Correction of Retirement Plan Errors
With all of the complicated and ever-changing rules that apply to 401(k) and other retirement plans, it is rare to see a plan without any errors. Sometimes employers find that they have missed the deadline for a required plan amendment, not followed the terms of the written plan document, or not deposited employee contributions as quickly as required. We also see late Form 5500 returns, and missed participant notices. These errors can cause a plan to lose its favored tax status and become very costly for the employer.
Sometimes errors are discovered during the plan's annual testing or audit, or when an employee asks questions. It is usually more expensive to correct an error if it is discovered during an audit by the Internal Revenue Service (IRS) or Department of Labor (DOL). The IRS and DOL maintain error correction programs for retirement plans to encourage plan sponsors to find and correct errors. The Employee Plans Compliance Resolution System (EPCRS), the Voluntary Fiduciary Correction Program (VFCP), and the Delinquent Filer Voluntary Compliance Program (DFVC) all allow employers to fix errors at a much lower cost than would apply to correction during an audit, but the programs have their own complicated and ever-changing rules.
Frost Brown Todd's employee benefits team has extensive experience helping employers find and correct all types of errors using the IRS and DOL correction programs. We also regularly work with clients to evaluate and improve their plan design and administrative processes to avoid new errors in the future. FBT regularly provides these services related to plan errors:
- Check plan documents for missing amendments and review new documents before the documents are signed to find any unintended changes.
- Review plan operations to find errors and suggest process improvements.
- Advise on options for correcting errors and evaluating any related risks.
- Perform correction calculations and help employers determine and document compliance with the IRS and DOL correction requirements.
- Work with other retirement plan service providers to implement corrections.
- Prepare any plan documents or amendments needed to correct an error.
- Develop a participant communication strategy and prepare communications about the errors and corrections.
- Prepare filings with the IRS and DOL, responding to the agencies' questions, and negotiating solutions.
- Help the employer follow-through on process changes to avoid future issues.
FBT can also provide assistance throughout the audit process in the event your plan is audited by the IRS or DOL and errors are discovered. We have experience helping employers prepare for an audit, provide documents, communicate with the agent, negotiate corrections for any errors, and complete corrective action.