The IRS has issued Discover 2023-43, offering interim steering on the expanded self-correction program below the Worker Plans Compliance Decision System (EPCRS). As background, the SECURE 2.0 Act made sweeping modifications to self-correction below EPCRS (see our Checkpoint article). Whereas the modifications technically took impact December 29, 2022, the extent to which the SECURE 2.0 Act modifications plans’ present self-correction choices is unsure as a result of the brand new regulation additionally grants the IRS appreciable latitude to restrict self-correction. For instance, the SECURE 2.0 Act offers that the flexibility to self-correct plan errors doesn’t apply if IRS steering offers in any other case, and that corrections should conform to the “rules and corrections” within the 2021 model of EPCRS or any successor steering. By particularly incorporating the present model of EPCRS (see our Checkpoint article), the SECURE 2.0 Act arguably delays any enlargement of self-correction past what’s permitted in that model. The IRS has now launched Discover 2023-43 to offer restricted interim steering till an official revision of EPCRS is printed.

Beneath Discover 2023-43, plan sponsors might self-correct an eligible inadvertent failure, together with one regarding a plan mortgage, so long as the failure shouldn’t be particularly excepted and sure circumstances are met, together with: (1) the failure shouldn’t be recognized by the IRS previous to any actions demonstrating a selected dedication to implement a self-correction; (2) the self-correction is made inside an affordable time after the failure is recognized; (3) the failure shouldn’t be egregious; and (4) the correction satisfies all provisions relevant to self-correction within the present model of EPCRS. Self-correction shouldn’t be presently out there for (1) failures to initially undertake a written plan; (2) important failures in terminated plans; and (3) corrections of operational failures by a plan modification that end in much less favorable remedy for a participant than the unique phrases of the plan. Discover 2023-43 additionally suspends sure current EPCRS necessities, together with: (1) the requirement {that a} plan be the topic of a positive willpower letter; (2) the prohibition towards self-correcting demographic failures and employer eligibility failures; and (3) the prohibition towards self-correcting sure mortgage failures.

Discover 2023-43 doesn’t tackle the restoration of plan overpayments, correction of computerized contribution errors, or any parts over which the DOL has authority. Plan sponsors might depend on Discover 2023-43 till the subsequent model of EPCRS steering is printed, and will apply religion, affordable interpretation of the SECURE 2.0 Act modifications for any self-correction accomplished previous to the issuance of Discover 2023-43 and on or after December 29, 2022.

EBIA Remark: The SECURE 2.0 Act directs the IRS to revise current EPCRS steering inside two years after its enactment (i.e., by December 29, 2024). Discover 2023-43 offers much-needed interim steering that plan sponsors can depend on till an EPCRS revision is issued. Due to the restricted, non-comprehensive nature of the steering, nevertheless, plan sponsors ought to proceed to work intently with their advisors earlier than counting on the SECURE 2.0 Act for any self-correction methodology that isn’t presently permitted by EPCRS steering and particularly addressed in Discover 2023-43. For extra data, see EBIA’s 401(okay) Plans handbook at Sections XXXIV.C (“Packages to Encourage Compliance”), XXXIV.G (“Errors Involving Contributions”), XXXIV.J (“Errors Involving Participant Loans”), and XXXV (“Correcting Plan Errors: IRS’s EPCRS”).

Contributing Editors: EBIA Employees.