PART II. PROGRAM EFFECT

AND ELIGIBILITY

SECTION 3. EFFECT OF EPCRS; RELIANCE

.05 Future enhancements .

(1) Future updates . It is expected that the EPCRS revenue procedure will continue to be updated, in whole or in part, from time to time, including further improvements to EPCRS based on comments received. Thus, the Service and Treasury continue to invite further comments on how to improve EPCRS. Comments should be sent to:

Internal Revenue Service Attention: SE:T:EP:RA:VC 1111 Constitution Avenue NW Washington, D.C. 20224

(2) Section 401(k) automatic enrollment, automatic escalation, and safe harbor notices . Comments continue to be requested for certain specific issues under EPCRS. First, comments are requested regarding methods to correct the failure to implement automatic enrollment (including automatic escalation of the amount deferred) with respect to elective deferrals in a § 401(k) plan or 403(b) Plan that has an automatic enrollment or automatic escalation provision, including a plan with a qualified automatic contribution arrangement within the meaning of § 401(k)(13) or 401(m)(12) under which correct amounts were not timely withheld from the compensation of an employee who did not make an affirmative election to have a specified contribution made on his or her behalf under the plan (or who affirmatively elected to have automatic escalation apply). For example, comments are requested on whether the correction in Appendix A, section .05(2)(d)(ii), should also apply with respect to a § 401(k)(13) or 401(m)(12) safe harbor plan that provides for automatic escalation in elective deferrals. Second, comments are requested regarding methods to correct the failure to timely provide a safe harbor notice under a plan designed to satisfy the requirements of § 401(k)(12), 401(k)(13), 401(m)(11), 401(m)(12), or 414(w).

(3) Designated Roth contributions . Comments continue to be requested on special issues relating to designated Roth contributions. For example, comments are requested on whether, if a plan failed to implement a participant’s election to have a designated Roth contribution made on his or her behalf, but instead a pre-tax elective deferral was made for the participant with the participant’s compensation reduced accordingly, it would be an appropriate correction of the failure for the employer to ask the participant whether correction should be made by a transfer of the contribution (adjusted for Earnings) to a Roth account under the plan and inclusion of the amount so transferred in the participant’s compensation in the year of the transfer (instead of either (i) a similar transfer with a corrected W–2 for the year of the failure and the participant having to complete an amended return for the year of the failure or (ii) a similar transfer and inclusion of the amount so transferred in the participant’s compensation in the year of the transfer, but with the employer to make a gross-up payment to the participant to make the participant whole for any increase in the resulting income tax). Comments are also requested regarding cases in which a plan fails to notify an employee of his or her right to elect designated Roth contributions, such as whether a corrective contribution to a Roth account (in an amount such as described in section .05(3) of Appendix A), with the right to elect to have that amount included in gross income as described in the preceding sentence, should be applied in this case or whether some additional corrective contribution should be required to reflect the possibility that a participant’s decision to make an elective deferral might be affected by the availability of designated Roth contributions. See generally section .05(3) of Appendix A and Example 3 of Appendix B, section 2.02(1)(b), for illustrations of corrections for exclusion of otherwise eligible employees from having an effective opportunity to make elective deferrals, which applies without regard to whether the plan only permits pre-tax elective deferrals or whether the plan also permits designated Roth elective deferrals.

.01 Effect of EPCRS on retirement plans . For a Qualified Plan, a 403(b) Plan, a SEP, or a SIMPLE IRA Plan, if the 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

2013–4 I.R.B. 321 January 22, 2013