By Ian Berger, JD
Follow Us on Twitter: @theslottreport
It looks like IRA owners will probably have to wait awhile to take advantage of a new program that allows them to self-correct IRA errors that previously couldn’t be fixed. In Notice 2023-43, the IRS said that self-correction for IRAs can’t be used until the IRS issues rules for the new program. And those rules aren’t required to be issued until the end of December 2024.
For a number of years, the IRS has had in effect a procedure – the Employee Plans Compliance Resolution Program (EPCRS) – that allows employers to fix certain tax code violations made by their retirement plans. The existing SECURE 2.0 legislation from last December loosened EPCRS to make self-correction for plans even more widely available. But employers have been in a bind because they didn’t know which rules to follow if they wanted to use EPCRS before the IRS publishes its new rules. Notice 2023-43 addresses this by giving interim guidance for companies to use during this transitional period.
SECURE 2.0 also expanded EPCRS to cover IRA errors for the first time. But since there’s no existing EPCRS rules for IRAs, Notice 2023-43 says the program won’t be available for IRAs until the IRS publishes guidance – which may not happen until December 2024.
Pending the expansion of EPCRS, IRA owners already have the ability to fix certain IRA mistakes. For example, since 2016 the IRS has permitted “self-certification” to remedy rollovers made after the 60-day deadline if the delay was on account of certain reasons. In addition, penalties for missed required minimum distributions (RMDs) and excess IRA contributions can be avoided if the IRA owner takes proper steps to fix the error.
With the extension of EPCRS, a wider list of IRA errors will eventually become available for self-correction. But it’s not clear just how wide this expansion will be. SECURE 2.0 says that IRA self-correction will allow “custodians to address” IRA errors. Does this mean that self-correction will be limited to mistakes made by custodians or will it also cover errors made by IRA owners or beneficiaries that can be fixed by custodians?
Whatever the case, the new self-correction program for IRAs probably won’t be effective anytime soon.