Reminder of 457(b) Plan Voluntary Correction Issues

Some plan sponsors, under limited circumstances, may submit requests for voluntary correction to the Internal Revenue Service (IRS) for their 457(b) retirement plans.

In an update on its website the IRS reminds plan sponsors that its Employee Plans Voluntary Compliance (VC) team will not consider any issue relating to the form of a written 457(b) plan document. Also, governmental plan sponsors do not have to make a submission to VC to voluntarily fix problems with their 457(b) plans.

The agency says it has received several submissions alleging that a written 457(b) plan was not timely adopted or amended for some tax law or income tax regulation. VC will not issue closing agreements for these matters and will decline to process these requests and refund any payments. The IRS notes that the remedial amendment concepts and definitions in Revenue Procedure 2007-44 do not apply to 457(b) retirement plans.

Plan sponsors who want the IRS to review their 457(b) plan document or consider any other document form issue may request a private letter ruling.

Governmental plan sponsors may self-correct their 457(b) plans if they did not comply with the Internal Revenue Code or regulations. They have until the first day of the plan year that begins more than 180 days after the IRS notifies them of the failure to correct their plan failures. The agency says that, considering the time governmental entities have to self-correct plan errors, they may not need to make voluntary submissions to the IRS in most cases. However, if a governmental plan sponsor needs to request additional relief or simply wants IRS approval for a correction method for a non-plan document failure, they may make a submission to VC.

More information is here.