Message from the Firm
As 1997 drew to a close, the IRS announced that the opportunity to self-correct significant defects under its Administrative Policy Regarding Self-Correction (APRSC) would be extended to two years after the year in which the plan defect occurred. In addition, the IRS National Office is working on examples of acceptable ways to correct common defects. Those examples should be published in the first half of 1998.
These changes reflect an acknowledgment by the IRS that innocent mistakes can and do occur in the operation of qualified plans and that most employers, if they are given the opportunity, will voluntarily correct their mistakes. This change brings us full circle from the IRS mindset of "crime and punishment" of the late 1980s and early 1990s. And, the sentiment seems to be mutual because employers, and their advisors, are making a more concerted effort to find and correct administrative errors.
As a word of caution, though, where disqualifying defects are discovered by an IRS Revenue Agent during an audit, the sanctions continue to be substantial. Thus, while there is a "carrot" for self-correction, there continues to be a "stick" for errors discovered during audit.
Best Wishes for the New Year.
Reprinted with permission,
© 1998 Reish & Luftman. All rights reserved. The Reish & Luftman Practical Guide to Employment Law is published as a general informational source. Articles are general in nature and are not intended to constitute legal advice in any particular matter. Transmission of this report does not create an attorney-client relationship. Reish Luftman Reicher & Cohen does not warrant and is not responsible for errors or omissions in the content of this report.
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