Current IRS Position on Scrivener's Errors Under EPCRS

[EBECatty]

I know EPCRS doesn't officially recognize scrivener's errors as such, but will accept a retroactive amendment under VCP to conform the terms of a plan to its prior operations. One of the conditions--which is tough to fulfill in many cases where you want VCP relief to begin with--is that the retroactive amendment not violate 411(d)(6).

I'm reading some commentary saying IRS was apparently "considering" its stance on scrivener's errors after the Verizon case, but the new EPCRS came and went without clarifying.

Is anyone aware of the current IRS position or willingness to approve, especially where the amendment technically would violate 411(d)(6)?

[Mike Preston]

As far as I know, the granddaddy of all scrivener's cases is McDaniel v. Chevron. Look it up and I think you'll see that if you have 2 billion or so on the line, the court (9th circuit, I believe) thinks that massive scrivener's errors are fixable, complete with 411(d)(6) issues. The key is that you need everything to line up. That is, a track record of having administered the plan and, IIRC, an SPD that was contrary to the scrivener's error, as well.

If the participants' reasonable expectations allow fixing the error, I would go for it.

But your client should be referred to plan counsel.

[EBECatty]

Thanks. Everything here lines up consistently (SPD, actuary, benefit election forms, participant communications, other portions of plan document, prior plan documents, current and historical operation, etc.). It's a clear and narrow drafting mistake in the plan document, i.e., a classic scrivener's error. There's absolutely no doubt about intent or participant expectations.

Also, I am plan counsel; just curious if other folks have had recent experience with whether the IRS will approve these errors through VCP and on what conditions.

[jpod]

I had a VCP case - a "perfect" case just like EBECatty describes - where the correction of an unintentional amendment by another amendment would have been a clear 411(d)(6) violation, reading 411(d)(6) and the regs literally. The fact pattern was that the plan always had allocation formula X, it was accidentally changed to allocation formula Y, and the VCP submission requested IRS blessing to amend retroactively to reflect allocation formula X. While I refrained from uttering the words "scrivener's error," or words to that effect, I side-stepped the 411(d)(6) issues by arguing that the mistaken first amendment was so clearly unintended that there really was never any "amendment" in the first place that would implicate 411(d)(6). I received a compliance statement without any other contact from the IRS. I don't know if it just slipped through or if the IRS accepted that argument.

[EBECatty]

Thanks jpod.