The SECURE Act 2.0 brings a significant change benefiting employers dealing with retirement plan administration errors. This expansion of the IRS Employee Plans Compliance Resolution System (EPCRS) and its Self-Correction Program (SCP) allows plan sponsors to rectify operational errors without IRS involvement, provided they identify these mistakes before the IRS does. This alteration simplifies the process, acknowledging the complexity and costliness of self-correcting plan errors. Christopher Dall from PNC Institutional Asset Management emphasized the relief this provision brings to plan sponsors, offering an opportunity for rectification with fewer penalties.
Previously, stringent requirements and fees deterred plan sponsors from self-correcting, allowing errors to escalate. The new rules necessitate identifying and rectifying errors within 18 months to leverage this simplified self-correction method.
Effective collaboration with vendors is crucial to swiftly identify potential errors. Clear communication, revised vendor contracts, and constant monitoring of plan operations become imperative. Renegotiating vendor contracts to include additional consulting hours for error handling may become customary.
Identifying potential problem areas, particularly after disruptions or vendor changes, gains significance. Mergers or acquisitions often cause unintentional errors due to systems not syncing effectively, accentuating the need for proactive error detection. Employee turnover within plan sponsors or vendors can contribute to errors, as new personnel may take time to adapt, potentially overlooking crucial tasks.
Furthermore, the newfound flexibility in self-correction may encourage employers to adopt automatic plan features. Fear of severe consequences previously deterred sponsors from implementing such features. However, the assurance of easier corrections might prompt sponsors to introduce automated plan elements.
The SECURE Act 2.0’s modifications offer a more accessible framework for rectifying retirement plan errors, aiming to alleviate burdens on sponsors while emphasizing proactive error identification and rectification.
The SECURE Act 2.0 marks a pivotal shift, empowering employers to rectify retirement plan errors more easily. By expanding self-correction avenues and emphasizing proactive error detection, this change alleviates complexities for sponsors. Collaborative efforts with vendors and newfound flexibility promise a smoother, more efficient plan administration process.
