Advisory Committee on Tax Exempt and Government Entities (ACT ...

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Improving the Employee Plans Compliance Resolution System: A Roadmap For Greater ComplianceEXHIBIT B PRACTITIONER COMMENTS AND RECOMMENDATIONS ON EPCRS PROGRAM Self-Correction Contribution ErrorsScriveners' Errors andDocument RelatedIssues Size of the PlanPromote Awareness andCommunication GeneralAllow retroactivecorrective amendments(i.e. for hardshipdistributions, loanprovisions, last dayservice requirements) torectify erroneousoverpayment; applysimilar time frame as othervoluntary amendments,possibly limited to non-HCEsAdd more safe harbors,more leniency for smalloffenses - i.e. if an erroraffects only HCEs, nocorrection is needed; if anerror affects less than 5%of the Participants, anyreasonable correction ispermitted; if an errorresults in less than $100in additional contributions,no action requiredScrivener's errors maylead to document errorsand misunderstandingsthat extend over longperiods; correction isexpensive but restatementof the plan is a disfavoredapproach; consider amore liberal approach tothese errorsCurrent VCP compliancefee schedule based onnumber of Participants inthe plan providesdisincentive for largerplans; consider a feeschedule dependent onnumber of ParticipantsaffectedIncrease awareness ofcompliance issues and theself-correction process,particularly for smallplans; provide resourcesfrom the private sector toassist small employerswith compliance issuesRequire that an applicantfor the correction programsubmit a writtenagreement that proves theapplicant has retained apractitioner recognizedunder Circular 230 toproperly advise the planadministrator regardingthe class of the error inquestion; the agreementshould require the IRS beadvised if the practitionerresigns within 3 yearsUnder Rev Proc 2006-27,self-correction undercertain circumstances canbe accomplished viaamendment but must besubmitted to the IRSduring the next cycleunder SCP; seems tocontradict the idea of selfcorrectionExpand use of highestrate of return to correctearnings; currently onlyapplicable for correctionsinvolving multiple funds ifmost of affectedemployees are non-HCEsAllow self correction ofplan document due toscrivener's errors andmapping errors,particularly whenParticipant accounts arenot affected and thesponsor can documentintentBroader application of flatfees; fees based on plansize discourage largeplans with minor errorsfrom using the programIncrease employeebenefits guidance; smallemployers rely too heavilyon 401(k) providers;persuade providers toencourage complianceExpand useful correctionprocedures available forloan failures currentlyavailable only throughVCP and SCP; minorOperational Failuresrelated to loans arecommon and large VCPfees seemdisproportionateADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 48
Improving the Employee Plans Compliance Resolution System: A Roadmap For Greater ComplianceSelf-Correction Contribution ErrorsScriveners' Errors andDocument RelatedIssues Size of the PlanPromote Awareness andCommunication GeneralAllow more flexibility toamend the plan to meetcompliance standards,particularly for sponsorswho make relatively smallcontributions and cannotafford large penaltiesApply DOL's VFCcorrection method for anycorrection of earningswithin 2 years; currentapplication of rate ofreturn of highest fund isunrealisticLess severe penalties fordocument errors i.e.failure to adopt interimamendments; in particularfailure to add 132(f)(4) to415 def. of compensationAllow employer plans thatcover only the owner (andspouse), which are notsubject to ERISA, toparticipate in DOL DFVCprogramMake availability ofcorrection programs morewidely knownExpand the $50 exceptionthat currently applies tocorrective distributions toapply to correctivecontributions andallocations; possiblyreduce to $10 for verysmall correctionsReasonable efforts to selfcorrect should result inlower sanctions; provideformal written guidelinesregarding the sanctionamounts relative to theerrorAllow employers to usereasonable estimates tocorrect earnings withouthaving to show the costwould significantly exceedthe probable differenceEmployers participating inthe EPCRS programshould be represented bycounsel; third-partyadministrators may correctOperational Failures bypreparing amendmentswith inaccurate dateswithout the employersknowledgeCorrection program forsmall plans adoptedthrough a third party whichare subsequentlydiscontinuedClarify violations thatqualify for submission tothe EPCRSAllow EPCRS correctionfilings to include multipledelinquent filingsMore flexibility for selfcorrections and other VCPcorrections based on factsand circumstances toencourage complianceAllow employers to correctcontributions withadditional "safe harbor"interest calculated withplan's qualified defaultinvestment optionAllow the use of planamendments to correctany Operational Failuresunder SCP, except whenthe use of an amendmentwould violate a statutoryprohibition such as411(d)(6)Better training for agentswho review filings andaudit 5500'sModify correction methodsto align administrativecosts with benefitsdeliveredRespondent supports selfcorrectionby retroactiveamendment for exclusionof eligible employees andhardshipsExpand use of lowest rateif a reduction to accountbalances is needed;currently only applicable ifmost employees involvedare non-HCEsAddress when ascrivener's error can becorrected and whatdocuments are necessaryto establish the drafter'soriginal intentDirect benefit advisorycommunications to HR,not to preoccupied ownersEnforcement should focuson egregious violations;perfection is not attainableADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 49
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MEMBER BIOGRAPHIESGOVERNMENT ENTITI
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GENERAL REPORTOF THEADVISORY COMMIT
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General Report of the Advis
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Tax Treatment Of Cellular Telephone
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IRC, 2007-CODE-VOL, SEC. 280F. LIMI
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Withholding RequirementsACCOUNTING
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