EPCRS - Revenue Procedure 2019--19

Another question on this. The corrective amendments to conform plan language to actual operation - I'm guessing that this will not override the normal timing requirements for advance notice in a safe harbor plan? Or, is it meant to allow self-correction n such a situation?

An IRS Revenue Procedure cannot supersede a Treasury regulation, since the IRS reports to the Treasury and a Treasury regulation has more clout than an IRS Procedure. However, the IRS might, as a policy matter, allow self-correction via amendment, as it has just done (it did so under the previous Procedure as well). Even so, under the latest EPCRS Procedure, three conditions must be met, one of which is that the (uniform) retroactive increase in a benefit, right, or feature must be otherwise permitted “under the Code” (which most practitioners would conclude means compliance with any Treasury regulation interpreting the Code).

So, no, this Procedure does not waive any requirements for an amendment to reduce or eliminate a benefit, right, or feature, such as the 30-day notice of any amendment that reduces or eliminates an otherwise required ADP safe harbor contribution, and any such midyear amendment must also meet the other conditions of Regulation 1.401(k)-3. Likewise, this latest Procedure does not allow the retroactive adoption of an ADP safe harbor (other than a plan that has reserved the right to install a nonelective safe harbor midyear by having issued a “maybe” notice, as authorized by that regulation), since that increase (ADP safe harbor status) would violate the same regulation (i.e., there must be a notice distributed prior to the start of the plan year). In other words, one way or another, an advance notice is required to adopt, change, or end an ADP safe harbor (with a couple very limited exceptions to the notice requirement in the context of some but not all plan terminations). Similarly, the new Procedure does not authorize a plan to adopt a retroactive amendment permitting deferrals, since the Code states that no deferrals can be taken from pay before the provision is adopted allowing for deferrals.

In contrast, the only reason that an employer previously could not adopt a loan feature retroactively to a prior plan year (that I can think of at the moment) is an IRS policy that states that discretionary amendments must be adopted no later than the last day of the plan year of implementation. The IRS position is that the terms of the document must be followed, and employers can’t have complete freedom to disregard the terms of the plan, but the IRS did allow a little bit of flexibility, i.e., until the end of the plan year, but even so, even that is permissible only so long as no other rule is violated.

Remember IRS Notice 2016-16? That was the Notice allowing for additional mid-year changes to an ADP safe harbor plan. Even so, it went out of its way to make clear it was not overruling any previous regulatory guidance. That Notice merely revised previous IRS administrative guidance (much of which was word-of-mouth) to acknowledge that the IRS had previously made statements that were unnecessarily restrictive, and that official guidance prior to that Notice was quite murky, and so the IRS provided additional clarity on such matters so that employers and the IRS itself would not dwell on many matters that had previously existed in the underworld of the “dreaded and evil” midyear prohibition on amendments. Again, no regulatory requirement was affected by that Notice, rather, it was just a new and welcome enforcement posture by the IRS, as is the latest EPCRS Procedure.

Enforcement on the timing of a certain type of amendment is now being made more liberal, but it is still a narrow passageway through which you must pass, i.e., you can stay in the park after the park has closed for the day without getting a ticket, but you can’t cause any other trouble, like littering or disturbing the peace, as you will most definitely are at risk of getting a ticket for any such shenanigans.