Five Questions, Four Categories Of Failure, Three Paths To Forgiveness
In a perfect world, all retirement plans would be amended on time and operated properly according to the plan terms and the law. However, we don't live in a perfect world and the IRS's Employee Plans Compliance Resolution System (EPCRS) acknowledges that fact. EPCRS lets plan sponsors correct certain common plan failures to satisfy the plan qualification requirements without suffering the severe penalty of plan disqualification. This article provides an overview of EPCRS and how you can save a retirement plan from disqualification.
The many tax advantages of qualified retirement plans come with the responsibility for compliance with the often complex requirements of Code section 401(a) and related provisions. Qualified plans must comply both in form and in operation. Any failure to meet these obligations can lead to plan disqualification, the severe effects of which can include:
- Income taxation of the plan's trust for all open years.
- The employer's loss or postponement of deductions for contributions made to the plan during open tax years.
- For plan participants, immediate income taxation of vested contributions made on their behalf, or vested accrued benefits, as well as loss of their right to roll over distributions tax free to IRAs or other plans.
Interested in learning more about the IRS's Employee Plans Compliance Resolution System? Please fill out the form on this page to access the full article.