What is SCP?
What is SCP? Operational defects in the operation of a qualified plan may be corrected in accordance with the self-correction procedures (SCP) under the IRS Employee Plans Compliance Resolution System (EPCRS).
In order to be eligible for self-correction under SCP, the plan must have:
Determination Letter
A favorable determination letter or equivalent. “Equivalent” would be an IRS opinion or advisory letter issued on a pre-approved document, upon which the plan may rely in accordance with the IRS requirements.
Practices & Procedures
Established (formally or informally) practices and procedures reasonably designed to promote and facilitate overall compliance with applicable Internal Revenue Code requirements.
In addition, in order to self-correct an operational defect, the errors must constitute operational failures that are corrected within the three-year self-correction period OR are insignificant. What is considered insignificant is based on many factors.
Every situation is unique and the analysis is based on the specific facts and circumstances. Appropriate self-correction requires experience and knowledge regarding the legal requirements, not just the operational aspects of the plan.
