The IRS issued Rev. Proc. 2013-12 in 2013 to provide updated guidance on the voluntary correction program for employee retirement plans, referred to as the Employee Plans Compliance Resolution System (EPCRS). Earlier this year, the IRS issued Rev. Proc. 2015-27 to modify, but not replace, the EPCRS issued in Rev. Proc. 2013-12.

The IRS recently issued Rev. Proc. 2015-28, again modifying the EPCRS issued in Rev. Proc. 2013-12. The new guidance simplifies and reduces the cost and burden of the correction process if a Section 401(k) or Section 403(b) plan using automatic enrollment or automatic increases fails to process the correct amount of employee contribution.

The correction safe harbor for plans with automatic contribution features requires the plan sponsor to make all employer matching contributions that should have been made related to the missed employee contributions, and to contribute an additional amount to make up for the earnings that should have accrued under the plan on those matching contributions. In addition, the plan is required to notify participants of errors and corrections, and that participants can make up for the missed employee contributions by electing larger employee contributions going forward.

The guidance also provides other new safe harbor methods to reduce the cost and burden of correcting certain errors in Section 401(k) and similar plans, regardless of whether they use automatic enrollment or automatic increases. The new correction methods in Rev. Proc. 2015-28 are effective immediately. The new safe harbor for plans using automatic contribution features applies to administrative errors occurring before 2021.