It looks like IRA owners will probably have to wait a while 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.

EPCRS

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. However, 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

SECURE 2.0 also expanded EPCRS to cover IRA errors for the first time. But since there are 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.

Self-Certification

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.

Navigating Unknowns

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.

 

By Ian Berger, JD
IRA Analyst

Copyright © 2023, Ed Slott and Company, LLC Reprinted from The Slott Report, 2022, with permission. Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article. Content posted in Ed Slott’s IRA Corner was developed and produced by Ed Slott & Co. to provide information on a topic that may be of interest. Ed Slott and Ed Slott & Co. are not affiliated with Ethos Capital Management, Inc. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.  The tax information provided is general in nature and should not be construed as legal or tax advice. Information is derived from sources deemed to be reliable. Always consult an attorney or tax professional regarding your specific legal, or tax situation. Tax rules and regulations are subject to change at any time. Ethos Capital Management, Inc. is a registered investment adviser. The firm only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.