By April 30, 2016, profit sharing, 401(k), and money purchase pension plans using pre-approved IRS documents were required to restate their plans to comply with the Pension Protection Act of 2006. If an employer finds this year end that the company's plan was not timely restated, the error can be corrected with the IRS. More importantly, if the error is found and corrected before April 30, 2017, the IRS fee to correct the error is reduced.
Errors with retirement plans are corrected through the IRS voluntary correction program known as the Employee Plans Compliance Resolution System ("EPCRS"). An employer would have to restate the retirement plan, complete an application to EPCRS explaining what happened, and pay the user fee. Generally, the user fee is based upon the number of participants in the plan and ranges from $500 for 20 or fewer participants to $15,000 for plans with more than 10,000 participants. For missing the restatement deadline, the fee is reduced by 50% if the employer corrects and submits the application within one year of the restatement deadline. However, the reduced fee is available if the only error is the missed restatement deadline. If other errors are found at the same time, the employer will be required to pay the full fee.
An employer finding and correcting any error through EPCRS before the IRS finds the employer will result in a lower correction fee. If the IRS finds the error through an audit, the employer will pay fees substantially higher than the EPCRS fees.
If you find that your company's retirement plan missed the restatement deadline or has any other compliance issue, please contact Edie Crump (937-449-5530) or Brent Gambill (937-449-5539).