How Does SECURE 2.0 Alter the IRS’ Program for Correcting Plan Errors?

Q: I’m a little confused by the SECURE 2.0’ Act’s effect on the Employee Plans Compliance Resolution System program in the area of insignificant and significant operational errors. Is there still a difference between the two (e.g., there was a deadline to correct significant failures, but not insignificant ones)?

Kimberly Boberg, Taylor Costanzo, Kelly Geloneck and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: Under EPCRS, as modified by Section 305 of SECURE 2.0, there is indeed no longer the concept of a significant or insignificant operational failure. In fact, there is an entirely new single concept of an “eligible inadvertent failure,” which essentially replaces those two terms. Eligible inadvertent failures are any failures that occur despite the existence of practices and procedures that satisfy the conditions of the current EPCRS program, but will in no case include failures that are egregious, relate to the diversion or misuse of plan assets, or are directly or indirectly related to an abusive tax avoidance transaction. There is no specific deadline for the correction of eligible inadvertent failures, only that the correction be completed within a reasonable period after such failure is identified (and they must not be identified by the IRS prior to demonstration of a “specific commitment” to self-correct such failure). Thus, both the scope of failures and the possible timeframe for correction under EPCRS have been modified by SECURE 2.0, and plan sponsors no longer need to identify operational failures as significant or insignificant.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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