IRS issues Rev. Proc 2015-28 to provide new safe harbor Employee Compliance Resolution System (“EPCRS”) correction methods relating to plans with automatic contribution features AND special safe harbor correction methods for plans (including plans with automatic contribution features) that have failures that are of limited duration and involve elective deferrals. These new methods are less costly and should reduce the administrative burden on plan sponsors trying to correct participant contribution errors.  In summary:

• If the 403b or 401k plan provides for automatic contribution features and the failure is discovered within 9 ½ months after the end of the plan year in which the error occurred, the sponsor just needs to implement the election.  No QNEC is required but as in the past, 100% of the match plus earnings needs to be remitted.  Failures include missed auto enrollment, missed auto escalation AND missed affirmative elections or changes.

• For all 403b and 401k plans with elective contributions, not just those with automatic contribution features, if the failure is discovered within 3 months of its occurrence, the sponsor just needs to implement the election.  No QNEC is required but as in the past, 100% of the match plus earnings needs to be remitted.

• For all 403b and 401k plans with elective contributions, not just those with automatic contribution features, if the failure is discovered after 3 months but before the last day of the second plan year following the year in which the failure occurred, the sponsor needs to make a QNEC of 25% of missed deferrals and 100% of the match plus earnings.

There are new participant notification requirements if you plan to use these correction methods as well as new options for calculating lost earnings.  This Rev. Proc. modifies the existing EPCRS program spelled out in Rev. Proc. 2013-12.  We have the expertise to assist you in understanding and applying these corrections.