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IRS Expands Self-Correction Program for Certain Plan Failures IRS Expands Self-Correction Program for Certain Plan Failures

IRS Expands Self-Correction Program for Certain Plan Failures

The Internal Revenue Service ("IRS") issued Revenue Procedure ("Rev. Proc.") 2019-19 ( on April 19, 2019, updating the Employee Plans Compliance Resolution System ("EPCRS"), effective April 19, 2019. Rev. Proc. 2019-19 modifies and supersedes Rev. Proc. 2018-52 (which only became effective January 1, 2019). In particular, Rev. Proc. 2019-19 expands the Self-Correction Program ("SCP") eligibility to permit certain Plan Document Failures and certain plan loan failures to be self-corrected and also to provide an additional method under the SCP to correct Operational Failures by plan amendment. Importantly, the SCP allows the correction of certain plan failures without the need to contact the IRS or pay a user fee.

EPCRS Correction Programs

EPCRS provides three correction programs for retirement plans that intend to meet the requirements of 401(a), 403(a), 403(b), 408(k) or 408(p) but fail to do so. (Governmental 457(b) plans generally also may follow the EPCRS correction procedures.) By following the appropriate correction program, plans can correct their failures, preserve their qualified status and continue to provide participants with retirement benefits on a tax-favored basis.

Certain Operational Failures or Plan Document Failures under the SCP

Rev. Proc. 2019-19 expands EPCRS to allow the correction of certain Operational Failures or Plan Document Failures under the SCP, summarized as follows:
  • Correction of Plan Document Failures - Rev. Proc. 2019-19 allows certain Plan Document Failures, except for the initial failure to adopt a Qualified Plan or the failure to adopt a written 403(b) plan document timely, to be corrected through the SCP. Importantly, to correct through the SCP, the Plan, as of the correction date, must be subject to a Favorable Letter, and the correction must be made within the "significant" failure two-year correction period. Under Rev. Proc. 2019-19, discretionary plan amendments are not considered this type of "Plan Document Failure."
  • Correction of Operational Failures - Rev. Proc. 2019-19 allows Operational Failures to be corrected by retroactive plan amendment under the SCP if: (a) the plan amendment results in an increase of a benefit, right, or feature; (b) the increase is available to all eligible employees; and (c) providing such increase is permitted under the Code and satisfies the EPCRS correction principles.
  • Correction of Plan Loan Failures - Rev. Proc. 2019-19 expands the correction of certain plan loan failures under the SCP. Notably, the SCP loan correction is consistent with the loan correction procedure the IRS recently has taken for similar loan failures submitted through the Voluntary Correction Program ("VCP").
  • Loan Default – A loan default occurs when a participant fails to make the required payments or makes late payments. The correction methods for a defaulted loan are the same as under Rev. Proc. 2018-52; namely, permitting correction by either a single-sum repayment, re-amortization of the outstanding loan balance, or a combination of the two.
  • 1099-R Reporting - Rev. Proc. 2019-19 allows a plan sponsor to report a deemed distribution on the 1099-R in the year of the correction rather than the year of the failure. 
  • Exceeding Number of Permissible Loans - Rev. Proc. 2019-19 allows for a retroactive plan amendment when the number of plan loans exceeds the number of plan loans permitted by the plan, if: (i) the amendment satisfies Code § 401(a), (ii) the plan as amended would have satisfied the qualification requirements of § 401(a) (and the plan loan requirements under § 72(p)), and (iii) the plan loans (including plan loans in excess of the number permitted under the terms of the plan) were available to all participants.
  • Unavailability for SCP - SCP continues to be unavailable for failures related to: (a) plan loans that are made in excess of the loan limits under § 72(p)(2)(A) or (b) plan terms that do not meet the requirements of § 72(p)(2)(B) or (C).
Other Modifications

Rev. Proc. 2019-19 provides for other modifications, as follows:
  • The IRS website under the heading "Correcting Plan Errors" will provide additional examples of insignificant Operational Failures.
  • As of April 1, 2019, all VCP submissions are required to be made electronically through Therefore, the transition rule allowing VCP submissions on paper has been removed.
Future Modifications
  • The Treasury and the IRS invite comments on how EPCRS can be improved.
  • The Treasury and the IRS continue to review comments as they develop modifications to the EPCRS rules on the correction of Overpayments.
For more information about the changes to EPCRS or how EPCRS might apply to your governmental plan, please contact Audra Ferguson-Allen, Robert Gauss, Lisa Harrison, Lindsay Knowles, Tara Sciscoe, Chris Sears, or the Ice Miller LLP Employee Benefits attorney with whom you most closely work. 

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.
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