On July 16, 2021, the IRS issued Revenue Procedure 2021-30 (Rev Proc 21-30) which offered updated guidance with respect to its three correction programs. These programs allow plan sponsors to correct plan failures depending upon the specific type of error or failure and how the error or failure was initially discovered. Below, we have summarized some of the more significant updates in Rev Proc 21-30 (which are effective July 16, 2021 unless otherwise noted):
- Self-Corrections
- Retroactive plan amendments
The new guidance makes it easier to use retroactive plan amendments to correct operational failures by removing the requirement that all participants in the plan benefit by the retroactive amendment.
- Retroactive plan amendments
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- Correction period
The new guidance extends the correction period available for significant operational failures from two years to three years.
- Defined Benefit overpayments
Rev Proc 21-30 allows plan sponsors to fix operational failures when plan participants (or their beneficiaries) receive payments from a defined benefit (DB) plan in excess of what is permitted by the provisions of the plan. Most significantly, the new guidance reduces the need to seek reimbursement to the plan from the participant or beneficiary who received the overpayment.
- Correction period
- Voluntary Correction Program (VCP)
- Extension of Auto-Enrollment Failures
Rev Proc 21-30 extends the existing safe harbor correction method available to plan sponsors to correct missed deferrals for those employees subject to an auto-enrollment feature.
- Pre-Submission Conferences
Effective January 1, 2022, the IRS will permit plan sponsors to make an anonymous written request for a conference to discuss a potential VCP submission. This allows a plan sponsor to assess the IRS’ position on a specific type of issue prior to making an official VCP filing.
Keep an eye on Meaden & Moore’s blog for future employee benefit plan content important to your compliance efforts or contact us for more details.
