You can self-correct many retirement plan errors without contacting the IRS or paying a fee. There
are no
application or reporting requirements.
Self-correction, also known as the Self-Correction Program or “SCP,” is authorized under Revenue Procedure 2013-12, the revenue procedure that governs the Employee Plans Compliance Resolution Program
(EPCRS).
You can self-correct an
insignificant operational error at any time to
preserve the tax-favored status of your plan. An operational error occurs when you don’t follow the written terms of the plan. Even
where the operational error is significant, you may still be able to self-correct if action is taken in a timely manner.
Availability and Timing of Retirement Plan Self Correction
| Type of failure
| Type of plan
| Self-correction available?
| When must self-correction be completed?
|
Insignificant operational |
Any |
Yes |
At any time |
Significant operational
|
- 401(k), profit- sharing or other qualified plan
- 403(b) plan
|
Yes |
- before the end of the second plan year after the failure occurred, or
- substantially corrected within a reasonable time
|
|
|
No |
N/A – Use VCP |
| Related to plans acquired in corporate merger | Special rule | Yes | - substantially corrected before the end of the plan year beginning after the business transaction
- allowed even if failure occurred more than two plan years earlier
|
| ADP or ACP test violations | Special rule | Yes | - substantially corrected before the end of the second plan year following the plan year that includes the last day of the additional period for correction permitted under IRC Sections 401(k)(8) or 401(m)(6)
|
| Egregious | Any | No
| N/A - Use VCP |