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Scrivener error

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Any opinions as to whether the SECURE 2.0 Section 305 will prompt the IRS to allow self-correction of scrivener errors?

I'm guessing not, but it sure would be nice. For example (just saw this recently) safe harbor 3% nonelective, with an additional PS discretionary, was amended in 2021, mid year, to exclude a category of compensation for PS allocation purposes. Since 1,000 hour/last day for the PS, no problem. Problem is that on the AA amendment, wrong box was checked - instead of checking the box to carve this out to exclude for PS purposes only for 2021, it was checked to exclude for all purposes. Clearly unintended, client made the appropriate safe harbor contribution for 2021, etc.

Now, technically this amendment appears to violate 1.401(k)-3(g), and would cause the plan to require ADP testing for 2021, etc. - a pretty harsh outcome. So a VCP filing appears to be required to correct this. Allowing as a Scrivener error would be much nicer.

To be fair, I can see why the IRS generally is leery about allowing self correction for Scrivener error, as it might allow some pretty creative "revisionist history" on plans which isn't justified. So I'm guessing this won't change. 


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That might not be about what the IRS allows because self-correction means the employer doesn’t ask the IRS.

Among the burdens of self-correction (even before SECURE 2.0 § 305) is that it puts responsibility on the employer and, practically, its adviser.

If, after a self-correction, the plan’s tax-qualified treatment is challenged, the burdens of proof and persuasion are on the employer to show that the failure was eligible for self-correction and that the correction was appropriate.

When a professional is asked for advice, whether written or oral, that a failure is eligible for self-correction, the professional evaluates the liability exposures and other risks of that advice.

About the example you set up, ask yourself this rhetorical question:

Could Belgarath, knowing that States’ laws hold a nonlawyer to the same standard of care that would be used by a prudent lawyer (with the same exposures for liability to one’s advisee and third persons), write something to confirm the failure is eligible for self-correction?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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I have a few points to add: 

(1) SECURE 2.0 section 305 opens with "Except as otherwise provided in the Internal Revenue Code of 1986, regulations, or other guidance of general applicability prescribed by the Secretary of the Treasury or the Secretary’s delegate". This seems to give the IRS/Treasury pretty broad discretion to issue guidance saying that self-correction is not permissible in certain specific contexts. As a technical matter, it could be read literally to mean that self-correction has not yet been extended at all, because the existing EPCRS program is "guidance of general applicability prescribed by the Secretary of the Treasury or the Secretary’s delegate". However, it seems pretty apparent from the context of SECURE 2.0 that Congress intended to expand self-correction, so most people seem to be operating under the assumption that self-correction is broadly expanded unless and until the IRS clarifies that it is not. That said, it seems pretty clear that the IRS could issue guidance tomorrow and say that no document failures can be self-corrected. So, "what the IRS allows" is quite relevant. 

(2) Even before SECURE 2.0 was passed, EPCRS permitted some document failures to be self-corrected. If correction of the scrivener's error would favor participants, correction is fairly broadly available. Have you reviewed the Rev. Proc. to see whether you can self-correct under pre-SECURE 2.0 rules?

(3) I think SECURE 2.0 reads most naturally to say that you can self-correct any eligible inadvertent failure, so long as you act promptly after you discover it to implement the substantive correction prescribed by EPCRS. There are a handful of limited exceptions: (i) if the IRS discovers the failure on audit before you take steps that demonstrate a specific commitment to self-correction, (ii) if the self-correction is not completed within a reasonable period of time after the failure is discovered, (iii) if an exception prescribed in the IRS guidance that hasn't yet come out applies, (iv) if the failure is not an "eligible inadvertent failure" (plan fails to maintain appropriate practices and procedures, or failure is egregious, intentional, abusive, etc.), then self-correction is not permitted. But I don't see any exception in SECURE 2.0 saying that you can't self-correct plan document failures or nondiscrimination failures. 

(4) The main reason to utilize VCP at this point is to obtain certainty regarding the correction approach you are selecting. If the correction is clear under EPCRS, and none of the limited exceptions to self-correction applies, then there is no reason to file a VCP submission. However, if the client wants to move forward with a correction approach that is not clearly correct under EPCRS, then an IRS submission can offer an opportunity to obtain certainty that your correction approach is not going to be challenged by the IRS down the road. Of course, participants could still sue, and their claims would not be bound by an IRS compliance statement anyways.

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