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 2016-51, 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|
||No||N/A – Use VCP|
|Related to plans acquired in corporate mergers||Special rule||Yes||
|ADP or ACP test violations||Special rule||Yes||
|Egregious||Any||No||N/A – Use VCP|
More on self-correcting plan errors:
- Retirement plan errors eligible for self-correction
- Steps to self-correct plan errors
- Timing of retirement plan self-correction
- Special rules for self-correction of retirement plan errors
- FAQs regarding the self-correction program