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We Have A Mistake In Our Retirement Plan - What Do We Do?

By:  Jennifer S. Kiesewetter, Esq. and Shunta Tidwell, J.D.

 

Plan Sponsors often make mistakes, many of which are inadvertent, regarding employees’ defined benefits and contribution plans. Once the Internal Revenue Service (“IRS”) discovers these mistakes, it could audit the plan assessing penalties accordingly.  Additionally, the tax qualification of the plan could be jeopardized. 

If a Plan Sponsor makes a mistake regarding the company’s defined benefit or defined contribution plan, the Plan Sponsor should remedy the mistake through the Employee Plans Compliance Resolution System (“EPCRS”) to avoid potential penalties, tax liabilities, and possible disqualification.

Under the EPCRS, the correction method should be reasonable, appropriate, and resemble a type of method provided for in the Code respective of facts and circumstances. The EPCRS offers three (3) programs for Plan Sponsors to correct plan errors: (1) Self-Correction Program (“SCP”); (2) the Voluntary Correction Program (“VCP”); and (3) the Audit Closing Agreement Program (“Audit CAP”).

Once the correction is approved, the IRS will issue a compliance statement, which details the mistakes identified by the Plan Sponsor and the correction methods approved by the IRS.   The Plan Sponsor then has 150 days from the issuance of the compliance statement to correct the identified mistakes.  This statement does not protect the plan from the effects of the other failures not identified under the EPCRS program that the IRS could discover, for example, during an audit.  However, while the IRS is processing the EPCRS submission, the IRS will not audit the plan, except under unusual circumstances. 

Regardless of the applicable program, if the proposed correction method under the chosen EPCRS program is not approved or if the IRS needs more information, the IRS will contact the Plan Sponsor and assist with finding an acceptable correction method.  If an agreement on a proper correction method cannot be obtained, the IRS will not issue a compliance statement or refund the user fee for the VCP application submission.

Should a Plan Sponsor’s defined benefit or defined contribution plan possess a failure, the Plan Sponsor should determine if that failure can be corrected under the EPCRS and proceed accordingly.  Remember, it is always better to be proactive instead or reactive.

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The DOL Fiduciary Rule: Part 2 - The Best Interest Contract Exemption - What Is It?

The DOL Fiduciary Rule:  Part 2  -  The Best Interest Contract Exemption - What Is It?

In adopting the Final Fiduciary Rule, the DOL allowed for some exemptions, most notably the Best Interest Contract Exemption ("BICE"). The BICE does not exempt advisors from the Final Rule's definition of a fiduciary.  The BICE provides relief to advisors providing non-discretionary advice and earn commissions on such advice.  This Blog provides a summary of the BICE.

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The DOL Fiduciary Rule: Part 1 - An Overview

The DOL Fiduciary Rule: Part 1 - An Overview

On April 6, 2016, the Department of Labor (DOL) publicly announced its final conflict of interest rule, or the fiduciary rule, as more often referenced, and published the rule in the Federal Register two (2) days later, on April 8, 2016.  The release of the final rule has been a tumultuous and controversial ride, to say the least.  This Blog Post provides an overview of the Final Rule.

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