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The Wagner Law Group

The Wagner Law Group, A Professional Corporation, is a nationally recognized ERISA & employee benefits, estate planning, employment, labor & human resources practice. 


Established in 1996, The Wagner Law Group has 22 attorneys engaged exclusively in employee benefits, estate planning and employment law. Six of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 40 states and several foreign countries.





Contact Info

The Wagner Law Group


  Integrity | Excellence



Tel: (617) 357-5200 

Fax: (617) 357-5250 

99 Summer Street 

13th Floor

Boston, MA 02110

Palm Beach Gardens 

Tel: (561) 293-3590
Fax: (561) 293-3591
7108 Fairway Drive
Suite 125
Palm Beach Gardens, FL 33418



Tel: (813) 603-2959

Fax: (813) 603-2961

101 East Kennedy Boulevard

Suite 2140
Tampa, FL  33602 


San Francisco

Tel: (415) 625-0002

Fax: (415) 358-8300

315 Montgomery Street

Suite 904

San Francisco, CA 94104


St. Louis

Tel: (314) 236-0065

Fax: (314) 236-5743
100 South 4th Street, Suite 550
St. Louis, MO  63102 







June 19, 2015


 ERISA & Employee Benefits





 EPCRS's Makeover


By Marcia S. Wagner, Esq.


As featured in the May/June 2015 edition of






Plan sponsors must operate their plans in compliance with notoriously complex rules set forth in the Internal Revenue Code (IRC) none more so than those relating to automatic contribution and automatic escalation features in 401(k) plans. If an error is not corrected, it can jeopardize the plan's tax-qualified status leading to costly tax consequences.


The Internal Revenue Service (IRS) Employee Plans Compliance Resolution System (EPCRS) is a tool for correcting operational errors, but until the recent issuance of enhancements, has been viewed as too costly to fix failures to implement automatic contribution features. This, in turn, has discouraged sponsors from adopting such features. To remove this impediment, the IRS recently issued Revenue Procedure 2015-28 that amends EPCRS so that implementation errors with respect to deferrals can be fixed more easily. The relaxed procedure applies to 401(k) and

403(b) plans that have failed to effectuate automatic contributions or affirmative deferral elections by participants, as well as the failure to carry out automatic escalation of the rate of deferral where called for by the plan. The new procedure also applies where an employee was improperly excluded from the plan by denying him or her the opportunity to make an affirmative election.


Under the old EPCRS rules, correction of these failures entailed making a so-called qualified nonelective contribution (QNEC) on behalf of the employee affected by the mistake. The amount of the QNEC was 50% of the of the deferral percentage for the employee's group in the plan - i.e., either the highly compensated group or nonhighly compensated group - multiplied by the employee's compensation for the year. The old rules also required corrective contributions for missed matching contributions and lost earnings. This was criticized for providing affected employees with a windfall, because they received plan contributions in addition to their full salary.


The new rules provide a safe harbor for certain deferral failures where the failure to implement an automatic contribution or an affirmative deferral election does not extend beyond the 9½ month period after the end of the plan year of the failure. This is generally the extended filing deadline for the plan's annual report on Form 5500 during the preparation of which implementation errors are frequently discovered. Under the safe harbor, if correct deferrals begin by the first payment of compensation after the earlier of this date or the date the plan sponsor is notified of the failure by the affected employee, a QNEC will not be required. The safe harbor is limited to employees subject to an automatic contribution feature.


There are two additional conditions for the safe harbor. The first requires that the affected employee receive notice of the failure (including the percentage of eligible compensation that should have been deferred and the date deferrals should have begun) within 45 days after correct deferrals begin. The plan sponsor must also make a corrective contribution for missed matching contributions adjusted for earnings that would have been earned on the match based on the employee's designated plan investment or, if none, the plan's default investment. The deadline for these contributions will generally be the last day of the second plan year following the plan year for which the failure occurred.


A second safe harbor correction method applies where correct deferrals begin by the first payment of compensation following the last day of the three-month period beginning after a deferral failure. In this instance, a QNEC for missed deferrals will not be required, although a corrective contribution for matching contributions and earnings, calculated in the same manner as under the first safe harbor, will be due. Notice of the failure with content tailored to the situation must be furnished to the affected employee within 45 days after correct deferrals begin. As under the first safe harbor, notification of a deferral failure from an affected employee before the three-month deadline will accelerate the date when corrective deferrals must begin.


The new EPCRS correction procedure provides a third safe harbor when correct deferrals begin more than three months after the deferral failure first occurred but no later than the first payment of compensation made on or after the last day of the second plan year following the plan year in which the failure occurred. If the affected employee notifies the plan sponsor of the failure before this date, correct deferrals will need to have begun by the first payroll date on or after the end of the month in which this notification was made.


The advantage of qualifying under the third safe harbor is that the generally applicable 50% QNEC will be replaced by a QNEC equal to 25% of the missed deferrals. This safe harbor is conditioned on furnishing a notice of the failure to the participant within 45 days after the beginning of correct deferrals.




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This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.