October 18, 2016

IRS Updates Correction Programs to Reflect Changes in Determination Letter Program

On September 29, 2016, the Internal Revenue Service (IRS) released Revenue Procedure 2016-51, an update of its correction programs for pension plans, the Employee Plans Compliance Resolution System (EPCRS). The new Revenue Procedure consolidates and replaces prior revenue procedures describing the correction program (Rev. Procs. 2013-12, 2015-27 and 2015-28).

The key changes, as summarized on the IRS EPCRS webpage, include:

  • For the “Audit CAP” portion of EPCRS (when “failures” are identified by the IRS in an examination or as part of a determination letter review), fees will no longer be a negotiated percentage of the maximum payment amount (MPA). Instead, the MPA will be only one factor of many that the auditor will consider;
  • An application for a new determination letter, which used to be required with certain VCP applications, is no longer permitted; and
  • A plan no longer needs to have a “current” determination letter in order to use the Self-Correction Program (SCP) portion of EPCRS.

Revenue Procedure 2016-51 is effective January 1, 2017. Despite the final nature of the Revenue Procedure, the IRS is inviting comments generally, and specifically continues to ask for comments related to the recoupment of overpayments. No deadline for comments is specified.

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