In Revenue Procedure 2019-19 effective April 19, 2019, the IRS expanded a plan sponsor’s ability to Self-Correct certain retirement plan failures. This expansion makes it easier for plan sponsors to fix retirement plan mistakes without paying the fee assessed for corrections and, more importantly, without contacting the IRS. The changes expand the Self-Correction Program in three categories: plan loans, operational errors, and document failures.
Plan sponsors may now self-correct certain failures with respect to plan loans, including:
- Providing participants new options to cure defaults on loan payments;
- Correcting failures occurring when the plan allowed participants to have multiple loans even though it was not permitted under the plan;
- Correcting a failure occurring when the plan provided a loan to a participant when the plan does not permit loans; and
- Correcting failures occurring when the plan failed to obtain a required spousal consent.
Plan sponsors may also self-correct certain plan operational errors, such as administering a plan differently than the plan documents provide and failing to timely adopt a discretionary amendment, if certain criteria are met.
The new expanded Self-Correction Program also allows the correction of plan document failures such as a failure to timely amend the plan document or fixing a plan which is simply missing required language. Self-Correction of plan document failures must occur before the end of the second plan year of the failure.
Now is the perfect time to contact any member of our Employee Benefits Group to have your retirement plan document and procedures reviewed to find and fix potential problems.