PART II. PROGRAM EFFECT AND

ELIGIBILITY

SECTION 3. EFFECT OF EPCRS; RELIANCE

.01 Effect of EPCRS on Qualified Plans . For a Qualified Plan, if the eligibility requirements of section 4 are satisfied and the Plan Sponsor corrects a Qualification Failure in accordance with the applicable requirements of SCP in section 7, VCP in sections 10 and 11, or Audit CAP in section 13, the Service will not treat the Qualified Plan as failing to meet § 401(a). Thus, for example, if the Plan Sponsor corrects the failures in accordance with the require

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if the plan document consists of either (i) a valid Model Form 5305–SIMPLE or 5304–SIMPLE adopted by an employer in accordance with the instructions on the applicable form, or (ii) a current favorable opinion letter for a Plan Sponsor that has adopted a prototype SIMPLE which has been amended in accordance with the procedures set forth in Rev. Proc. 2002–10, 2002–4 I.R.B. 401. .04 Established practices and proce- dures . In order to be eligible for SCP, the Plan Sponsor or administrator of a plan must have established practices and procedures (formal or informal) reasonably designed to promote and facilitate overall compliance with applicable Code requirements. For example, the plan administrator of a Qualified Plan that may be topheavy under § 416 may include in its plan operating manual a specific annual step to determine whether the plan is top-heavy and, if so, to ensure that the minimum contribution requirements of the top-heavy rules are satisfied. A plan document alone does not constitute evidence of established procedures. In order for a Plan Sponsor or administrator to use SCP, these established procedures must have been in place and routinely followed, and an Operational Failure must have occurred through an oversight or mistake in applying them or because of an inadequacy in the procedures. In the case of a failure that relates to Transferred Assets or to a plan assumed in connection with a corporate merger, acquisition, or other similar employer transaction between the Plan Sponsor and sponsor of the transferor plan or the prior plan sponsor of an assumed plan, the plan is considered to have established practices and procedures if such practices and procedures are in effect by the end of the first plan year that begins after the corporate merger, acquisition, or other similar transaction.

.05 Correction by plan amendment . (1) Availability of correction by plan amend- ment in VCP . A Plan Sponsor may use VCP for a Qualified Plan to correct an Operational Failure by a plan amendment to conform the terms of the plan to the plan’s prior operations, provided that the amendment complies with the requirements of § 401(a), including the requirements of §§ 401(a)(4), 410(b), and 411(d)(6).

(2) Certain correction by plan amend- ment permitted in SCP . A Plan Sponsor may

ments of this revenue procedure, the plan will be treated as a qualified plan for purposes of applying § 3121(a)(5) (FICA taxes) and § 3306(b)(5) (FUTA taxes).

.02 Effect of EPCRS on 403(b) Plans . (1) Income taxes . For a 403(b) Plan, if the applicable eligibility requirements of section 4 are satisfied and the Plan Sponsor corrects a failure in accordance with the applicable requirements of SCP in section 7, VCP in sections 10 and 11, or Audit CAP in section 13, the Service will not pursue income inclusion for affected participants, or liability for income tax withholding, on account of the failure. However, the correction of a failure may result in income tax consequences to participants and beneficiaries (for example, participants may be required to include in gross income distributions of Excess Amounts in the year of distribution).

(2) Excise and employment taxes . Excise taxes, FICA taxes, and FUTA taxes (and corresponding withholding obligations), if applicable, that result from a failure are not waived merely because the failure has been corrected.

.03 Effect of EPCRS on SEPs and SIMPLE IRA Plans . If the eligibility requirements of section 4 are satisfied and the Plan Sponsor, as defined in section 5.01(7), corrects a failure to satisfy the requirements of § 408(k) for a SEP or § 408(p) for a SIMPLE IRA Plan in accordance with the applicable requirements of SCP in section 7 (but only if the failure is an insignificant Operational Failure), VCP in sections 10 and 11, or Audit CAP in section 13, the Service will not treat the SEP or SIMPLE IRA Plan as failing to meet § 408(k) or § 408(p), as applicable. Thus, for example, if the Plan Sponsor corrects the failures in accordance with the requirements of this revenue procedure, the SEP will be treated as satisfying § 408(k) and the SIMPLE IRA Plan will be treated as satisfying § 408(p), for purposes of applying § 3121(a)(5) (FICA taxes) and § 3306(b)(5) (FUTA taxes).

.04 Compliance Statement . If a Plan Sponsor or Eligible Organization receives a compliance statement under VCP, the compliance statement is binding upon the Service and the Plan Sponsor or Eligible Organization as provided in section 10.09.

.05 Other taxes and penalties . See section 6.09 for rules relating to other taxes and penalties.

.06 Reliance . Taxpayers may rely on this revenue procedure, including the relief described in sections 3.01, 3.02, and 3.03.