# Bulletin No. 2021–31

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3Af0c24b6357a2b90f

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

HIGHLIGHTS
OF THIS ISSUE




Bulletin No. 2021–31
August 2, 2021

These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

ADMINISTRATIVE
Announcement 2021-12, page 267.

The Office of Professional Responsibility (OPR) announces recent disciplinary sanctions involving attorneys, certified public accountants, enrolled agents, enrolled actuaries, enrolled
retirement plan agents, and appraisers. These individuals are
subject to the regulations governing practice before the Internal Revenue Service (IRS), which are set out in Title 31, Code
of Federal Regulations, Part 10, and which are published in
pamphlet form as Treasury Department Circular No. 230.
The regulations prescribe the duties and restrictions relating
to such practice and prescribe the disciplinary sanctions for
violating the regulations.

EMPLOYEE PLANS
Notice 2021-44, page 166.

This notice sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for July
2021 used under § 417(e)(3)(D), the 24-month average segment rates applicable for July 2021, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)
(iv).

Rev. Proc. 2021-30, page 172.

Rev. Proc. 2021-30 adds two new benefit overpayment correction methods that encourage employers to avoid seeking

Finding Lists begin on page ii.

recoupment of benefit overpayments made to participants
and beneficiaries, either by not requiring correction if the
plan satisfies a specified funding level, or by limiting the
amount to be recouped under certain circumstances. In addition, the revenue procedure eliminates the VCP anonymous
submission procedure and adds an anonymous, no-fee, VCP
pre-submission conference procedure. The revenue procedure also expands correction by plan amendment under SCP,
extends the end of the SCP correction period for significant
failures by one year, and extends the sunset of the safe harbor correction method for certain missed elective deferrals
by three years.

INCOME TAX
Notice 2021-45, page 170.

This notice advises State and local housing credit agencies
that allocate low-income housing tax credits under § 42 of
the Internal Revenue Code of the county and parish-level populations residing in a qualified disaster zone to use in calculating the applicable dollar limitation for 2021 and 2022 as
provided in section 305 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Pub. L. 116-260) (Act).

Rev. Rul. 2021-14, page 164.

Federal rates; adjusted federal rates; adjusted federal longterm rate, and the long-term tax exempt rate. For purposes
of sections 382, 1274, 1288, 7872 and other sections of
the Code, tables set forth the rates for August 2021.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.

Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

August 2, 2021 

Bulletin No. 2021–31

Part I
Section 1274.—
Determination of Issue
Price in the Case of Certain
Debt Instruments Issued for
Property
(Also Sections 42, 280G, 382, 467, 468, 482, 483,
1288, 7520, 7872.)

Rev. Rul. 2021-14
This revenue ruling provides various
prescribed rates for federal income tax

AFR
110% AFR
120% AFR
130% AFR
AFR
110% AFR
120% AFR
130% AFR
150% AFR
175% AFR
AFR
110% AFR
120% AFR
130% AFR

Short-term adjusted AFR
Mid-term adjusted AFR
Long-term adjusted AFR

August 2, 2021

purposes for August 2021 (the current
month). Table 1 contains the shortterm, mid-term, and long-term applicable federal rates (AFR) for the current
month for purposes of section 1274(d)
of the Internal Revenue Code. Table 2
contains the short-term, mid-term, and
long-term adjusted applicable federal
rates (adjusted AFR) for the current
month for purposes of section 1288(b).
Table 3 sets forth the adjusted federal long-term rate and the long-term
tax-exempt rate described in section
382(f). Table 4 contains the appropri-

ate percentages for determining the
low-income housing credit described in
section 42(b)(1) for buildings placed in
service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service
after July 30, 2008, shall not be less
than 9%. Finally, Table 5 contains the
federal rate for determining the present
value of an annuity, an interest for life
or for a term of years, or a remainder or
a reversionary interest for purposes of
section 7520.

REV. RUL. 2021-14 TABLE 1
Applicable Federal Rates (AFR) for August 2021
Period for Compounding
Annual
Semiannual
Quarterly
Short-term
0.19%
0.19%
0.19%
0.21%
0.21%
0.21%
0.23%
0.23%
0.23%
0.25%
0.25%
0.25%
Mid-term
1.00%
1.00%
1.00%
1.10%
1.10%
1.10%
1.20%
1.20%
1.20%
1.30%
1.30%
1.30%
1.51%
1.50%
1.50%
1.76%
1.75%
1.75%
Long-term
1.89%
1.88%
1.88%
2.08%
2.07%
2.06%
2.27%
2.26%
2.25%
2.45%
2.44%
2.43%

Annual
0.14%
0.76%
1.44%

REV. RUL. 2021-14 TABLE 2
Adjusted AFR for August 2021
Period for Compounding
Semiannual
0.14%
0.76%
1.43%

164

Monthly
0.19%
0.21%
0.23%
0.25%
1.00%
1.10%
1.20%
1.30%
1.50%
1.74%
1.87%
2.06%
2.25%
2.43%

Quarterly
0.14%
0.76%
1.43%

Monthly
0.14%
0.76%
1.43%

Bulletin No. 2021–31

REV. RUL. 2021-14 TABLE 3
Rates Under Section 382 for August 2021
Adjusted federal long-term rate for the current month
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal
long-term rates for the current month and the prior two months.)

1.44%
1.58%

REV. RUL. 2021-14 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for August 2021
Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July
30, 2008, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit
7.33%
Appropriate percentage for the 30% present value low-income housing credit
3.14%

REV. RUL. 2021-14 TABLE 5
Rate Under Section 7520 for August 2021
Applicable federal rate for determining the present value of an annuity, an interest for life or a
term of years, or a remainder or reversionary interest

Section 42.—Low-Income
Housing Credit
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2021. See Rev. Rul. 2021-14, page 164.

Section 280G.—Golden
Parachute Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2021. See Rev. Rul. 2021-14, page 164.

Section 382.—Limitation
on Net Operating Loss
Carryforwards and
Certain Built-In Losses
Following Ownership
Change
The adjusted applicable federal long-term rate
is set forth for the month of August 2021. See Rev.
Rul. 2021-14, page 164.

Section 467.—Certain
Payments for the Use of
Property or Services
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2021. See Rev. Rul. 2021-14, page 164.

Section 468.—Special
Rules for Mining and Solid
Waste Reclamation and
Closing Costs
The applicable federal short-term rates are set
forth for the month of August 2021. See Rev. Rul.
2021-14, page 164.

Section 482.—Allocation
of Income and Deductions
Among Taxpayers
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2021. See Rev. Rul. 2021-14, page 164.

1.2%

Section 483.—Interest on
Certain Deferred Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2021. See Rev. Rul. 2021-14, page 164.

Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of
August 2021. See Rev. Rul. 2021-14, page 164.

Section 7520.—Valuation
Tables
The applicable federal mid-term rates are set
forth for the month of August 2021. See Rev. Rul.
2021-14, page 164.

Section 7872.—Treatment
of Loans With BelowMarket Interest Rates
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2021. See Rev. Rul. 2021-14, page 164.

Bulletin No. 2021–31

165

August 2, 2021

Part III
Update for Weighted
Average Interest Rates,
Yield Curves, and Segment
Rates
Notice 2021-44
This notice provides guidance on the
corporate bond monthly yield curve, the
corresponding spot segment rates used
under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the
Internal Revenue Code. In addition, this
notice provides guidance as to the interest
rate on 30-year Treasury securities under
§ 417(e)(3)(A)(ii)(II) as in effect for plan
years beginning before 2008 and the 30year Treasury weighted average rate under
§ 431(c)(6)(E)(ii)(I).
YIELD CURVE AND SEGMENT
RATES
Section 430 specifies the minimum
funding requirements that apply to sin-

Applicable Month
July 2021

gle-employer plans (except for CSEC
plans under § 414(y)) pursuant to § 412.
Section 430(h)(2) specifies the interest rates that must be used to determine
a plan’s target normal cost and funding
target. Under this provision, present value is generally determined using three
24-month average interest rates (“segment rates”), each of which applies to
cash flows during specified periods. To
the extent provided under § 430(h)(2)
(C)(iv), these segment rates are adjusted
by the applicable percentage of the 25year average segment rates for the period
ending September 30 of the year preceding the calendar year in which the plan
year begins.1 However, an election may
be made under § 430(h)(2)(D)(ii) to use
the monthly yield curve in place of the
segment rates.
Notice 2007-81, 2007-44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, and
the 24-month average corporate bond
segment rates used to compute the target
normal cost and the funding target. Consistent with the methodology specified in

Notice 2007-81, the monthly corporate
bond yield curve derived from June 2021
data is in Table 2021-6 at the end of this
notice. The spot first, second, and third
segment rates for the month of June 2021
are, respectively, 0.63, 2.70, and 3.32.
The 24-month average segment rates
determined under § 430(h)(2)(C)(i)
through (iii) must be adjusted pursuant to
§ 430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average
segment rates.
The 25-year average segment rates for
plan years beginning in 2020 and 2021
were published Notice 2019-51, 2019-41
I.R.B. 866, and Notice 2020-72, 2020-40
I.R.B. 789, respectively.
24-MONTH AVERAGE CORPORATE
BOND SEGMENT RATES
The three 24-month average corporate
bond segment rates applicable for July
2021 without adjustment for the 25-year
average segment rate limits are as follows:

24-Month Average Segment Rates Without 25-Year Average Adjustment
First Segment
Second Segment
1.20
2.73

25-YEAR AVERAGE SEGMENT
RATES
Section 9706(a) of the American Rescue Plan Act of 2021, Pub. L. No. 1172 (ARP), which was enacted on March
11, 2021, changes the 25-year average
segment rates and the applicable minimum and maximum percentages used
under § 430(h)(3)(C)(iv) of the Code to
adjust the 24-month average segment
rates. Prior to this change, the applicable minimum and maximum percentages

were 90% and 110% for a plan year beginning in 2020, and 85% and 115% for
a plan year beginning in 2021, respectively. After this change, the applicable
minimum and maximum percentages are
95% and 105% for a plan year beginning
in 2020 or 2021. In addition, pursuant
to this change, any 25-year average segment rate that is less than 5% is deemed
to be 5%.2
Pursuant to § 9706(c)(1) of ARP, these
changes apply with respect to plan years
beginning on or after January 1, 2020.

Third Segment
3.42

However, § 9706(c)(2) of ARP provides
that a plan sponsor may elect not to have
these changes apply to any plan year beginning before January 1, 2022.3
The adjusted 24-month average segment rates set forth in the chart below
reflect § 430(h)(2)(C)(iv) of the Code as
amended by § 9706(a) of ARP. These adjusted 24-month average segment rates
apply only for plan years for which an
election under § 9706(c)(2) of ARP is not
in effect. For a plan year for which such
an election does not apply, the 24-month

Pursuant to § 433(h)(3)(A), the 3rd segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount
of the full funding limitation under § 433(c)(7)(C)).
2
Pursuant to this change, the 25-year averages of the first segment rate for 2020 and 2021 are increased to 5.00% because those 25-year averages as originally published are below 5.00%.
3
This election may be made either for all purposes for which the amendments under § 9706 of ARP apply or solely for purposes of determining the adjusted funding target attainment percentage under § 436 of the Code for the plan year.
1

August 2, 2021

166

Bulletin No. 2021–31

averages applicable for July 2021, adjusted to be within the applicable minimum

For Plan Years
Beginning In

and maximum percentages of the corresponding 25-year average segment rates

in accordance with § 430(h)(2)(C)(iv) of
the Code, are as follows:

Adjusted 24-Month Average Segment Rates
Applicable
First
Second
Month
Segment
Segment

Third
Segment

2020

July 2021

4.75

5.50

6.27

2021

July 2021

4.75

5.36

6.11

The adjusted 24-month average segment rates set forth in the chart below do
not reflect the changes to § 430(h)(2)(C)
(iv) of the Code made by § 9706(a) of
ARP. These adjusted 24-month average

For Plan Years
Beginning In

segment rates apply only for plan years for
which an election under § 9706(c)(2) of
ARP is in effect. For a plan year for which
such an election applies, the 24-month averages applicable for July 2021, adjusted

to be within the applicable minimum and
maximum percentages of the corresponding 25-year average segment rates in accordance with § 430(h)(2)(C)(iv) of the
Code, are as follows:

Pre-ARP Adjusted 24-Month Average Segment Rates
Applicable
First
Second
Month
Segment
Segment

Third
Segment

2020

July 2021

3.64

5.21

5.94

2021

July 2021

3.32

4.79

5.47

30-YEAR TREASURY SECURITIES
INTEREST RATES

late current liability for this purpose must
be no more than 5 percent above and no
more than 10 percent below the weighted
average of the rates of interest on 30-year
Treasury securities during the four-year
period ending on the last day before the
beginning of the plan year. Notice 88-73,
1988-2 C.B. 383, provides guidelines for
determining the weighted average interest
rate. The rate of interest on 30-year Trea-

sury securities for June 2021 is 2.16 percent. The Service determined this rate as
the average of the daily determinations of
yield on the 30-year Treasury bond maturing in May 2051. For plan years beginning
in July 2021, the weighted average of the
rates of interest on 30-year Treasury securities and the permissible range of rates
used to calculate current liability are as
follows:

For Plan Years
Beginning In

Treasury Weighted Average Rates
30-Year Treasury
Weighted Average

Permissible Range
90% to 105%

July 2021

2.22

1.99 to 2.33

under § 417(e)(3)(D) are segment rates
computed without regard to a 24-month
average. Notice 2007-81 provides guidelines for determining the minimum pres-

ent value segment rates. Pursuant to that
notice, the minimum present value segment rates determined for June 2021 are
as follows:

Section 431 specifies the minimum
funding requirements that apply to multiemployer plans pursuant to § 412. Section
431(c)(6)(B) specifies a minimum amount
for the full-funding limitation described in
§ 431(c)(6)(A), based on the plan’s current
liability. Section 431(c)(6)(E)(ii)(I) provides that the interest rate used to calcu-

MINIMUM PRESENT VALUE
SEGMENT RATES
In general, the applicable interest rates

Month
June 2021

Bulletin No. 2021–31

Minimum Present Value Segment Rates
First Segment
Second Segment
0.63
2.70

Third Segment
3.32

167

August 2, 2021

DRAFTING INFORMATION
The principal author of this notice is
Tom Morgan of the Office of the Asso-

August 2, 2021

ciate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Taxes). However, other personnel from
the IRS participated in the development

168

of this guidance. For further information
regarding this notice, contact Mr. Morgan
at 202-317-6700 or Paul Stern at 202-3178702 (not toll-free numbers).

Bulletin No. 2021–31

Table 2021-6
Monthly Yield Curve for June 2021
Derived from June 2021 Data
Maturity
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
12.5
13.0
13.5
14.0
14.5
15.0
15.5
16.0
16.5
17.0
17.5
18.0
18.5
19.0
19.5
20.0

Yield
0.13
0.22
0.32
0.42
0.54
0.66
0.79
0.93
1.07
1.22
1.37
1.52
1.67
1.82
1.96
2.10
2.22
2.34
2.45
2.55
2.64
2.72
2.80
2.86
2.92
2.97
3.01
3.05
3.08
3.11
3.13
3.15
3.17
3.18
3.19
3.20
3.21
3.22
3.22
3.23

Maturity
20.5
21.0
21.5
22.0
22.5
23.0
23.5
24.0
24.5
25.0
25.5
26.0
26.5
27.0
27.5
28.0
28.5
29.0
29.5
30.0
30.5
31.0
31.5
32.0
32.5
33.0
33.5
34.0
34.5
35.0
35.5
36.0
36.5
37.0
37.5
38.0
38.5
39.0
39.5
40.0

Bulletin No. 2021–31

Yield
3.23
3.24
3.24
3.24
3.24
3.25
3.25
3.25
3.26
3.26
3.26
3.26
3.27
3.27
3.27
3.28
3.28
3.28
3.29
3.29
3.29
3.29
3.30
3.30
3.30
3.31
3.31
3.31
3.31
3.31
3.32
3.32
3.32
3.32
3.32
3.33
3.33
3.33
3.33
3.33

Maturity
40.5
41.0
41.5
42.0
42.5
43.0
43.5
44.0
44.5
45.0
45.5
46.0
46.5
47.0
47.5
48.0
48.5
49.0
49.5
50.0
50.5
51.0
51.5
52.0
52.5
53.0
53.5
54.0
54.5
55.0
55.5
56.0
56.5
57.0
57.5
58.0
58.5
59.0
59.5
60.0

Yield
3.34
3.34
3.34
3.34
3.34
3.34
3.34
3.35
3.35
3.35
3.35
3.35
3.35
3.35
3.36
3.36
3.36
3.36
3.36
3.36
3.36
3.36
3.36
3.37
3.37
3.37
3.37
3.37
3.37
3.37
3.37
3.37
3.37
3.37
3.38
3.38
3.38
3.38
3.38
3.38

169

Maturity
60.5
61.0
61.5
62.0
62.5
63.0
63.5
64.0
64.5
65.0
65.5
66.0
66.5
67.0
67.5
68.0
68.5
69.0
69.5
70.0
70.5
71.0
71.5
72.0
72.5
73.0
73.5
74.0
74.5
75.0
75.5
76.0
76.5
77.0
77.5
78.0
78.5
79.0
79.5
80.0

Yield
3.38
3.38
3.38
3.38
3.38
3.38
3.38
3.38
3.39
3.39
3.39
3.39
3.39
3.39
3.39
3.39
3.39
3.39
3.39
3.39
3.39
3.39
3.39
3.39
3.39
3.39
3.40
3.40
3.40
3.40
3.40
3.40
3.40
3.40
3.40
3.40
3.40
3.40
3.40
3.40

Maturity
80.5
81.0
81.5
82.0
82.5
83.0
83.5
84.0
84.5
85.0
85.5
86.0
86.5
87.0
87.5
88.0
88.5
89.0
89.5
90.0
90.5
91.0
91.5
92.0
92.5
93.0
93.5
94.0
94.5
95.0
95.5
96.0
96.5
97.0
97.5
98.0
98.5
99.0
99.5
100.0

Yield
3.40
3.40
3.40
3.40
3.40
3.40
3.40
3.40
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41
3.41

August 2, 2021

State Populations Residing
in a Qualified Disaster Zone
Notice 2021-45
I. PURPOSE
This notice advises State and local housing credit agencies that allocate low-income housing tax credits under § 42 of the
Internal Revenue Code of the county and
parish-level populations residing in a qualified disaster zone to use in calculating the
applicable dollar limitation for 2021 and
2022 as provided in section 305 of the Taxpayer Certainty and Disaster Tax Relief Act
of 2020 (Pub. L. 116-260) (Act).
II. BACKGROUND
Under section 305(a)(1) of the Act, for
purposes of § 42, the State housing credit
ceiling for any State for each of calendar
years 2021 and 2022 shall be increased by
the aggregate housing credit dollar amount
allocated by the State housing credit agencies of the State for the calendar year to
buildings located in any qualified disaster
zone in the State.
Section 305(a)(2)(A) of the Act limits
the aggregate increase in any State housing
credit ceiling in calendar years 2021 and
2022 to the applicable dollar limitation.
Section 305(a)(2)(B) of the Act defines
the applicable dollar limitation, with respect to any State, as the lesser of (i) $3.50
multiplied by the population of the State
(as determined for calendar year 2020) residing in a qualified disaster zone, or (ii)
65% of the State housing credit ceiling for
such State for calendar year 2020.
Section 301(2) of the Act defines qualified disaster zone as the portion of any
qualified disaster area (as defined in 301(1)
of the Act) which was determined by the
President, during the period beginning on
January 1, 2020, and ending on February
25, 2021 (the date which is 60 days after
enactment of the Act), to warrant individual or individual and public assistance from
the Federal Government under the Robert
T. Stafford Disaster Relief and Emergency
Assistance Act, 42 U.S.C. §§ 5121-5206
(the Stafford Act) by reason of the qualified disaster with respect to the disaster
area. Section 301(1) of the Act generally

August 2, 2021

defines qualified disaster area as any area
with respect to which a major disaster was
declared (excluding disasters as a result of
COVID-19), during the period beginning
on January 1, 2020, and ending on February
25, 2021, by the President under section 401
of the Stafford Act, if the incident period of
the disaster began on or after December 28,
2019 and before or on December 27, 2020.
The President of the United States issued major disaster declarations with
respect to damage in 11 states and Puerto Rico that meet the criteria of the Act.
More information related to each of the
major disasters is available at www.fema.
gov. This includes information related
to the counties and parishes determined
to warrant individual or individual and
public assistance from the Federal Government under the Stafford Act, which
are also listed later in this notice and are
needed to determine the population of a
State residing in a qualified disaster zone.
The major disasters that resulted in declarations meeting the criteria of the Act are:
• Hurricane Sally for Alabama and
Florida. See DR-4563-AL and DR4564-FL.
• Hurricane Zeta for Alabama, Louisiana, and Mississippi. See DR-4573AL, DR-4577-LA, and DR-4576-MS.
• Hurricane Laura for Louisiana. See
DR-4559-LA.
• Hurricane Delta for Louisiana. See
DR-4570-LA.
• Wildfires for California. See DR4558-CA and DR-4569-CA.
• Severe Storms for Iowa. See DR4557-IA.
• Severe Storms and Flooding for
Michigan. See DR-4547-MI.
• Severe Storms, Tornadoes, Straightline Winds, and Flooding for Mississippi. See DR-4536-MS.
• Wildfires and Straight-line Winds for
Oregon. See DR-4562-OR.
• Severe Storms, Flooding, Landslides,
and Mudslides for Oregon. See DR4519-OR.
• Severe Storm and Flooding for Puerto
Rico. See DR-4571-PR.
• Tropical Storm Isaias for Puerto Rico.
See DR-4560-PR.
• Earthquakes for Puerto Rico. See DR4473-PR.
• Severe Storms, Tornadoes, and
Straight-line Winds for South Carolina. See DR-4542-SC.

170

•

Severe Storms, Tornadoes, Straightline Winds, and Flooding for Tennessee. See DR-4541-TN and DR-4476TN.
• Earthquake and Aftershocks for Utah.
See DR-4548-UT.
The counties and parishes located in a
qualified disaster zone in the 11 states, and
Puerto Rico are:
Alabama- Baldwin, Clarke, Dallas,
Escambia, Marengo, Mobile, Perry, Washington, and Wilcox.
California- Butte, Fresno, Lake, Lassen, Los Angeles, Madera, Mendocino,
Monterey, Napa, San Bernardino, San Diego, San Mateo, Santa Clara, Santa Cruz,
Shasta, Siskiyou, Solano, Sonoma, Stanislaus, Trinity, Tulare, and Yolo.
Florida- Bay, Escambia, Okaloosa,
Santa Rosa, and Walton.
Iowa- Benton, Boone, Cedar, Clinton,
Jasper, Linn, Marshall, Polk, Poweshiek,
Scott, Story, and Tama.
Louisiana- Acadia, Allen, Beauregard, Caddo, Calcasieu, Cameron, Grant,
Iberia, Jackson, Jefferson, Jefferson Davis, Lafayette, Laforuche, LaSalle, Lincoln, Morehouse, Natchitoches, Orleans,
Ouachita, Plaquemines, Rapides, Sabine,
St. Bernard, St. Landry, St. Martin, Terrebone, Union, Vermilion, Vernon, and
Winn.
Michigan- Arenac, Gladwin, Iosco,
Midland, and Saginaw.
MississippiClarke,
Covington,
George, Greene, Grenada, Hancock,
Harrison, Jackson, Jasper, Jefferson Davis, Jones, Lawrence, Panola, Stone, and
Walthall.
Oregon- Clackamas, Douglas, Jackson, Klamath, Lane, Lincoln, Linn, Marion, and Umatilla.
Puerto Rico- Adjuntas, Aguada, Añasco, Arecibo, Barecloneta, Cabo Rojo, Ciales, Coamo, Corozal, Guánica, Guayanilla,
Hormigueros, Jayuya, Juana Díaz, Lajas,
Lares, Las Marías, Maricao, Mayagüez,
Moca, Morovis, Naranjito, Orocovis,
Peñuelas, Ponce, Rincón, Sabana Grande,
Salinas, San Germán, San Sebastián, Santa
Isabel, Utuado, Villalba, and Yauco.
South Carolina- Aiken, Barnwell,
Berkeley, Colleton, Hampton, Marlboro,
Oconee, Orangeburg, and Pickens.
Tennessee- Bradley, Davidson, Hamilton, Putnam, and Wilson.
Utah- Davis, and Salt Lake.

Bulletin No. 2021–31

For the counties and parishes located in
a qualified disaster zone in the 11 states,
and Puerto Rico, the 2020 calendar year
population figures to be used in calculating the additional credit authority in
the Act are the resident population county-level estimates as of July 1, 2019 that
were released electronically by the U.S.
Census Bureau on March 26, 2020 and
described in Press Release CB20-53. This
is consistent with the population figures
used in Notice 2020-10, 2020-10 I.R.B.
456, which advised State and local housing credit agencies on the 2020 calendar
year resident population figures.
III. STATE POPULATIONS RESIDING
IN A QUALIFIED DISASTER ZONE
Based on the foregoing, the portion of
each jurisdiction’s population residing in a

Bulletin No. 2021–31

qualified disaster zone for calculating the
applicable dollar limitation is provided
below:
Alabama
California
Florida
Iowa
Louisiana
Michigan
Mississippi
Oregon
Puerto Rico
South Carolina
Tennessee
Utah

788,380
23,069,525
962,143
1,215,774
2,770,640
339,154
667,359
1,805,895
1,053,857
795,267
1,394,960
1,515,918

171

IV. DRAFTING INFORMATION
The principal author of this notice is
Michael J. Torruella Costa, Office of the
Associate Chief Counsel (Passthroughs
and Special Industries). For further information regarding this notice, please contact Mr. Torruella Costa at (202) 317-4137
(not a toll-free number).

August 2, 2021

Rev. Proc. 2021-30
TABLE OF CONTENTS
PART I. INTRODUCTION TO EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM
SECTION 1. PURPOSE AND OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

.01 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

.02 General principles underlying EPCRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

.03 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
SECTION 2. EFFECT OF THIS REVENUE PROCEDURE ON PROGRAMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .176

.01 Effect on programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176

.02 Correction of Overpayment (defined benefit plans). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177

.03 Description of other modifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178

.04 Future enhancements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
PART II. PROGRAM EFFECT AND ELIGIBILITY
SECTION 3. EFFECT OF EPCRS; RELIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

.01 Effect of EPCRS on retirement plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

.02 Compliance statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

.03 Excise and other taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

.04 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
SECTION 4. PROGRAM ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

.01 EPCRS Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

.02 Effect of examination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180

.03 SCP eligibility requirements relating to plan documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180

.04 Established practices and procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180

.05 Correction by plan amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

.06 Availability of correction for Employer Eligibility Failures and Demographic Failures. . . . . . . . . . . . . . . . . . . . . . 182

.07 Availability of correction for a terminated plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

.08 Availability of correction for an Orphan Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

.09 Availability of correction for § 457(b) plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

.10 Egregious failures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

.11 Diversion or misuse of plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

.12 Abusive tax avoidance transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
PART III. DEFINITIONS, CORRECTION PRINCIPLES, AND RULES OF GENERAL APPLICABILITY
SECTION 5. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184

.01 Definitions for Qualified Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184

.02 Definitions for § 403(b) Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187

.03 Definitions for Orphan Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188

.04 Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

.05 IRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

.06 SEP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

.07 SIMPLE IRA Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

.08 Under Examination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
SECTION 6. CORRECTION PRINCIPLES AND RULES OF GENERAL APPLICABILITY. . . . . . . . . . . . . . . . . . . . . . . 190

.01 Correction principles; rules of general applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190

.02 Correction principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190

.03 Correction of an Employer Eligibility Failure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194

.04 Correction of a failure to obtain spousal consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195

August 2, 2021

172

Bulletin No. 2021–31

.05 Determination letter application not permitted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
.06 Special rules relating to Excess Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196
.07 Correction of plan loan failures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
.08 Correction under statute or regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
.09 Matters subject to excise or other taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
.10 Correction for § 403(b) Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202
.11 Correction for SEPs and SIMPLE IRA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203
.12 Confidentiality and disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204
.13 No effect on other law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204

PART IV. SELF-CORRECTION (SCP)
SECTION 7. AVAILABILITY OF SCP FOR CERTAIN OPERATIONAL FAILURES AND
PLAN DOCUMENT FAILURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204

.01 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204

.02 Operational Failures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204

.03 Plan Document Failures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
SECTION 8. SELF-CORRECTION OF INSIGNIFICANT OPERATIONAL FAILURES . . . . . . . . . . . . . . . . . . . . . . . . . . 205

.01 Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205

.02 Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205

.03 Multiple failures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205

.04 Examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
SECTION 9. SELF-CORRECTION OF CERTAIN SIGNIFICANT OPERATIONAL FAILURES AND
PLAN DOCUMENT FAILURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206

.01 Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206

.02 Correction period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206

.03 Substantial completion of correction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207

.04 Examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
PART V. VOLUNTARY CORRECTION PROGRAM WITH IRS APPROVAL (VCP)
SECTION 10. VCP PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208

.01 VCP pre-submission conference. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208

.02 VCP requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208

.03 Identification of failures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209

.04 Effect of VCP submission on examination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209

.05 No concurrent examination activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209

.06 Determination letter applications not related to a VCP submission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209

.07 Processing of submission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209

.08 Compliance statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211

.09 Effect of compliance statement on examination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212

.10 Anonymous submissions not permitted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212

.11 Special rules relating to group submissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213

.12 Multiemployer and multiple employer plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214
SECTION 11. SUBMISSION PROCEDURES FOR VCP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214

.01 General rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214

.02 Submission of model forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214

.03 Mandatory Submission Process using the Pay.gov website. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215

.04 PDF file submission contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216

.05 User fee due at the time of VCP submission using the Pay.gov website. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217

.06 Additional user fee due for group submissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217

.07 Additional amounts due for certain submissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218

.08 Power of attorney requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218

.09 Acknowledgement of filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218

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.10 Maintenance of copies of submissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218
.11 Assembling the submission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .218

SECTION 12. VCP USER FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219

.01 User fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219
PART VI. CORRECTION ON AUDIT (AUDIT CAP)
SECTION 13. DESCRIPTION OF AUDIT CAP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

.01 Audit CAP requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

.02 Payment of sanction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

.03 Additional requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

.04 Failure to reach resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

.05 Effect of closing agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

.06 Other procedural rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
SECTION 14. AUDIT CAP SANCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

.01 Determination of sanction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

.02 Factors considered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221

.03 Transferred Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222

.04 Sanction for Nonamender Failures discovered during the determination letter application process. . . . . . . . . . . . . 222
PART VII. EFFECT ON OTHER DOCUMENTS; EFFECTIVE DATE; PAPERWORK REDUCTION ACT
SECTION 15. EFFECT ON OTHER DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223
SECTION 16. EFFECTIVE DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223
SECTION 17. PUBLIC COMMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223
SECTION 18. PAPERWORK REDUCTION ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
DRAFTING INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
APPENDIX A. OPERATIONAL FAILURES AND CORRECTION METHODS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225

.01 General rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225

.02 Failure to properly provide the minimum top-heavy benefit under § 416 to non-key employees. . . . . . . . . . . . . . . 225

.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). . . . . . . . . . . . . . . 225

.04 Failure to distribute elective deferrals in excess of the § 402(g) limit (in contravention of § 401(a)(30)) . . . . . . . . 226

.05 Exclusion of an eligible employee from all contributions or accruals under the plan for one or
more plan years.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226

.06 Failure to timely pay the minimum distribution required under § 401(a)(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233

.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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233

.08 Failure to satisfy the § 415 limits in a defined contribution plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234

.09 Orphan Plans; orphan contracts and other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234
APPENDIX B. CORRECTION METHODS AND EXAMPLES; EARNINGS ADJUSTMENT METHODS AND EXAMPLES. . 236
SECTION 1. PURPOSE, ASSUMPTIONS FOR EXAMPLES AND SECTION REFERENCES. . . . . . . . . . . . . . . . . . . . . 236

.01 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236

.02 Assumptions for Examples. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236

.03 Designated Roth contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236

.04 Section references. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236

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SECTION 2. CORRECTION METHODS AND EXAMPLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

.01 ADP/ACP Failures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

.02 Exclusion of Otherwise Eligible Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239

.03 Vesting Failures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250

.04 Section 415(c) Failures and Correction of Overpayments (Defined Contribution Plans and § 403(b) Plans). . . . . . 251

.05 Section 415(b) Failures and Correction of Overpayments (Defined Benefit Plans). . . . . . . . . . . . . . . . . . . . . . . . . .252

.06 § 401(a)(17) Failures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258

.07 Correction by Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258
SECTION 3. EARNINGS ADJUSTMENT METHODS AND EXAMPLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260

.01 Earnings Adjustment Methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260

.02 Examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263
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 Self-Correction 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:

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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.

•

Sanctions for plan failures identified on audit should be reasonable in light of the nature,
extent, and severity of the violation.

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•

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. 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).

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.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 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 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).

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.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.

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.

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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), 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.
(c) SEPs and SIMPLE IRA Plans. SEPs and SIMPLE IRA Plans are eligible to 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 § 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 5305A-SEP, 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

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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
top-heavy and, if so, to ensure that the minimum contribution requirements of the top-heavy 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 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:
(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.

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

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(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.
.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.
(c) Audit CAP and SCP (for plans Under Examination). For plans Under 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 other transaction identified as an abusive transaction on the IRS website entitled “EP Abusive Tax Transactions.”

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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 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.
(C) “Nonamender Failure” means a failure to adopt an amendment that corrects a disqualifying
provision described in §1.401(b)‑1(b) within the applicable remedial amendment period. In gener-

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al, 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.
(c) Demographic Failure. The term “Demographic Failure” means a failure to 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 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 after-tax 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).
(c) Overpayment. The term “Overpayment” means a Qualification Failure due to a payment being
made to a participant or beneficiary (“Overpayment recipient”) that exceeds the amount payable

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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);
(c) additional income tax resulting from income inclusion for participants in the 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 § 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.

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(8) Pre-approved Plan. For purposes of this revenue procedure, the term “Pre-approved 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 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.
(c) Demographic Failure. The term “Demographic Failure” means a failure to 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 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

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§ 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.
(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

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(c) In the case of a Qualified Plan to which Title I of ERISA has never applied, a 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.
.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 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 deter-

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mination 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.
(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

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(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.
(c) The correction method for failures relating to nondiscrimination should 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.
(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 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).)

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(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.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3Af0c24b6357a2b90f. Public record. Not legal advice.