amount

(adjusted for Earnings) is removed from the recipient’s § 403(b) Plan or IRA. The

amount removed is generally taxed in a manner that is similar to the manner in which

the corrective disbursement of elective deferrals is taxed, as described in section 3 of

Rev. Proc. 92-93.

§ 4973 excise tax and provide an explanation supporting the request.

(6) Section 72(t). As part of VCP, in appropriate cases, the IRS will not pursue

the 10 percent additional income tax under § 72(t) (or will pursue only a portion thereof)

if, as part of the proposed correction of an Overpayment that occurred solely because

an employee received a distribution from his or her vested account balance that was

not a distributable event, the participant or beneficiary (“recipient”) returns the

improperly distributed amount, adjusted for Earnings, to the plan. If the improperly

distributed amount was rolled over to the recipient’s IRA, then correction will include

removing the amount improperly distributed and rolled over (adjusted for Earnings)

from the recipient’s IRA and returning that amount to the plan. In appropriate cases, as

a condition for not pursuing all or a portion of the additional tax, the IRS may require

the Plan Sponsor to pay a sanction not in excess of the 10 percent additional income

tax under § 72(t). The Plan Sponsor, as part of the submission, must request the relief

and provide an explanation supporting the request.

.10 Correction for § 403(b) Plans. (1) Correction for § 403(b) Plans generally.

Except as provided in sections 6.03(2) and 6.10(2), the correction for a § 403(b) Plan is

expected to be the same as the correction required for a Qualified Plan with the same

Failure (that is, a Plan Document Failure, Operational Failure, Demographic Failure, or

Employer Eligibility Failure).

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(2) Special correction principles. In general, a § 403(b) Failure can be corrected

by treating a contract as a § 403(c) annuity contract (or, if applicable, as an amount to

which § 61, 83, or 402(b) applies), such as for purposes of correcting an Employer

Eligibility Failure, a failure to provide for full vesting (including a failure to maintain a

separate account), or an exchange made to a vendor which is not part of the plan (and

for which there is no information sharing agreement). In addition, for purposes of this

revenue procedure, a § 403(b) Plan will be treated as having a Favorable Letter if

either (a) the employer is an eligible employer and, on or before December 31, 2009

(or the date a § 403(b) Plan is established, if later), the employer has adopted a written

§ 403(b) Plan that is intended to satisfy § 403(b) (including the regulations thereunder)

effective as of January 1, 2009 (or the first day of the plan year in which a § 403(b)

Plan is established, if later), or (b) the employer has failed to adopt a written § 403(b)

Plan timely and corrects the failure in accordance with section 6.10(3) below. In

addition, for purposes of section 4.04 (requiring that the Plan Sponsor or administrator

of the plan have established practices and procedures reasonably designed to promote

and facilitate overall compliance with applicable Code requirements in order to be

eligible for SCP to be available to correct Operational Failures and Plan Document

Failures), the requirement to have established practices and procedures only applies

for failures during periods after December 31, 2009.

(3) Correction for failure to adopt a written § 403(b) Plan timely. A failure to

adopt a written § 403(b) Plan timely in accordance with the final regulations under

§ 403(b) and Notice 2009-3 may be corrected under VCP or Audit CAP. The issuance

of a compliance statement or closing agreement for the failure to adopt a written

§ 403(b) Plan timely will result in the written § 403(b) Plan being treated as if it had

been adopted timely for the purpose of making available the extended remedial

amendment period set forth in Rev. Proc. 2017-18, 2017-5 I.R.B. 743, as modified by

Notice 2020-35, 2020-25 I.R.B. 948. However, the issuance of a compliance

statement or closing agreement does not constitute a determination as to whether the

written plan, as drafted, complies with the applicable requirements of § 403(b) of the

Code and the final § 403(b) regulations.

.11 Correction for SEPs and SIMPLE IRA Plans. (1) Correction for SEPs and

SIMPLE IRA Plans generally. Generally, the correction for a SEP or a SIMPLE IRA

Plan is expected to be similar to the correction required for a Qualified Plan with a

similar Qualification Failure (that is, a Plan Document Failure, Operational Failure,

Demographic Failure, or Employer Eligibility Failure).

(2) Special correction for SEPs and SIMPLE IRA Plans. In any case in which

correction under section 6.11(1) is not feasible for a SEP or SIMPLE IRA Plan or in any

other case determined by the IRS in its discretion (including failures relating to

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§ 402(g), 415, or 401(a)(17), failures relating to deferral percentages, discontinuance of

contributions to a SARSEP or SIMPLE IRA Plan, and retention of Excess Amounts for

cases in which there has been no violation of a statutory limitation with respect to a

SEP or SIMPLE IRA Plan), the IRS may provide for a different correction.

(3) Correction of failure to satisfy deferral percentage test. If the failure involves

a violation of the deferral percentage test under § 408(k)(6)(A)(iii) applicable to a

SARSEP, the failure may be corrected in either of the following ways:

(a) The Plan Sponsor may make contributions that are 100 percent vested to all

eligible nonhighly compensated employees (to the extent permitted by § 415)

necessary to raise the deferral percentage to an amount sufficient to pass the test.

This amount may be calculated as the same percentage of compensation (regardless

of the terms of the SEP); or

(b) The Plan Sponsor may effect distribution of excess contributions, adjusted

for Earnings through the date of correction, to highly compensated employees to

correct the failure. The Plan Sponsor must also contribute to the SEP an amount equal

to the total amount distributed. This amount must be allocated to (i) current employees

who were nonhighly compensated employees in the year of the failure, (ii) current

nonhighly compensated employees who were nonhighly compensated employees in

the year of the failure, or (iii) employees (both current and former) who were nonhighly

compensated employees in the year of the failure.

(4) Treatment of undercontributions to a SEP or a SIMPLE IRA Plan. (a) Makeup contributions; Earnings. The Plan Sponsor should correct undercontributions to a

SEP or a SIMPLE IRA Plan by contributing make-up amounts that are fully vested,

adjusted for Earnings from the date of the failure to the date of correction.

(b) Earnings adjustment methods. Insofar as SEP and SIMPLE IRA Plan assets

are held in IRAs, there is no earnings rate under the SEP or SIMPLE IRA Plan as a

whole. If it is not feasible to make a reasonable estimate of what the actual investment

results would have been, a reasonable interest rate may be used.

(5) Treatment of Excess Amounts under a SEP or a SIMPLE IRA Plan. (a)

Distribution of Excess Amounts. For purposes of this section 6.11, an Excess Amount

is an amount contributed on behalf of an employee that is in excess of an employee’s

benefit under the plan, or an elective deferral in excess of the limitations of § 402(g) or

408(k)(6)(A)(iii). If an Excess Amount is attributable to elective deferrals, the Plan

Sponsor may effect distribution of the Excess Amount, adjusted for Earnings through

the date of correction, to the affected participant. The amount distributed to the

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affected participant is includible in gross income in the year of distribution. The

distribution is reported on Form 1099-R, Distributions From Pensions, Annuities,

Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. for the year of

distribution with respect to each participant receiving the distribution. In addition, the

Plan Sponsor must inform affected participants that the distribution of an Excess

Amount is not eligible for favorable tax treatment accorded to distributions from a SEP

or a SIMPLE IRA Plan (and, specifically, is not eligible for tax-free rollover). If the

Excess Amount is attributable to employer contributions, the Plan Sponsor may effect

distribution of the employer Excess Amount, adjusted for Earnings through the date of

correction, to the Plan Sponsor. The amount distributed to the Plan Sponsor is not

includible in the gross income of the affected participant. The Plan Sponsor is not

entitled to a deduction for such employer Excess Amount. The distribution is reported

on Form 1099-R issued to the participant indicating the taxable amount as zero.

(b) Retention of Excess Amounts. If the failure involves an Excess Amount

under a SEP or a SIMPLE IRA Plan and the Plan Sponsor retains the Excess Amount

in the SEP or SIMPLE IRA Plan, a sanction applies, in addition to the SEP or SIMPLE

IRA Plan user fee described in Appendix A of Rev. Proc. 2021-4 (and its annual

successors). A sanction equal to at least 10 percent of the Excess Amount with no

adjustment for Earnings is imposed. In addition, the Plan Sponsor is not entitled to a

deduction for an Excess Amount retained in the SEP or SIMPLE IRA Plan. In the case

of an Excess Amount retained in a SEP that is attributable to a § 415 failure, the

Excess Amount, adjusted for Earnings through the date of correction, must reduce an

affected participant’s applicable § 415 limit for the year following the year of correction

(or for the year of correction if the Plan Sponsor so chooses), and subsequent years,

until the excess is eliminated.

SIMPLE IRA Plan, whether attributable to elective deferrals or employer contributions,

is $250 or less, the Plan Sponsor is not required to distribute the Excess Amount and

the sanction described in section 6.11(5)(b) does not apply.

.12 Confidentiality and disclosure. Because each correction program relates

directly to the enforcement of Code requirements, the information received or

generated by the IRS under the program is subject to the confidentiality requirements

of § 6103 and is not a written determination within the meaning of § 6110.

.13 No effect on other law. Correction under these programs has no effect on

the rights or obligations of any party under any other law, including the rights of any

persons and the obligations of fiduciaries or employers under Title I of ERISA. The

Department of Labor maintains the VFCP, under which certain ERISA fiduciary

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violations may be corrected. The Department of Labor also maintains a Delinquent

Filer Voluntary Compliance Program under which certain failures to comply with the

annual reporting requirements (Form 5500 series) under ERISA may be corrected.

PART IV. SELF-CORRECTION (SCP)

SECTION 7. AVAILABILITY OF SCP FOR CERTAIN OPERATIONAL FAILURES

AND PLAN DOCUMENT FAILURES

.01 In general. (1) Operational Failures. The requirements of this section 7 are

satisfied with respect to an Operational Failure if the Plan Sponsor of a Qualified Plan,

a § 403(b) Plan, a SEP, or a SIMPLE IRA Plan satisfies the requirements of section

7.02, and either section 8 (relating to insignificant Operational Failures), or, in the case

of a Qualified Plan or a § 403(b) Plan, section 9 (relating to significant Operational

Failures).

(2) Plan Document Failures. The requirements of this section 7 are satisfied

with respect to an eligible Plan Document Failure if the Plan Sponsor of a Qualified

Plan or a § 403(b) Plan satisfies the requirements of section 7.03 and section 9.

.02 Operational Failures. (1) In general. Operational Failures may be corrected

under SCP in accordance with the correction principles and rules of general

applicability set forth in section 6.

(2) Corrective amendments for Operational Failures. Operational Failures may

be corrected under SCP by adoption of a plan amendment that conforms the terms of

the plan to the plan’s prior operations, provided the requirements of section 4.05(2) are

satisfied.

(3) Plan loan failures. The following plan loan failures may be corrected under

SCP: defaulted loans (described in section 6.07(3)(d)); the failure to obtain spousal

consent (described in section 6.07(4)(a)); and the failure to abide by a limitation on the

number of plan loans permitted per participant as set forth under the terms of the plan

(described in section 6.07(5)).

.03 Plan Document Failures. An eligible Plan Document Failure, as described in

section 4.01(1)(b), may be corrected under SCP provided that the requirements

described in section 4.05(2)(c)(i) (Favorable Letter requirement) and 4.05(2)(c)(ii)

(treating Plan Document Failures under SCP as significant failures) are satisfied.

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SECTION 8. SELF-CORRECTION OF INSIGNIFICANT OPERATIONAL FAILURES

.01 Requirements. The requirements of this section 8 are satisfied with respect

to an Operational Failure if the Plan Sponsor of a Qualified Plan, a § 403(b) Plan, a

SEP, or a SIMPLE IRA Plan corrects the Operational Failure and, given all the facts

and circumstances, the Operational Failure is insignificant. This section 8 is available

for correcting an insignificant Operational Failure even if the plan or Plan Sponsor is

Under Examination and even if the Operational Failure is discovered on examination.

.02 Factors. The factors to be considered in determining whether an

Operational Failure under a plan is insignificant include, but are not limited to: (1)

whether other failures occurred during the period being examined (for this purpose, a

failure is not considered to have occurred more than once merely because more than

one participant is affected by the failure); (2) the percentage of plan assets and

contributions involved in the failure; (3) the number of years the failure occurred; (4) the

number of participants affected relative to the total number of participants in the plan;

(5) the number of participants affected as a result of the failure relative to the number

of participants who could have been affected by the failure; (6) whether correction was

made within a reasonable time after discovery of the failure; and (7) the reason for the

failure (for example, data errors such as errors in the transcription of data, the

transposition of numbers, or minor arithmetic errors). No single factor is determinative.

Additionally, factors (2), (4), and (5) should not be interpreted to exclude small

businesses.

.03 Multiple failures. In the case of a plan with more than one Operational

Failure in a single year, or Operational Failures that occur in more than one year, the

Operational Failures are eligible for correction under this section 8 only if all of the

Operational Failures are insignificant in the aggregate. Operational Failures that have

been corrected under SCP in section 9 and VCP in sections 10 and 11 are not taken

into account for purposes of determining if Operational Failures are insignificant in the

aggregate.

.04 Examples. (1) In general. The following examples illustrate the application

of this section 8. The IRS plans to provide additional examples illustrating whether an

Operational Failure is insignificant. The additional examples will be provided on the

IRS.gov website. It is expected that a link to these examples will appear on the

“Correcting Plan Errors” webpage on the IRS.gov website.

(2) Assumptions for examples in section 4.04. It is assumed, in each example,

that the eligibility requirements of section 4 relating to SCP (for example, the

requirements of section 4.04 relating to established practices and procedures) have

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been satisfied and that no Operational Failures occurred other than the Operational

Failures identified below.

Example 1: In 1991, Employer X established Plan A, a profit-sharing plan that satisfies the

requirements of § 401(a) in form. In 2005, the benefits of 50 of the 250 participants in Plan A were

limited by § 415(c). However, when the IRS examined Plan A in 2008, it discovered that, during the

2005 limitation year, the annual additions allocated to the accounts of 3 of these employees exceeded

the maximum limitations under § 415(c). Employer X contributed $3,500,000 to the plan for the plan

year. The amount of the excesses totaled $4,550. Under these facts, because the number of

participants affected by the failure relative to the total number of participants who could have been

affected by the failure, and the monetary amount of the failure relative to the total employer contribution

to the plan for the 2005 plan year, are insignificant, the § 415(c) failure in Plan A that occurred in 2005

would be eligible for correction under this section 8.

Example 2: The facts are the same as in Example 1, except that the failure to satisfy § 415

occurred during each of the 2005 and 2007 limitation years. In addition, the three participants affected

by the § 415 failure were not identical each year. The fact that the § 415 failures occurred during more

than one limitation year does not cause the failures to be significant; accordingly, the failures are still

eligible for correction under this section 8.

Example 3: The facts are the same as in Example 1, except that the annual additions of 18 of

the 50 employees whose benefits were limited by § 415(c) nevertheless exceeded the maximum

limitations under § 415(c) during the 2005 limitation year, and the amount of the excesses ranged from

$1,000 to $9,000, and totaled $150,000. Under these facts, taking into account the number of

participants affected by the failure relative to the total number of participants who could have been

affected by the failure for the 2005 limitation year (and the monetary amount of the failure relative to the

total employer contribution), the failure is significant. Accordingly, the § 415(c) failure in Plan A that

occurred in 2005 is ineligible for correction under this section 8 as an insignificant failure.

Example 4: Employer J maintains Plan C, a money purchase pension plan established in 1992.

The plan document satisfies the requirements of § 401(a). The formula under the plan provides for an

employer contribution equal to 10% of compensation, as defined in the plan. During its examination of

the plan for the 2005 plan year, the IRS discovered that the employee responsible for entering data into

the employer's computer made minor arithmetic errors in transcribing the compensation data with

respect to 6 of the plan's 40 participants, resulting in excess allocations to those 6 participants' accounts.

Under these facts, the number of participants affected by the failure relative to the number of participants

that could have been affected is insignificant, and the failure is due to minor data errors. Thus, the

failure occurring in 2005 is insignificant and therefore eligible for correction under this section 8.

Example 5: Public School maintains for its 200 employees a salary reduction § 403(b) Plan

(“Plan B”) that is intended to satisfy the requirements of § 403(b). The business manager has primary

responsibility for administering Plan B, in addition to other administrative functions within Public School.

During the 2005 plan year, a former employee should have received an additional minimum required

distribution of $278 under § 403(b)(10). Another participant received an impermissible hardship

withdrawal of $2,500. Another participant made elective deferrals of which $1,000 was in excess of the

§ 402(g) limit. Under these facts, even though multiple failures occurred in a single plan year, the

failures are eligible for correction under this section 8 because in the aggregate the failures are

insignificant.

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SECTION 9. SELF-CORRECTION OF CERTAIN SIGNIFICANT OPERATIONAL

FAILURES AND PLAN DOCUMENT FAILURES

.01 Requirements. The requirements of this section 9 are satisfied with respect

to a significant Operational Failure or a Plan Document Failure if the Plan Sponsor of a

Qualified Plan or § 403(b) Plan corrects the failure, and the correction is either

completed or, in the case of an Operational Failure, is substantially completed (in

accordance with section 9.03) by the last day of the correction period described in

section 9.02.

.02 Correction period. (1) End of correction period. The last day of the

correction period is the last day of the third plan year following the plan year for which

the failure occurred. However, in the case of a failure to satisfy the requirements of

§ 401(k)(3) or 401(m)(2), the correction period does not end until the last day of the

third plan year following the plan year that includes the last day of the additional period

for correction permitted under § 401(k)(8) or 401(m)(6). If a § 403(b) Plan does not

have a designated plan year, the plan year is deemed to be the calendar year for

purposes of this section 9.02.

(2) Extension of correction period for Transferred Assets. In the case of an

Operational Failure or Plan Document Failure that relates only to Transferred Assets,

or to a plan assumed in connection with a corporate merger, acquisition, or other

similar employer transaction, the correction period will not end before the last day of

the first plan year that begins after the corporate merger, acquisition, or other similar

employer transaction between the Plan Sponsor and the sponsor of the transferor plan

or the prior sponsor of an assumed plan.

(3) Effect of examination. The correction period for an Operational Failure or

Plan Document Failure that occurs for any plan year ends, in any event, on the first

date the plan or Plan Sponsor is Under Examination for that plan year (determined

without regard to the second sentence of section 9.02). (But see section 9.03 for

special rules permitting completion of correction of an Operational Failure after the end

of the correction period.)

.03 Substantial completion of correction. Correction of an Operational Failure is

substantially completed by the last day of the correction period only if the requirements

of either paragraph (1) or (2) of this section 9.03 are satisfied.

(1) The requirements of this paragraph (1) are satisfied if:

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(a) during the correction period, the Plan Sponsor is reasonably prompt in

identifying the Operational Failure, formulating a correction method, and initiating

correction in a manner that demonstrates a commitment to completing correction of the

failure as expeditiously as practicable; and

(b) within 120 days after the last day of the correction period, the Plan Sponsor

completes correction of the failure.

(2) The requirements of this paragraph (2) are satisfied if:

(a) during the correction period, correction is completed with respect to 65

percent of all participants affected by the Operational Failure; and

(b) thereafter, the Plan Sponsor completes correction of the Operational Failure

with respect to the remaining affected participants in a diligent manner.

.04 Examples. The following examples illustrate the application of this section 9.

It is assumed, in each example, that the eligibility requirements of section 4 relating to

SCP have been met.

Example 1: Employer Z established a qualified defined contribution plan in 2017 and received a

favorable determination letter. During 2021, while doing a self-audit of the operation of the plan for the

2020 plan year, the plan administrator discovered that, despite the practices and procedures established

by Employer Z with respect to the plan, several employees eligible to participate in the plan were

excluded from participation. The administrator also found that for 2020 Operational Failures occurred

because the elective deferrals of additional employees exceeded the § 402(g) limit and Employer Z

failed to make the required top-heavy minimum contribution. In addition, during the review of the

administration for the 2020 year, it was found that the plan administrator intended to implement

correction for the failure to satisfy the ADP test (as described in § 401(k)(3)) for the 2019 plan year.

During the 2023 plan year, the Plan Sponsor made QNECs on behalf of the excluded employees,

distributed the excess deferrals to the affected participants, and made a top-heavy minimum contribution

to all participants entitled to that contribution for the 2020 plan year. Each corrective contribution and

distribution was credited with Earnings at a rate appropriate for the plan from the date the corrective

contribution or distribution should have been made to the date of correction. The failed ADP test for

2019 was corrected by making corrective contributions, adjusted for Earnings, on behalf of nonhighly

compensated employees using the method described in Appendix A, section .03. Under these facts, the

Plan Sponsor has corrected the ADP test failure for the 2019 plan year and the Operational Failures for

the 2020 plan year within the correction period and thus satisfied the requirements of this section 9.

Example 2: Employer A established a qualified defined contribution plan, Plan A, in 2007 and

has received a favorable determination letter for the applicable law changes. In April 2021, Employer A

purchased all of the stock of Employer B, a wholly-owned subsidiary of Employer C. Employees of

Employer B participated in Plan C, a qualified defined contribution plan sponsored by Employer C.

Following Employer A’s review of Plan C, Employer A and Employer C agreed that Plan A would accept

a transfer of plan assets from Plan C attributable to the account balances of the employees of Employer

B who had participated in Plan C. As part of this agreement, Employer C represented to Employer A

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that Plan C was tax qualified. Employers A and C also agreed that such transfer would be in

accordance with § 414(l) and §1.414(l)-1 and addressed issues related to costs associated with the

transfer. Following the transaction, the employees of Employer B began participation in Plan A.

Effective July 1, 2021, Plan A accepted the transfer of plan assets from Plan C. After the transfer,

Employer A determined that all the participants in one division of Employer B had been incorrectly

excluded from allocation of the profit-sharing contributions for the 2016 and 2017 plan years. During

2022, Employer A made corrective contributions on behalf of the affected participants. The corrective

contributions were credited with Earnings at a rate appropriate for the plan from the date the corrective

contributions should have been made to the date of correction and Employer A otherwise complied with

the requirements of SCP. Under these facts, Employer A has, within the correction period, corrected the

Operational Failures for the 2016 and 2017 plan years with respect to the assets transferred to Plan A,

and thus satisfied the requirements of this section 9.

PART V. VOLUNTARY CORRECTION PROGRAM WITH IRS APPROVAL (VCP)

SECTION 10. VCP PROCEDURES

.01 VCP pre-submission conference. (1) Effective January 1, 2022, prior to

submitting a VCP application, a representative of a Plan Sponsor may request an

anonymous VCP pre-submission conference regarding corrective actions with respect

to any failure that is eligible to be submitted under VCP. A VCP pre-submission

conference may be requested only (1) for matters on which a compliance statement

may be issued under this revenue procedure, (2) with respect to requested correction

methods that are not described as safe harbor correction methods in Appendix A or B,

and (3) if the Plan Sponsor is eligible and intends to submit an application under VCP.

VCP pre-submission conferences are held only at the discretion of the IRS, and as

time permits.

(2) The Plan Sponsor’s representative must submit the VCP pre-submission

conference request via the Pay.gov website by submitting a Form 8950, Application for

Voluntary Correction Program (VCP) Submission Under the Employee Plans

Compliance Resolution System. The request should also include (1) a description of

the failure(s), including how and why the failure(s) occurred; (2) a description of the

proposed method(s) of correction; (3) a description of all relevant facts, including the

type of affected participants (for example, highly compensated employees or nonhighly

compensated employees); (4) plan provisions and amendments that are relevant to the

request; and (5) any other information the IRS would need to evaluate the request. It is

anticipated that the published IRS instructions associated with the Form 8950 will be

modified in order to provide specificity on the information that needs to be included with

the VCP pre-submission conference request.

(3) At the conference, the IRS will provide the representative of the Plan

Sponsor with oral feedback regarding the failure(s) and proposed correction method(s)

described in the request. Any discussion of substantive issues at the conference,

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however, is advisory only, is not binding on the IRS, and cannot be relied upon as a

basis for obtaining relief under EPCRS or retroactive relief under the provisions of

§ 7805(b). After the conference, the IRS will provide a written confirmation that the

conference took place, and the matter will be closed. If the Plan Sponsor subsequently

files a VCP submission regarding the issues discussed, the Plan Sponsor must follow

the procedures set forth in this section 10 and section 11 (which require submission of

a new Form 8950 and payment of an applicable user fee).

.02 VCP requirements. The requirements of VCP are satisfied with respect to a

failure if, on the Pay.gov website, the Plan Sponsor files a VCP submission and pays

the applicable user fee set forth in Appendix A of Rev. Proc. 2021-4 (and its annual

successors), in accordance with the requirements of this section 10 and section 11,

and implements the corrective actions and satisfies any

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