Upcoming EPCRS revisions -- will they apply to pre-existing violations?

[jstorch]

I've seen from a couple of sources that IRS is planing on issuing revised Employee Plans Compliance Resolution System materials later this month.

One of the big changes is that employers will be required to contribute only 50% (rather than the current 100%) of average pre-tax deferrals for employees who were improperly excluded from participation.

I'm currently in settlement negotiations for an employee who was improperly denied participation in an elective deferral plan for about five years. We've based our settlement position on the current IRS EPCRS requirement that the employer contribute 100% of average deferrals. If the new EPCRS will cut that contribution in half, I'm concerned our settlement also will be halved.

Any thoughts on how I should proceed? The material when it comes out might address the situation, but I don't know if it's safe to wait that long if it ends up being unfavorable to the client. Our backup plan was to involve the DOL if a reasonable settlement couldn't be reached, assuming they'd recommend a correction similar to EPCRS. I don't think we can be too sure of our initial settlement calculations now.