Plan sponsors may be reluctant to document errors, even if they are corrected corrected under the CPS. However, the documentation of the error and the nature of the correction show that a plan sponsor is capable of detecting and correcting an error in the plan, and it is likely that it will be useful, if necessary, for the independent annual review of the plan and for all IRS audit activities. The audit CAP is different from the self-correction program (SCP) and the volutantary correction (VCP) program because it is initiated as a result of the IRS, which finds the (s) qualification defect (s) by a plan audit, not the plan sponsor who finds the error. A plan sponsor who is not forwarded to the IRS, but whose old-age pension has considerable problems discovered by the IRS during the examination or during the doctoral letter application process, is empowered, as part of the audit correction program, to maintain the tax benefits associated with duly maintained retirement plans. The IRS has implemented the Employee Plan Compliance Resolution System (EPCRS) as a way for sponsors to take corrective action to avoid the tax consequences of disqualification the plan. One of the three components of EPCRS is the Audit Closing Agreement (Audit CAP). As part of this program, the sponsor undertakes to correct the qualification error, pay a penalty and sign a conclusion agreement with the IRS. The concluding agreement is an agreement between the IRS and the sponsor of the plan that links the tax issues mentioned in the agreement for the specified periods. Depending on the nature of the failure or failures, the IRS will discuss with the sponsor the appropriateness of the plan`s existing administrative procedures. If existing administrative procedures are not sufficient to implement the plan in accordance with the applicable requirements of the code, the final agreement may be contingent on the implementation of the procedures indicated. The Internal Revenue Service manages the Employee Plan Compliance Resolution System (EPCRS) to allow plan sponsors to correct most non-compliance cases themselves in some way. Most of the time, the prescribed corrective actions will place the participants concerned in the position they were in if the error did not occur.
THE EPCRS supports three core programs If the IRS and sponsor fail to agree on the default correction or the amount of the penalty, the IRS will continue to disqualify the plan. The EMPLOYee Plan Compliance Resolution System (EPCRS) offers three programs to correct planning errors: the IRS offers many self-correction programs and QPS can help you determine what fits your situation. Below are links to the most common planning errors and links to the various proposed programs: (1) sponsor steps to ensure that the plan does not fail (5) the number of uncompensated employees who would be affected if the plan was not qualified or considered to meet the requirements of Section 403 (b) , 408 (k). , or 408 (p) Because of the above factors, sanctions must not be excessive and must be proportionate to the nature, magnitude and severity of failures.