Internal Revenue Bulletin 2021-31 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2021–31
August 2, 2021
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE
Announcement 2021-12, page 267.
The Office of Professional Responsibility (OPR) announces re-
cent disciplinary sanctions involving attorneys, certified pub-
lic accountants, enrolled agents, enrolled actuaries, enrolled
retirement plan agents, and appraisers. These individuals are
subject to the regulations governing practice before the Inter-
nal Revenue Service (IRS), which are set out in Title 31, Code
of Federal Regulations, Part 10, and which are published in
pamphlet form as Treasury Department Circular No. 230.
The regulations prescribe the duties and restrictions relating
to such practice and prescribe the disciplinary sanctions for
violating the regulations.
EMPLOYEE PLANS
Notice 2021-44, page 166.
This notice sets forth updates on the corporate bond month-
ly yield curve, the corresponding spot segment rates for July
2021 used under § 417(e)(3)(D), the 24-month average seg-
ment rates applicable for July 2021, and the 30-year Trea-
sury rates, as reflected by the application of § 430(h)(2)(C)
(iv).
Rev. Proc. 2021-30, page 172.
Rev. Proc. 2021-30 adds two new benefit overpayment cor-
rection methods that encourage employers to avoid seeking
recoupment of benefit overpayments made to participants
and beneficiaries, either by not requiring correction if the
plan satisfies a specified funding level, or by limiting the
amount to be recouped under certain circumstances. In ad-
dition, the revenue procedure eliminates the VCP anonymous
submission procedure and adds an anonymous, no-fee, VCP
pre-submission conference procedure. The revenue proce-
dure also expands correction by plan amendment under SCP,
extends the end of the SCP correction period for significant
failures by one year, and extends the sunset of the safe har-
bor correction method for certain missed elective deferrals
by three years.
INCOME TAX
Notice 2021-45, page 170.
This notice advises State and local housing credit agencies
that allocate low-income housing tax credits under § 42 of
the Internal Revenue Code of the county and parish-level pop-
ulations residing in a qualified disaster zone to use in calcu-
lating the applicable dollar limitation for 2021 and 2022 as
provided in section 305 of the Taxpayer Certainty and Disas-
ter Tax Relief Act of 2020 (Pub. L. 116-260) (Act).
Rev. Rul. 2021-14, page 164.
Federal rates; adjusted federal rates; adjusted federal long-
term rate, and the long-term tax exempt rate. For purposes
of sections 382, 1274, 1288, 7872 and other sections of
the Code, tables set forth the rates for August 2021.
Finding Lists begin on page ii.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing of-
ficial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
August 2, 2021 Bulletin No. 2021–31

Part I
Section 1274.—
Determination of Issue
Price in the Case of Certain
Debt Instruments Issued for
Property
(Also Sections 42, 280G, 382, 467, 468, 482, 483,
1288, 7520, 7872.)
Rev. Rul. 2021-14
This revenue ruling provides various
prescribed rates for federal income tax
purposes for August 2021 (the current
month). Table 1 contains the short-
term, mid-term, and long-term applica-
ble federal rates (AFR) for the current
month for purposes of section 1274(d)
of the Internal Revenue Code. Table 2
contains the short-term, mid-term, and
long-term adjusted applicable federal
rates (adjusted AFR) for the current
month for purposes of section 1288(b).
Table 3 sets forth the adjusted feder-
al long-term rate and the long-term
tax-exempt rate described in section
382(f). Table 4 contains the appropri-
ate percentages for determining the
low-income housing credit described in
section 42(b)(1) for buildings placed in
service during the current month. How-
ever, under section 42(b)(2), the appli-
cable percentage for non-federally sub-
sidized new buildings placed in service
after July 30, 2008, shall not be less
than 9%. Finally, Table 5 contains the
federal rate for determining the present
value of an annuity, an interest for life
or for a term of years, or a remainder or
a reversionary interest for purposes of
section 7520.
REV. RUL. 2021-14 TABLE 1
Applicable Federal Rates (AFR) for August 2021
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR0.19%0.19%0.19%0.19%
110% AFR0.21%0.21%0.21%0.21%
120% AFR0.23%0.23%0.23%0.23%
130% AFR0.25%0.25%0.25%0.25%
Mid-term
AFR1.00%1.00%1.00%1.00%
110% AFR 1.10%1.10%1.10%1.10%
120% AFR1.20%1.20%1.20%1.20%
130% AFR1.30%1.30%1.30%1.30%
150% AFR1.51%1.50%1.50%1.50%
175% AFR1.76%1.75%1.75%1.74%
Long-term
AFR1.89%1.88%1.88%1.87%
110% AFR2.08%2.07%2.06%2.06%
120% AFR2.27%2.26%2.25%2.25%
130% AFR2.45%2.44%2.43%2.43%
REV. RUL. 2021-14 TABLE 2
Adjusted AFR for August 2021
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adjusted AFR0.14%0.14%0.14%0.14%
Mid-term adjusted AFR0.76%0.76%0.76%0.76%
Long-term adjusted AFR1.44%1.43%1.43%1.43%
August 2, 2021 164 Bulletin No. 2021–31

REV. RUL. 2021-14 TABLE 3
Rates Under Section 382 for August 2021
Adjusted federal long-term rate for the current month1.44%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal
long-term rates for the current month and the prior two months.)
1.58%
REV. RUL. 2021-14 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for August 2021
Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July
30, 2008, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit7.33%
Appropriate percentage for the 30% present value low-income housing credit 3.14%
REV. RUL. 2021-14 TABLE 5
Rate Under Section 7520 for August 2021
Applicable federal rate for determining the present value of an annuity, an interest for life or a
term of years, or a remainder or reversionary interest
1.2%
Section 42.—Low-Income
Housing Credit
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2021. See Rev. Rul. 2021-14, page 164.
Section 280G.—Golden
Parachute Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2021. See Rev. Rul. 2021-14, page 164.
Section 382.—Limitation
on Net Operating Loss
Carryforwards and
Certain Built-In Losses
Following Ownership
Change
The adjusted applicable federal long-term rate
is set forth for the month of August 2021. See Rev.
Rul. 2021-14, page 164.
Section 467.—Certain
Payments for the Use of
Property or Services
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2021. See Rev. Rul. 2021-14, page 164.
Section 468.—Special
Rules for Mining and Solid
Waste Reclamation and
Closing Costs
The applicable federal short-term rates are set
forth for the month of August 2021. See Rev. Rul.
2021-14, page 164.
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2021. See Rev. Rul. 2021-14, page 164.

Section 483.—Interest on
Certain Deferred Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2021. See Rev. Rul. 2021-14, page 164.
Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
August 2021. See Rev. Rul. 2021-14, page 164.
Section 7520.—Valuation
Tables
The applicable federal mid-term rates are set
forth for the month of August 2021. See Rev. Rul.
2021-14, page 164.
Section 7872.—Treatment
of Loans With Below-
Market Interest Rates
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
August 2021. See Rev. Rul. 2021-14, page 164.

Bulletin No. 2021–31 165 August 2, 2021

August 2, 2021 166 Bulletin No. 2021–31
Part III
Update for Weighted
Average Interest Rates,
Yield Curves, and Segment
Rates
Notice 2021-44
This notice provides guidance on the
corporate bond monthly yield curve, the
corresponding spot segment rates used
under § 417(e)(3), and the 24-month aver-
age segment rates under § 430(h)(2) of the
Internal Revenue Code. In addition, this
notice provides guidance as to the interest
rate on 30-year Treasury securities under
§ 417(e)(3)(A)(ii)(II) as in effect for plan
years beginning before 2008 and the 30-
year Treasury weighted average rate under
§ 431(c)(6)(E)(ii)(I).
YIELD CURVE AND SEGMENT
RATES
Section 430 specifies the minimum
funding requirements that apply to sin-
gle-employer plans (except for CSEC
plans under § 414(y)) pursuant to § 412.
Section 430(h)(2) specifies the inter-
est rates that must be used to determine
a plan’s target normal cost and funding
target. Under this provision, present val-
ue is generally determined using three
24-month average interest rates (“seg-
ment rates”), each of which applies to
cash flows during specified periods. To
the extent provided under § 430(h)(2)
(C)(iv), these segment rates are adjusted
by the applicable percentage of the 25-
year average segment rates for the period
ending September 30 of the year preced-
ing the calendar year in which the plan
year begins.
1
However, an election may
be made under § 430(h)(2)(D)(ii) to use
the monthly yield curve in place of the
segment rates.
Notice 2007-81, 2007-44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, and
the 24-month average corporate bond
segment rates used to compute the target
normal cost and the funding target. Con-
sistent with the methodology specified in
Notice 2007-81, the monthly corporate
bond yield curve derived from June 2021
data is in Table 2021-6 at the end of this
notice. The spot first, second, and third
segment rates for the month of June 2021
are, respectively, 0.63, 2.70, and 3.32.
The 24-month average segment rates
determined under § 430(h)(2)(C)(i)
through (iii) must be adjusted pursuant to
§ 430(h)(2)(C)(iv) to be within the appli-
cable minimum and maximum percentag-
es of the corresponding 25-year average
segment rates.
The 25-year average segment rates for
plan years beginning in 2020 and 2021
were published Notice 2019-51, 2019-41
I.R.B. 866, and Notice 2020-72, 2020-40
I.R.B. 789, respectively.
24-MONTH AVERAGE CORPORATE
BOND SEGMENT RATES
The three 24-month average corporate
bond segment rates applicable for July
2021 without adjustment for the 25-year
average segment rate limits are as fol-
lows:
24-Month Average Segment Rates Without 25-Year Average Adjustment
Applicable Month First Segment Second Segment Third Segment
July 2021 1.20 2.73 3.42
25-YEAR AVERAGE SEGMENT
RATES
Section 9706(a) of the American Res-
cue Plan Act of 2021, Pub. L. No. 117-
2 (ARP), which was enacted on March
11, 2021, changes the 25-year average
segment rates and the applicable mini-
mum and maximum percentages used
under § 430(h)(3)(C)(iv) of the Code to
adjust the 24-month average segment
rates. Prior to this change, the applica-
ble minimum and maximum percentages
were 90% and 110% for a plan year be-
ginning in 2020, and 85% and 115% for
a plan year beginning in 2021, respec-
tively. After this change, the applicable
minimum and maximum percentages are
95% and 105% for a plan year beginning
in 2020 or 2021. In addition, pursuant
to this change, any 25-year average seg-
ment rate that is less than 5% is deemed
to be 5%.
2
Pursuant to § 9706(c)(1) of ARP, these
changes apply with respect to plan years
beginning on or after January 1, 2020.
However, § 9706(c)(2) of ARP provides
that a plan sponsor may elect not to have
these changes apply to any plan year be-
ginning before January 1, 2022.
3
The adjusted 24-month average seg-
ment rates set forth in the chart below
reflect § 430(h)(2)(C)(iv) of the Code as
amended by § 9706(a) of ARP. These ad-
justed 24-month average segment rates
apply only for plan years for which an
election under § 9706(c)(2) of ARP is not
in effect. For a plan year for which such
an election does not apply, the 24-month
1
Pursuant to § 433(h)(3)(A), the 3
rd
segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount
of the full funding limitation under § 433(c)(7)(C)).
2
Pursuant to this change, the 25-year averages of the first segment rate for 2020 and 2021 are increased to 5.00% because those 25-year averages as originally published are below 5.00%.
3
This election may be made either for all purposes for which the amendments under § 9706 of ARP apply or solely for purposes of determining the adjusted funding target attainment per-
centage under § 436 of the Code for the plan year.

Bulletin No. 2021–31 167 August 2, 2021
averages applicable for July 2021, adjust-
ed to be within the applicable minimum
and maximum percentages of the corre-
sponding 25-year average segment rates
in accordance with § 430(h)(2)(C)(iv) of
the Code, are as follows:
Adjusted 24-Month Average Segment Rates
For Plan Years
Beginning In
Applicable
Month
First
Segment
Second
Segment
Third
Segment
2020July 20214.755.506.27
2021July 20214.755.366.11
The adjusted 24-month average seg-
ment rates set forth in the chart below do
not reflect the changes to § 430(h)(2)(C)
(iv) of the Code made by § 9706(a) of
ARP. These adjusted 24-month average
segment rates apply only for plan years for
which an election under § 9706(c)(2) of
ARP is in effect. For a plan year for which
such an election applies, the 24-month av-
erages applicable for July 2021, adjusted
to be within the applicable minimum and
maximum percentages of the correspond-
ing 25-year average segment rates in ac-
cordance with § 430(h)(2)(C)(iv) of the
Code, are as follows:
Pre-ARP Adjusted 24-Month Average Segment Rates
For Plan Years
Beginning In
Applicable
Month
First
Segment
Second
Segment
Third
Segment
2020July 20213.645.215.94
2021July 20213.324.795.47
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 431 specifies the minimum
funding requirements that apply to multi-
employer plans pursuant to § 412. Section
431(c)(6)(B) specifies a minimum amount
for the full-funding limitation described in
§ 431(c)(6)(A), based on the plan’s current
liability. Section 431(c)(6)(E)(ii)(I) pro-
vides that the interest rate used to calcu-
late current liability for this purpose must
be no more than 5 percent above and no
more than 10 percent below the weighted
average of the rates of interest on 30-year
Treasury securities during the four-year
period ending on the last day before the
beginning of the plan year. Notice 88-73,
1988-2 C.B. 383, provides guidelines for
determining the weighted average interest
rate. The rate of interest on 30-year Trea-
sury securities for June 2021 is 2.16 per-
cent. The Service determined this rate as
the average of the daily determinations of
yield on the 30-year Treasury bond matur-
ing in May 2051. For plan years beginning
in July 2021, the weighted average of the
rates of interest on 30-year Treasury se-
curities and the permissible range of rates
used to calculate current liability are as
follows:
Treasury Weighted Average Rates
For Plan Years
Beginning In
30-Year Treasury
Weighted Average
Permissible Range
90% to 105%
July 20212.221.99 to 2.33
MINIMUM PRESENT VALUE
SEGMENT RATES
In general, the applicable interest rates
under § 417(e)(3)(D) are segment rates
computed without regard to a 24-month
average. Notice 2007-81 provides guide-
lines for determining the minimum pres-
ent value segment rates. Pursuant to that
notice, the minimum present value seg-
ment rates determined for June 2021 are
as follows:
Minimum Present Value Segment Rates
Month First Segment Second Segment Third Segment
June 2021 0.63 2.70 3.32

August 2, 2021 168 Bulletin No. 2021–31
DRAFTING INFORMATION
The principal author of this notice is
Tom Morgan of the Office of the Asso-
ciate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Taxes). However, other personnel from
the IRS participated in the development
of this guidance. For further information
regarding this notice, contact Mr. Morgan
at 202-317-6700 or Paul Stern at 202-317-
8702 (not toll-free numbers).

Bulletin No. 2021–31 169 August 2, 2021
Table 2021-6
Monthly Yield Curve for June 2021
Derived from June 2021 Data
MaturityYieldMaturityYieldMaturityYieldMaturityYieldMaturityYield
0.50.1320.53.2340.53.3460.53.3880.53.40
1.00.2221.03.2441.03.3461.03.3881.03.40
1.50.3221.53.2441.53.3461.53.3881.53.40
2.00.4222.03.2442.03.3462.03.3882.03.40
2.50.5422.53.2442.53.3462.53.3882.53.40
3.00.6623.03.2543.03.3463.03.3883.03.40
3.50.7923.53.2543.53.3463.53.3883.53.40
4.00.9324.03.2544.03.3564.03.3884.03.40
4.51.0724.53.2644.53.3564.53.3984.53.41
5.01.2225.03.2645.03.3565.03.3985.03.41
5.51.3725.53.2645.53.3565.53.3985.53.41
6.01.5226.03.2646.03.3566.03.3986.03.41
6.51.6726.53.2746.53.3566.53.3986.53.41
7.01.8227.03.2747.03.3567.03.3987.03.41
7.51.9627.53.2747.53.3667.53.3987.53.41
8.02.1028.03.2848.03.3668.03.3988.03.41
8.52.2228.53.2848.53.3668.53.3988.53.41
9.02.3429.03.2849.03.3669.03.3989.03.41
9.52.4529.53.2949.53.3669.53.3989.53.41
10.02.5530.03.2950.03.3670.03.3990.03.41
10.52.6430.53.2950.53.3670.53.3990.53.41
11.02.7231.03.2951.03.3671.03.3991.03.41
11.52.8031.53.3051.53.3671.53.3991.53.41
12.02.8632.03.3052.03.3772.03.3992.03.41
12.52.9232.53.3052.53.3772.53.3992.53.41
13.02.9733.03.3153.03.3773.03.3993.03.41
13.53.0133.53.3153.53.3773.53.4093.53.41
14.03.0534.03.3154.03.3774.03.4094.03.41
14.53.0834.53.3154.53.3774.53.4094.53.41
15.03.1135.03.3155.03.3775.03.4095.03.41
15.53.1335.53.3255.53.3775.53.4095.53.41
16.03.1536.03.3256.03.3776.03.4096.03.41
16.53.1736.53.3256.53.3776.53.4096.53.41
17.03.1837.03.3257.03.3777.03.4097.03.41
17.53.1937.53.3257.53.3877.53.4097.53.41
18.03.2038.03.3358.03.3878.03.4098.03.41
18.53.2138.53.3358.53.3878.53.4098.53.41
19.03.2239.03.3359.03.3879.03.4099.03.41
19.53.2239.53.3359.53.3879.53.4099.53.41
20.03.2340.03.3360.03.3880.03.40100.03.41

August 2, 2021 170 Bulletin No. 2021–31
State Populations Residing
in a Qualified Disaster Zone
Notice 2021-45
I. PURPOSE
This notice advises State and local hous-
ing credit agencies that allocate low-in-
come housing tax credits under § 42 of the
Internal Revenue Code of the county and
parish-level populations residing in a qual-
ified disaster zone to use in calculating the
applicable dollar limitation for 2021 and
2022 as provided in section 305 of the Tax-
payer Certainty and Disaster Tax Relief Act
of 2020 (Pub. L. 116-260) (Act).
II. BACKGROUND
Under section 305(a)(1) of the Act, for
purposes of § 42, the State housing credit
ceiling for any State for each of calendar
years 2021 and 2022 shall be increased by
the aggregate housing credit dollar amount
allocated by the State housing credit agen-
cies of the State for the calendar year to
buildings located in any qualified disaster
zone in the State.
Section 305(a)(2)(A) of the Act limits
the aggregate increase in any State housing
credit ceiling in calendar years 2021 and
2022 to the applicable dollar limitation.
Section 305(a)(2)(B) of the Act defines
the applicable dollar limitation, with re-
spect to any State, as the lesser of (i) $3.50
multiplied by the population of the State
(as determined for calendar year 2020) re-
siding in a qualified disaster zone, or (ii)
65% of the State housing credit ceiling for
such State for calendar year 2020.
Section 301(2) of the Act defines qual-
ified disaster zone as the portion of any
qualified disaster area (as defined in 301(1)
of the Act) which was determined by the
President, during the period beginning on
January 1, 2020, and ending on February
25, 2021 (the date which is 60 days after
enactment of the Act), to warrant individu-
al or individual and public assistance from
the Federal Government under the Robert
T. Stafford Disaster Relief and Emergency
Assistance Act, 42 U.S.C. §§ 5121-5206
(the Stafford Act) by reason of the qual-
ified disaster with respect to the disaster
area. Section 301(1) of the Act generally
defines qualified disaster area as any area
with respect to which a major disaster was
declared (excluding disasters as a result of
COVID-19), during the period beginning
on January 1, 2020, and ending on February
25, 2021, by the President under section 401
of the Stafford Act, if the incident period of
the disaster began on or after December 28,
2019 and before or on December 27, 2020.
The President of the United States is-
sued major disaster declarations with
respect to damage in 11 states and Puer-
to Rico that meet the criteria of the Act.
More information related to each of the
major disasters is available at www.fema.
gov. This includes information related
to the counties and parishes determined
to warrant individual or individual and
public assistance from the Federal Gov-
ernment under the Stafford Act, which
are also listed later in this notice and are
needed to determine the population of a
State residing in a qualified disaster zone.
The major disasters that resulted in decla-
rations meeting the criteria of the Act are:
• Hurricane Sally for Alabama and
Florida. See DR-4563-AL and DR-
4564-FL.
• Hurricane Zeta for Alabama, Louisi-
ana, and Mississippi. See DR-4573-
AL, DR-4577-LA, and DR-4576-MS.
• Hurricane Laura for Louisiana. See
DR-4559-LA.
• Hurricane Delta for Louisiana. See
DR-4570-LA.
• Wildfires for California. See DR-
4558-CA and DR-4569-CA.
• Severe Storms for Iowa. See DR-
4557-IA.
• Severe Storms and Flooding for
Michigan. See DR-4547-MI.
• Severe Storms, Tornadoes, Straight-
line Winds, and Flooding for Missis-
sippi. See DR-4536-MS.
• Wildfires and Straight-line Winds for
Oregon. See DR-4562-OR.
• Severe Storms, Flooding, Landslides,
and Mudslides for Oregon. See DR-
4519-OR.
• Severe Storm and Flooding for Puerto
Rico. See DR-4571-PR.
• Tropical Storm Isaias for Puerto Rico.
See DR-4560-PR.
• Earthquakes for Puerto Rico. See DR-
4473-PR.
• Severe Storms, Tornadoes, and
Straight-line Winds for South Caroli-
na. See DR-4542-SC.
• Severe Storms, Tornadoes, Straight-
line Winds, and Flooding for Tennes-
see. See DR-4541-TN and DR-4476-
TN.
• Earthquake and Aftershocks for Utah.
See DR-4548-UT.
The counties and parishes located in a
qualified disaster zone in the 11 states, and
Puerto Rico are:
Alabama- Baldwin, Clarke, Dallas,
Escambia, Marengo, Mobile, Perry, Wash-
ington, and Wilcox.
California- Butte, Fresno, Lake, Las-
sen, Los Angeles, Madera, Mendocino,
Monterey, Napa, San Bernardino, San Di-
ego, San Mateo, Santa Clara, Santa Cruz,
Shasta, Siskiyou, Solano, Sonoma, Stanis-
laus, Trinity, Tulare, and Yolo.
Florida- Bay, Escambia, Okaloosa,
Santa Rosa, and Walton.
Iowa- Benton, Boone, Cedar, Clinton,
Jasper, Linn, Marshall, Polk, Poweshiek,
Scott, Story, and Tama.
Louisiana- Acadia, Allen, Beaure-
gard, Caddo, Calcasieu, Cameron, Grant,
Iberia, Jackson, Jefferson, Jefferson Da-
vis, Lafayette, Laforuche, LaSalle, Lin-
coln, Morehouse, Natchitoches, Orleans,
Ouachita, Plaquemines, Rapides, Sabine,
St. Bernard, St. Landry, St. Martin, Ter-
rebone, Union, Vermilion, Vernon, and
Winn.
Michigan- Arenac, Gladwin, Iosco,
Midland, and Saginaw.
Mississippi- Clarke, Covington,
George, Greene, Grenada, Hancock,
Harrison, Jackson, Jasper, Jefferson Da-
vis, Jones, Lawrence, Panola, Stone, and
Walthall.
Oregon- Clackamas, Douglas, Jack-
son, Klamath, Lane, Lincoln, Linn, Mar-
ion, and Umatilla.
Puerto Rico- Adjuntas, Aguada, Añas-
co, Arecibo, Barecloneta, Cabo Rojo, Cia-
les, Coamo, Corozal, Guánica, Guayanilla,
Hormigueros, Jayuya, Juana Díaz, Lajas,
Lares, Las Marías, Maricao, Mayagüez,
Moca, Morovis, Naranjito, Orocovis,
Peñuelas, Ponce, Rincón, Sabana Grande,
Salinas, San Germán, San Sebastián, Santa
Isabel, Utuado, Villalba, and Yauco.
South Carolina- Aiken, Barnwell,
Berkeley, Colleton, Hampton, Marlboro,
Oconee, Orangeburg, and Pickens.
Tennessee- Bradley, Davidson, Hamil-
ton, Putnam, and Wilson.
Utah- Davis, and Salt Lake.

Bulletin No. 2021–31 171 August 2, 2021
For the counties and parishes located in
a qualified disaster zone in the 11 states,
and Puerto Rico, the 2020 calendar year
population figures to be used in calcu-
lating the additional credit authority in
the Act are the resident population coun-
ty-level estimates as of July 1, 2019 that
were released electronically by the U.S.
Census Bureau on March 26, 2020 and
described in Press Release CB20-53. This
is consistent with the population figures
used in Notice 2020-10, 2020-10 I.R.B.
456, which advised State and local hous-
ing credit agencies on the 2020 calendar
year resident population figures.
III. STATE POPULATIONS RESIDING
IN A QUALIFIED DISASTER ZONE
Based on the foregoing, the portion of
each jurisdiction’s population residing in a
qualified disaster zone for calculating the
applicable dollar limitation is provided
below:
Alabama788,380
California23,069,525
Florida962,143
Iowa1,215,774
Louisiana2,770,640
Michigan339,154
Mississippi667,359
Oregon1,805,895
Puerto Rico1,053,857
South Carolina795,267
Tennessee1,394,960
Utah1,515,918
IV. DRAFTING INFORMATION
The principal author of this notice is
Michael J. Torruella Costa, Office of the
Associate Chief Counsel (Passthroughs
and Special Industries). For further infor-
mation regarding this notice, please con-
tact Mr. Torruella Costa at (202) 317-4137
(not a toll-free number).

August 2, 2021 172 Bulletin No. 2021–31
Rev. Proc. 2021-30
TABLE OF CONTENTS
PART I. INTRODUCTION TO EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM
SECTION 1. PURPOSE AND OVERVIEW ..............................................................175
.01 Purpose ....................................................................................175
.02 General principles underlying EPCRS ............................................................175
.03 Overview ..................................................................................176
SECTION 2. EFFECT OF THIS REVENUE PROCEDURE ON PROGRAMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .176
.01 Effect on programs ...........................................................................176
.02 Correction of Overpayment (defined benefit plans) ..................................................177
.03 Description of other modifications ...............................................................178
.04 Future enhancements .........................................................................178
PART II. PROGRAM EFFECT AND ELIGIBILITY
SECTION 3. EFFECT OF EPCRS; RELIANCE ...........................................................179
.01 Effect of EPCRS on retirement plans .............................................................179
.02 Compliance statement ........................................................................179
.03 Excise and other taxes ........................................................................179
.04 Reliance ...................................................................................179
SECTION 4. PROGRAM ELIGIBILITY .................................................................179
.01 EPCRS Programs ............................................................................179
.02 Effect of examination .........................................................................180
.03 SCP eligibility requirements relating to plan documents ..............................................180
.04 Established practices and procedures .............................................................180
.05 Correction by plan amendment .................................................................181
.06 Availability of correction for Employer Eligibility Failures and Demographic Failures ......................182
.07 Availability of correction for a terminated plan .....................................................182
.08 Availability of correction for an Orphan Plan ......................................................182
.09 Availability of correction for § 457(b) plans .......................................................182
.10 Egregious failures ............................................................................182
.11 Diversion or misuse of plan assets ...............................................................183
.12 Abusive tax avoidance transactions ..............................................................183
PART III. DEFINITIONS, CORRECTION PRINCIPLES, AND RULES OF GENERAL APPLICABILITY
SECTION 5. DEFINITIONS ..........................................................................184
.01 Definitions for Qualified Plans ..................................................................184
.02 Definitions for § 403(b) Plans ..................................................................187
.03 Definitions for Orphan Plans ...................................................................188
.04 Earnings ...................................................................................189
.05 IRA .......................................................................................189
.06 SEP .......................................................................................189
.07 SIMPLE IRA Plan ...........................................................................189
.08 Under Examination ...........................................................................189
SECTION 6. CORRECTION PRINCIPLES AND RULES OF GENERAL APPLICABILITY .......................190
.01 Correction principles; rules of general applicability .................................................190
.02 Correction principles .........................................................................190
.03 Correction of an Employer Eligibility Failure ......................................................194
.04 Correction of a failure to obtain spousal consent ....................................................195

Bulletin No. 2021–31 173 August 2, 2021
.05 Determination letter application not permitted ......................................................195
.06 Special rules relating to Excess Amounts ..........................................................196
.07 Correction of plan loan failures .................................................................199
.08 Correction under statute or regulations ...........................................................201
.09 Matters subject to excise or other taxes ...........................................................201
.10 Correction for § 403(b) Plans ...................................................................202
.11 Correction for SEPs and SIMPLE IRA Plans .......................................................203
.12 Confidentiality and disclosure ..................................................................204
.13 No effect on other law ........................................................................204
PART IV. SELF-CORRECTION (SCP)
SECTION 7. AVAILABILITY OF SCP FOR CERTAIN OPERATIONAL FAILURES AND
PLAN DOCUMENT FAILURES ............................................................204
.01 In general ..................................................................................204
.02 Operational Failures ..........................................................................204
.03 Plan Document Failures .......................................................................205
SECTION 8. SELF-CORRECTION OF INSIGNIFICANT OPERATIONAL FAILURES ..........................205
.01 Requirements ...............................................................................205
.02 Factors ....................................................................................205
.03 Multiple failures .............................................................................205
.04 Examples ..................................................................................205
SECTION 9. SELF-CORRECTION OF CERTAIN SIGNIFICANT OPERATIONAL FAILURES AND
PLAN DOCUMENT FAILURES ............................................................206
.01 Requirements ...............................................................................206
.02 Correction period ............................................................................206
.03 Substantial completion of correction .............................................................207
.04 Examples ..................................................................................207
PART V. VOLUNTARY CORRECTION PROGRAM WITH IRS APPROVAL (VCP)
SECTION 10. VCP PROCEDURES ....................................................................208
.01 VCP pre-submission conference .................................................................208
.02 VCP requirements ............................................................................208
.03 Identification of failures .......................................................................209
.04 Effect of VCP submission on examination .........................................................209
.05 No concurrent examination activity ..............................................................209
.06 Determination letter applications not related to a VCP submission ......................................209
.07 Processing of submission ......................................................................209
.08 Compliance statement ........................................................................211
.09 Effect of compliance statement on examination .....................................................212
.10 Anonymous submissions not permitted ...........................................................212
.11 Special rules relating to group submissions ........................................................213
.12 Multiemployer and multiple employer plans .......................................................214
SECTION 11. SUBMISSION PROCEDURES FOR VCP ....................................................214
.01 General rules ................................................................................214
.02 Submission of model forms ....................................................................214
.03 Mandatory Submission Process using the Pay.gov website ............................................215
.04 PDF file submission contents ...................................................................216
.05 User fee due at the time of VCP submission using the Pay.gov website ..................................217
.06 Additional user fee due for group submissions .....................................................217
.07 Additional amounts due for certain submissions ....................................................218
.08 Power of attorney requirements .................................................................218
.09 Acknowledgement of filing ....................................................................218

August 2, 2021 174 Bulletin No. 2021–31
.10 Maintenance of copies of submissions ............................................................218
.11 Assembling the submission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .218
SECTION 12. VCP USER FEES .......................................................................219
.01 User fees ...................................................................................219
PART VI. CORRECTION ON AUDIT (AUDIT CAP)
SECTION 13. DESCRIPTION OF AUDIT CAP ...........................................................220
.01 Audit CAP requirements .......................................................................220
.02 Payment of sanction ..........................................................................220
.03 Additional requirements .......................................................................220
.04 Failure to reach resolution .....................................................................220
.05 Effect of closing agreement ....................................................................220
.06 Other procedural rules ........................................................................220
SECTION 14. AUDIT CAP SANCTION .................................................................220
.01 Determination of sanction .....................................................................220
.02 Factors considered ...........................................................................221
.03 Transferred Assets ...........................................................................222
.04 Sanction for Nonamender Failures discovered during the determination letter application process .............222
PART VII. EFFECT ON OTHER DOCUMENTS; EFFECTIVE DATE; PAPERWORK REDUCTION ACT
SECTION 15. EFFECT ON OTHER DOCUMENTS .......................................................223
SECTION 16. EFFECTIVE DATE ......................................................................223
SECTION 17. PUBLIC COMMENTS ...................................................................223
SECTION 18. PAPERWORK REDUCTION ACT .........................................................224
DRAFTING INFORMATION .........................................................................224
APPENDIX A. OPERATIONAL FAILURES AND CORRECTION METHODS .................................225
.01 General rule ................................................................................225
.02 Failure to properly provide the minimum top-heavy benefit under § 416 to non-key employees ...............225
.03 Failure to satisfy the ADP test set forth in § 401(k)(3), the ACP test set forth in § 401(m)(2), or,
for plan years beginning on or before December 31, 2001, the multiple use test of § 401(m)(9) ...............225
.04 Failure to distribute elective deferrals in excess of the § 402(g) limit (in contravention of § 401(a)(30)) ........226
.05 Exclusion of an eligible employee from all contributions or accruals under the plan for one or
more plan years. .............................................................................226
.06 Failure to timely pay the minimum distribution required under § 401(a)(9) ...............................233
.07 Failure to obtain participant or spousal consent for a distribution subject to the participant and
spousal consent rules under §§ 401(a)(11), 411(a)(11), and 417 ........................................233
.08 Failure to satisfy the § 415 limits in a defined contribution plan ........................................234
.09 Orphan Plans; orphan contracts and other assets ....................................................234
APPENDIX B. CORRECTION METHODS AND EXAMPLES; EARNINGS ADJUSTMENT METHODS AND EXAMPLES ..236
SECTION 1. PURPOSE, ASSUMPTIONS FOR EXAMPLES AND SECTION REFERENCES .....................236
.01 Purpose ....................................................................................236
.02 Assumptions for Examples .....................................................................236
.03 Designated Roth contributions ..................................................................236
.04 Section references ............................................................................236

Bulletin No. 2021–31 175 August 2, 2021
SECTION 2. CORRECTION METHODS AND EXAMPLES ................................................237
.01 ADP/ACP Failures ...........................................................................237
.02 Exclusion of Otherwise Eligible Employees .......................................................239
.03 Vesting Failures .............................................................................250
.04 Section 415(c) Failures and Correction of Overpayments (Defined Contribution Plans and § 403(b) Plans) ......251
.05 Section 415(b) Failures and Correction of Overpayments (Defined Benefit Plans). . . . . . . . . . . . . . . . . . . . . . . . . .252
.06 § 401(a)(17) Failures .........................................................................258
.07 Correction by Amendment .....................................................................258
SECTION 3. EARNINGS ADJUSTMENT METHODS AND EXAMPLES .....................................260
.01 Earnings Adjustment Methods ..................................................................260
.02 Examples ..................................................................................263
PART I.
INTRODUCTION TO EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM
SECTION 1. PURPOSE AND OVERVIEW
.01 Purpose. This revenue procedure updates the comprehensive system of correction programs
for sponsors of retirement plans that are intended to satisfy the requirements of § 401(a), 403(a),
403(b), 408(k), or 408(p) of the Internal Revenue Code (the “Code”), but that have not met these
requirements for a period of time. This system, the Employee Plans Compliance Resolution Sys-
tem (“EPCRS”), permits Plan Sponsors to correct these failures and thereby continue to provide
their employees with retirement benefits on a tax-favored basis. The components of EPCRS are
the Self-Correction Program (“SCP”), the Voluntary Correction Program (“VCP”), and the Audit
Closing Agreement Program (“Audit CAP”).
.02 General principles underlying EPCRS. EPCRS is based on the following general principles:
• Sponsors and other administrators of eligible plans should be encouraged to establish ad-
ministrative practices and procedures that ensure that these plans are operated properly in
accordance with the applicable requirements of the Code.
• Sponsors and other administrators of eligible plans should satisfy the applicable plan docu-
ment requirements of the Code.
• Sponsors and other administrators should make voluntary and timely correction of any plan
failures, whether involving discrimination in favor of highly compensated employees, plan
operations, the terms of the plan document, or adoption of a plan by an ineligible employer.
Timely and efficient correction protects participating employees by providing them with their
expected retirement benefits, including favorable tax treatment.
• Voluntary compliance is promoted by establishing limited fees for voluntary corrections ap-
proved by the Internal Revenue Service (“IRS”), thereby reducing employers’ uncertainty
regarding their potential tax liability and participants’ potential tax liability.
• Fees and sanctions should be graduated in a series of steps so that there is always an incentive
to correct promptly.
• Sanctions for plan failures identified on audit should be reasonable in light of the nature,
extent, and severity of the violation.

August 2, 2021 176 Bulletin No. 2021–31
• Administration of EPCRS should be consistent and uniform.
• Sponsors should be able to rely on the availability of EPCRS in taking corrective actions to
maintain the tax-favored status of their plans.
.03 Overview. EPCRS includes the following basic elements:
• Self-correction (SCP). A Plan Sponsor that has established compliance practices and proce-
dures may, at any time without paying any fee or sanction, correct insignificant Operational
Failures under a Qualified Plan, a § 403(b) Plan, a SEP, or a SIMPLE IRA Plan. For a SEP or
SIMPLE IRA Plan, SCP is available only if the SEP or SIMPLE IRA Plan is established and
maintained on a document approved by the IRS. In addition, in the case of a Qualified Plan or
§ 403(b) Plan that satisfies the requirements of sections 4.03 and 4.04, the Plan Sponsor gen-
erally may correct significant Operational Failures and Plan Document Failures without pay-
ment of any fee or sanction if the correction is made within the time specified in section 9.02.
• Voluntary correction with IRS approval (VCP). A Plan Sponsor, at any time before audit,
may pay a limited fee and receive the IRS’s approval for correction of a Qualified Plan,
§ 403(b) Plan, SEP, or SIMPLE IRA Plan failure. Under VCP, there are special procedures
for anonymous submissions and group submissions. However, effective January 1, 2022, the
anonymous submission procedure is eliminated. VCP submissions may not be submitted on
an anonymous basis on or after that date. Additionally, an anonymous, no-fee, VCP pre-sub-
mission conference procedure is added, effective January 1, 2022.
• Correction on audit (Audit CAP). If a failure (other than a failure corrected through SCP or
VCP) is identified on audit, the Plan Sponsor may correct the failure and pay a sanction. The
sanction imposed will bear a reasonable relationship to the nature, extent, and severity of the
failure, taking into account the extent to which correction occurred before audit.
SECTION 2. EFFECT OF THIS REVENUE PROCEDURE ON PROGRAMS
.01 Effect on programs. This revenue procedure modifies and supersedes Rev. Proc. 2019-19,
2019-19 I.R.B. 1086, the most recent prior consolidated statement of the correction programs
under EPCRS. This update to Rev. Proc. 2019-19 is a limited update and is published primarily to:
(1) expand guidance on the recoupment of Overpayments;
(2) eliminate the anonymous submission procedure under VCP, effective January 1, 2022;
(3) add an anonymous, no-fee, VCP pre-submission conference procedure, effective January 1,
2022;
(4) extend the end of the SCP correction period for significant failures by one year (which has
the result of also extending the safe harbor correction method for Employee Elective Deferral
Failures lasting more than three months but not beyond the extended SCP correction period
for significant failures);
(5) expand the ability of a Plan Sponsor to correct an Operational Failure under SCP by plan
amendment; and
(6) extend by three years the sunset of the safe harbor correction method available for certain
Employee Elective Deferral Failures associated with missed elective deferrals for eligible
employees who are subject to an automatic contribution feature in a § 401(k) plan or § 403(b)
Plan (from December 31, 2020, to December 31, 2023).

Bulletin No. 2021–31 177 August 2, 2021
.02 Correction of Overpayment (defined benefit plans). (1) In general. Rev. Proc. 2015-27,
2015-16 I.R.B. 914, clarified the permissible methods for correcting Overpayments under EP-
CRS by noting that, depending on the facts and circumstances, correcting an Overpayment under
EPCRS may not need to include requesting that Overpayments be returned to the plan by plan
participants and beneficiaries. The Department of the Treasury (“Treasury Department”) and the
IRS also requested comments in Rev. Proc. 2015-27 on potential changes relating to the recoup-
ment of Overpayments. In light of comments received, the Treasury Department and the IRS are
modifying Rev. Proc. 2019-19 to further clarify and expand options available for the recoupment
of Overpayments.
(2) Modifications to current correction methods. Sections 6.06(3), 6.06(4), and Appendix B, sec-
tion 2.05, are revised to provide that Plan Sponsors may provide Overpayment recipients the
option of repaying an Overpayment in a single sum payment, through an installment agreement,
or through an adjustment in future payments.
(3) New correction methods. Section 6.06(3) is revised to provide two new Overpayment cor-
rection methods, the funding exception correction method and the contribution credit correction
method. These methods reduce the need for defined benefit plans to seek recoupment from Over-
payment recipients and ease the process for Overpayment recipients repaying Overpayments,
while balancing the interest of other participants in the plan.
(i) Funding exception correction method. Section 6.06(3)(d)(i) sets forth the new funding ex-
ception correction method, which provides that corrective payments are not required for a plan
subject to § 436, provided that the plan’s certified or presumed adjusted funding target attainment
percentage (“AFTAP”) determined under § 436 that is applicable to the plan at the date of cor-
rection is equal to at least 100 percent (or, in the case of a multiemployer plan, the plan’s most
recent annual funding certification indicates that the plan is not in critical, critical and declining,
or endangered status (as defined in § 432), determined at the date of correction). Future benefit
payments to an Overpayment recipient must be reduced to the correct benefit payment amount.
For purposes of EPCRS, no further corrective payments from any party are required, no further
reductions to future benefit payments to an Overpayment recipient, or any spouse or beneficiary
of an Overpayment recipient, are permitted, and no further corrective payments from an Over-
payment recipient, or any spouse or beneficiary of an Overpayment recipient, are permitted. See
section 6.06(3)(d)(i) and Appendix B, section 2.05(3).
(ii) Contribution credit correction method. Section 6.06(3)(d)(ii) sets forth the new contribu-
tion credit correction method, which provides that the amount of Overpayments required to
be repaid to the plan is the amount of the Overpayments reduced (but not below zero) by:
(A) the cumulative increase in the plan’s minimum funding requirements attributable to the
Overpayments (including the increase attributable to the overstatement of liabilities, whether
funded through cash contributions or through the use of a funding standard carryover balance,
prefunding balance, or funding standard account credit balance), beginning with (1) the plan
year for which the Overpayments are taken into account for funding purposes, through (2) the
end of the plan year preceding the plan year for which the corrected benefit payment amount is
taken into account for funding purposes; and (B) certain additional contributions in excess of
minimum funding requirements paid to the plan after the first of the Overpayments was made.
This reduction is referred to as a “contribution credit.” Future benefit payments to an Overpay-
ment recipient must be reduced to the correct benefit payment amount. For purposes of EPCRS,
if the amount of the Overpayments is reduced to zero after the contribution credit is applied,
no further corrective payments from any party are required, no further reductions to future
benefit payments to an Overpayment recipient, or any spouse or beneficiary of an Overpayment
recipient, are permitted, and no further corrective payments from an Overpayment recipient, or
any spouse or beneficiary of an Overpayment recipient, are permitted. However, if a net Over-
payment remains after the application of the contribution credit, the Plan Sponsor or another
party must take further action to reimburse the plan for the remainder of the Overpayment. See
section 6.06(3)(d)(ii) and Appendix B, section 2.05(4).

August 2, 2021 178 Bulletin No. 2021–31
.03 Description of other modifications. The other modifications to Rev. Proc. 2019-19 that are
made by this revenue procedure include the following—
1. Eliminating the condition previously set forth in section 4.05(2)(a)(ii) (relating to correc-
tion by plan amendment of Operational Failures under SCP for Qualified Plans and § 403(b)
Plans) that requires a plan amendment that increases a benefit, right, or feature to apply to all
participants eligible to participate under the plan.
2. Increasing from $100 to $250 the threshold for certain de minimis amounts for which a Plan
Sponsor is not required to implement correction. See sections 6.02(5)(c), 6.02(5)(e), and
6.11(5)(c).
3. Modifying the structure of section 6.06(4) and Appendix B, section 2.04, to be more consis-
tent with changes made to section 6.06(3) and Appendix B, section 2.05, and to clarify the
correction principles relating to Overpayments from defined contribution plans and § 403(b)
Plans.
4. Extending the end of the SCP correction period for significant failures (set forth in section
9.02) from the last day of the second plan year following the plan year for which the failure
occurred to the last day of the third plan year following the plan year for which the failure
occurred (which has the result of also extending the safe harbor correction method set forth
in Appendix A, section .05(9)(b) for Employee Elective Deferral Failures lasting more than
three months but not beyond the extended SCP correction period for significant failures) and
modifying the examples in section 9.04 to reflect this extension.
5. Revising section 10.01 to add an option, effective January 1, 2022, for Plan Sponsors to re-
quest a no-fee anonymous VCP pre-submission conference under specified circumstances.
6. Eliminating the anonymous submission procedure described in section 10.09 of Rev. Proc.
2019-19, which permits submission of a Qualified Plan, § 403(b) Plan, SEP, or SIMPLE IRA
Plan under VCP without initially identifying the applicable plan, the Plan Sponsor, or the El-
igible Organization, effective January 1, 2022, and making conforming revisions to sections
11.04(16) and 11.08(2) to reflect the elimination of this procedure. See section 10.10 of this
revenue procedure.
7. Requiring that Audit CAP sanctions be paid through the Pay.gov website (instead of by certi-
fied check or cashier’s check) beginning January 1, 2022. See section 13.02.
8. Revising Appendix A, section .05(8), to extend by three years (from December 31, 2020,
to December 31, 2023) the sunset of the safe harbor correction method available for certain
Employee Elective Deferral Failures associated with missed elective deferrals for eligible
employees who are subject to an automatic contribution feature in a § 401(k) plan or § 403(b)
Plan.
.04 Future enhancements.
It is expected that the Treasury Department and the IRS will continue to update the EPCRS reve-
nue procedure, in whole or in part, from time to time, including further improvements to EPCRS
based on comments received. Accordingly, the Treasury Department and the IRS continue to in-
vite further comments on how to improve EPCRS. For information on how to submit comments,
see section 17.

Bulletin No. 2021–31 179 August 2, 2021
PART II.
PROGRAM EFFECT AND ELIGIBILITY
SECTION 3. EFFECT OF EPCRS; RELIANCE
.01 Effect of EPCRS on retirement plans. For a Qualified Plan, a § 403(b) Plan, a SEP, or a SIM-
PLE IRA Plan, if the eligibility requirements of section 4 are satisfied and the Plan Sponsor cor-
rects a failure in accordance with the applicable requirements of SCP in section 7, VCP in section
10, or Audit CAP in section 13, the IRS will not treat the plan as failing to satisfy the requirements
of § 401(a), 403(b), 408(k), or 408(p), as applicable, because of the failure. For example, if the
Plan Sponsor corrects a failure in accordance with the requirements of this revenue procedure, the
plan will not thereby be treated as failing to satisfy § 401(a), 403(b), 408(k), or 408(p), as applica-
ble, for purposes of applying §§ 3121(a)(5) (FICA taxes) and 3306(b)(5) (FUTA taxes).
.02 Compliance statement. If a Plan Sponsor or Eligible Organization receives a compliance state-
ment under VCP, the compliance statement is binding upon the IRS and the Plan Sponsor or Eli-
gible Organization as provided in section 10.08.
.03 Excise and other taxes. See section 6.09 for rules relating to excise and other taxes.
.04 Reliance. Taxpayers may rely on this revenue procedure, including the relief described in
section 3.01.
SECTION 4. PROGRAM ELIGIBILITY
.01 EPCRS Programs. (1) SCP. SCP is available to correct Operational Failures and certain Plan
Document Failures as follows:
(a) Operational Failures. A Plan Sponsor of a Qualified Plan or § 403(b) Plan that is otherwise
eligible for correction under SCP may use SCP to correct significant and insignificant Operational
Failures (including certain plan loan failures described in section 6.07). Operational Failures that
are significant may be corrected under SCP only if the correction of the failure is completed or
substantially completed (in accordance with section 9.03) by the last day of the correction period
described in section 9.02.
(b) Plan Document Failures. A Plan Sponsor of a Qualified Plan or § 403(b) Plan may use SCP to
correct certain Plan Document Failures, as defined in section 5.01(2)(a) for a Qualified Plan and
section 5.02(2)(a) for a § 403(b) Plan, that are otherwise eligible for correction under SCP. A Plan
Document Failure consisting of the initial failure to adopt a Qualified Plan, or the failure to adopt
a written § 403(b) Plan timely in accordance with §1.403(b)-3(b)(3) and Notice 2009-3, 2009-2
I.R.B. 250, is treated as a Plan Document Failure that is not eligible to be corrected under SCP. All
Plan Document Failures that are eligible to be corrected under SCP are treated as significant; thus,
the correction must be completed by the last day of the correction period described in section 9.02.
(c) SEPs and SIMPLE IRA Plans. SEPs and SIMPLE IRA Plans are eligible to be corrected under
SCP only with respect to insignificant Operational Failures.

August 2, 2021 180 Bulletin No. 2021–31
(d) Demographic Failures and Employer Eligibility Failures. Demographic Failures and Employ-
er Eligibility Failures may not be corrected under SCP.
(2) VCP. Qualified Plans, § 403(b) Plans, SEPs, and SIMPLE IRA Plans are eligible for correc-
tion under VCP. VCP provides general procedures for correction of all Qualification Failures:
Operational, Plan Document, Demographic, and Employer Eligibility. VCP also provides general
procedures for the correction of plan loan failures (see section 6.07). Effective January 1, 2022,
VCP submissions may not be submitted on an anonymous basis.
(3) Audit CAP. Unless otherwise provided, Audit CAP is available for the correction of Qualified
Plans, § 403(b) Plans, SEPs, and SIMPLE IRA Plans for all failures found on examination that
have not been corrected in accordance with SCP or VCP. Audit CAP also provides general proce-
dures for the correction of plan loan failures (see section 6.07).
(4) Eligibility for other arrangements. The IRS may extend EPCRS to other arrangements.
(5) Appropriate use of programs. In a particular case, the IRS may decline to make available one
or more correction programs under EPCRS in the interest of sound tax administration.
.02 Effect of examination. If the plan or Plan Sponsor is Under Examination, VCP is not available.
SCP is available only as follows:
(1) Insignificant Operational Failures. While the plan or Plan Sponsor is Under Examination,
insignificant Operational Failures may be corrected under SCP.
(2) Significant Operational Failures. If correction of significant Operational Failures has been
substantially completed (as described in section 9.03) before the plan or Plan Sponsor is Under
Examination, the Plan Sponsor may complete correction of those failures under SCP.
.03 SCP eligibility requirements relating to plan documents. (1) Requirements for Qualified Plans
and § 403(b) Plans. The provisions of SCP relating to certain Plan Document Failures, as de-
scribed in section 4.01(1)(b), and significant Operational Failures, as described in section 9, are
available for a Qualified Plan that, as of the date of correction, is the subject of a Favorable Letter.
See section 5.01(4) for the definition of Favorable Letter for a Qualified Plan. The provisions of
SCP relating to certain Plan Document Failures and significant Operational Failures are available
for a § 403(b) Plan if the conditions for being treated as having a Favorable Letter in section
6.10(2) are satisfied. See section 5.02(5) for the definition of Favorable Letter for a § 403(b) Plan.
(2) Requirements for SEPs and SIMPLE IRAs. The provisions of SCP relating to insignificant
Operational Failures (see section 8) are available for a SEP only if the plan document consists of
either (i) a valid Model Form 5305-SEP, Simplified Employee Pension—Individual Retirement
Accounts Contribution Agreement, or 5305A-SEP, Salary Reduction Simplified Employee Pen-
sion—Individual Retirement Accounts Contribution Agreement, adopted by an employer in ac-
cordance with the instructions on the applicable form (see Rev. Proc. 2002-10, 2002-1 C.B. 401)
or (ii) a prototype SEP that has a current favorable opinion letter and that has been amended in
accordance with the procedures set forth in Rev. Proc. 2002-10. The provisions of SCP relating
to insignificant Operational Failures are available for a SIMPLE IRA Plan only if the plan docu-
ment consists of either (i) a valid Model Form 5305-SIMPLE, Savings Incentive Match Plan for
Employees of Small Employers (SIMPLE)—for Use with a Designated Financial Institution, or
5304-SIMPLE, Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)—
Not for Use with a Designated Financial Institution, adopted by an employer in accordance with
the instructions on the applicable form (see Rev. Proc. 2002-10) or (ii) a prototype SIMPLE IRA
Plan that has a current favorable opinion letter and that has been amended in accordance with the
procedures set forth in Rev. Proc. 2002-10.
.04 Established practices and procedures. To be eligible for SCP, the Plan Sponsor or administrator
of a plan must have established practices and procedures (formal or informal) reasonably designed

Bulletin No. 2021–31 181 August 2, 2021
to promote and facilitate overall compliance in form and operation with applicable Code require-
ments. For example, the plan administrator of a Qualified Plan that may be top-heavy 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 or Plan Document Failure must have
occurred through an oversight or mistake in applying them. SCP also may be used in situations
in which the Operational Failure or Plan Document Failure occurred because the procedures that
were in place, while reasonable, were not sufficient to prevent the occurrence of the failure. A plan
that provides for elective deferrals and nonelective employer contributions that are not matching
contributions is not treated as failing to have established practices and procedures to prevent the
occurrence of a § 415(c) violation in the case of a plan under which excess annual additions under
§ 415(c) are regularly corrected by return of elective deferrals to the affected employee within
9½ months after the end of the plan’s limitation year. The correction, however, should not violate
another applicable Code requirement. 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 the sponsor of the transferor plan or the prior Plan
Sponsor of an assumed plan, the plan is considered to have established practices and procedures
for the Transferred Assets if such practices and procedures are in effect for the Transferred Assets
by the end of the first plan year that begins after the corporate merger, acquisition, or other similar
transaction. (See section 6.10(2) for special rules regarding established practices and procedures
for § 403(b) Plans.)
.05 Correction by plan amendment. (1) Availability of correction by plan amendment in VCP or
Audit CAP. A Plan Sponsor of a Qualified Plan or § 403(b) Plan may use VCP or Audit CAP to
correct Plan Document, Demographic, and Operational Failures by plan amendment, including to
correct an Operational Failure by plan amendment to conform the terms of the plan to the plan’s
prior operations, provided that the amendment complies with the applicable Code requirements
(including the requirements of §§ 401(a)(4), 410(b), 411(d)(6), and 403(b)(12), as applicable). In
addition, a Plan Sponsor may adopt a plan amendment to reflect corrective action. For example,
if the plan failed to satisfy the actual deferral percentage (“ADP”) test required under § 401(k)
(3) and the Plan Sponsor must make qualified nonelective contributions not already provided for
under the plan, the plan may be amended to provide for qualified nonelective contributions. As
explained further in sections 6.05 and 10.08(2), the issuance of a compliance statement constitutes
a determination that the failure identified has been corrected, but does not constitute a determina-
tion that the terms of the plan, including the corrective plan amendment, satisfy the qualification
requirements in form.
(2) Availability of correction by plan amendment in SCP. SCP is available for corrections made
by plan amendment, as provided in section 4.05(2)(a), (b), and (c). In addition, a Plan Sponsor
may adopt a plan amendment to reflect corrective action. For example, if the plan failed to satisfy
the ADP test required under § 401(k)(3) and the Plan Sponsor must make qualified nonelective
contributions not already provided for under the plan, the plan may be amended to provide for
qualified nonelective contributions.
(a) Correction of Operational Failure by plan amendment for a Qualified Plan or § 403(b) Plan.
A Plan Sponsor of a Qualified Plan or § 403(b) Plan may correct an Operational Failure by plan
amendment in order to conform the terms of the plan to the plan’s prior operations only if the
following conditions are satisfied:
(i) The plan amendment would result in an increase of a benefit, right, or feature.
(ii) The provision of the increase in the benefit, right, or feature to participants is permitted under
the Code (including the requirements of §§ 401(a)(4), 410(b), 411(d)(6), and 403(b)(12), as ap-
plicable), and satisfies the correction principles of section 6.02 and any other applicable rules of
this revenue procedure.

August 2, 2021 182 Bulletin No. 2021–31
(b) Operational Failure correction methods in accordance with Appendix B. In addition to cor-
rection by plan amendment as described in section 4.05(2)(a), a Plan Sponsor of a Qualified Plan
or § 403(b) Plan may use SCP to correct Operational Failures listed in Appendix B, section 2.07,
by plan amendment to conform the terms of the plan to the plan’s prior operations. Under SCP,
these failures must be corrected in accordance with the correction methods set forth in Appendix
B, section 2.07.
(c) Plan Document Failures. A Plan Sponsor of a Qualified Plan or § 403(b) Plan may use SCP to
correct an eligible Plan Document Failure, as described in section 4.01(1)(b), only if the following
conditions are satisfied:
(i) The Qualified Plan or § 403(b) Plan has been issued a Favorable Letter, as respectively defined
in sections 5.01(4) and 5.02(5).
(ii) The Plan Sponsor satisfies the requirements in section 9 relating to correcting a Plan Docu-
ment Failure. Thus, for example, the Plan Sponsor must adopt a corrective plan amendment by the
end the correction period set forth in section 9.02.
.06 Availability of correction for Employer Eligibility Failures and Demographic Failures. SCP is
not available for a Plan Sponsor to correct Employer Eligibility Failures or Demographic Failures.
.07 Availability of correction for a terminated plan. Correction of Qualification Failures and
§ 403(b) Failures in a terminated plan may be made under VCP or Audit CAP, whether or not the
plan trust or contract is still in existence.
.08 Availability of correction for an Orphan Plan. A failure in an Orphan Plan that is terminating
may be corrected under VCP or Audit CAP if the party acting on behalf of the plan is an Eligible
Party, as defined in section 5.03(2). See, generally, section 6.02(2)(e)(i). SCP is not available for
correcting failures in Orphan Plans. In the case of a terminating Orphan Plan, the IRS may, in its
discretion, waive the user fee. In such a case, the submission must include a request for a waiver
of the user fee. See section 11.04(14).
.09 Availability of correction for § 457(b) plans. The IRS will accept submissions relating to
§ 457(b) plans on a provisional basis outside of EPCRS through standards that are similar to those
that apply with respect to VCP filings under sections 10 and 11, as applicable, including proce-
dures for filing a submission on the Pay.gov website. The availability of correction is generally
limited to plans that are sponsored by governmental entities described in § 457(e)(1)(A). In the
case of a § 457(b) plan that is an unfunded deferred compensation plan established for the benefit
of top hat employees of a tax-exempt entity described in § 457(e)(1)(B), the IRS generally will not
enter into an agreement to address problems associated with such a plan. However, the IRS may
consider a submission for such a plan where, for example, the plan was erroneously established to
benefit the entity’s nonhighly compensated employees and the plan has been operated in a manner
that is similar to a Qualified Plan.
.10 Egregious failures. (1) In general. Egregious failures include: (a) a plan that has consistently
and improperly covered only highly compensated employees; (b) a plan that provides more favor-
able benefits for an owner of the employer based on a purported collective bargaining agreement
where there has in fact been no good faith bargaining between bona fide employee representatives
and the employer (see Notice 2003-24, 2003-1 C.B. 853, with respect to good faith bargaining and
welfare benefit funds); or (c) a defined contribution plan where a contribution is made on behalf
of a highly compensated employee that is several times greater than the dollar limit set forth in
§ 415(c).
(2) SCP. SCP is not available to correct Operational Failures or Plan Document Failures that are
egregious.

Bulletin No. 2021–31 183 August 2, 2021
(3) VCP. VCP is available to correct egregious failures. However, the IRS reserves the right to
impose a sanction that may be larger than the user fee described in Rev. Proc. 2021-4, 2021-1
I.R.B. 157 (and its annual successors). For this purpose, an egregious failure would include any
case in which the IRS concludes that the parties controlling the plan recognized that the action
taken would constitute a failure and the failure either involves a substantial number of participants
or beneficiaries or involves participants who are predominantly highly compensated employees.
(4) Audit CAP. Audit CAP is available to correct egregious failures.
.11 Diversion or misuse of plan assets. SCP, VCP, and Audit CAP are not available to correct fail-
ures relating to the diversion or misuse of plan assets.
.12 Abusive tax avoidance transactions. (1) Effect on Programs. (a) SCP. With respect to SCP, in
the event that the plan or the Plan Sponsor has been a party to an abusive tax avoidance transac-
tion (as defined in section 4.12(2)), SCP is not available to correct any Operational Failure or Plan
Document Failure that is directly or indirectly related to the abusive tax avoidance transaction.
(b) VCP. With respect to VCP, if the IRS determines that a plan or Plan Sponsor was, or may
have been, a party to an abusive tax avoidance transaction (as defined in section 4.12(2)), then the
matter will be discussed and coordinated with appropriate IRS personnel. The IRS may determine
that the plan or the Plan Sponsor has been a party to an abusive tax avoidance transaction, and that
the failures addressed in the VCP submission are related to that transaction. In those situations, the
IRS will conclude the review of the submission without issuing a compliance statement and will
refer the case for examination. However, if the IRS determines that the plan failures are unrelated
to the abusive tax avoidance transaction or that no abusive tax avoidance transaction occurred,
then the IRS will permit the VCP submission to address the failures identified in the VCP sub-
mission, and may issue a compliance statement with respect to those failures. In no event may
a compliance statement be relied on for the purpose of concluding that the plan or Plan Sponsor
was not a party to an abusive tax avoidance transaction. In addition, even if it is concluded that
the failures can be addressed pursuant to a VCP submission, the IRS reserves the right to make a
referral of the abusive tax avoidance transaction matter for examination.
(c) Audit CAP and SCP (for plans Under Examination). For plans Under Examination, if the IRS
determines that the plan or Plan Sponsor was, or may have been, a party to an abusive tax avoid-
ance transaction, the matter may be discussed and coordinated with appropriate IRS personnel.
With respect to plans Under Examination, an abusive tax avoidance transaction includes a trans-
action described in section 4.12(2) and any other transaction that the IRS determines was designed
to facilitate the impermissible avoidance of tax. Upon receiving a response from the appropriate
IRS personnel, (i) if the IRS determines that a failure is related to the abusive tax avoidance trans-
action, the IRS reserves the right to conclude that neither Audit CAP nor SCP is available for that
failure, or (ii) if the IRS determines that satisfactory corrective actions have not been taken with
regard to the transaction, the IRS reserves the right to conclude that neither Audit CAP nor SCP
is available to the plan.
(2) Abusive tax avoidance transaction defined. For purposes of section 4.12(1) (except to the
extent otherwise provided in section 4.12(1)(c)), an abusive tax avoidance transaction means any
listed transaction under §1.6011-4(b)(2) and any other transaction identified as an abusive trans-
action on the IRS website entitled “EP Abusive Tax Transactions.”

August 2, 2021 184 Bulletin No. 2021–31
PART III.
DEFINITIONS, CORRECTION PRINCIPLES, AND RULES OF GENERAL APPLICABILITY
SECTION 5. DEFINITIONS
The following definitions apply for purposes of this revenue procedure:
.01 Definitions for Qualified Plans. The definitions in this section 5.01 apply to Qualified Plans.
(1) Qualified Plan. The term “Qualified Plan” means a plan intended to satisfy the requirements
of § 401(a) or 403(a).
(2) Qualification Failure. The term “Qualification Failure” means any failure that adversely af-
fects the qualification of a plan. There are four types of Qualification Failures: (a) Plan Document
Failures; (b) Operational Failures; (c) Demographic Failures; and (d) Employer Eligibility Fail-
ures.
(a) Plan Document Failure. (i) In general. The term “Plan Document Failure” means a plan pro-
vision (or the absence of a plan provision) that, on its face, violates the requirements of § 401(a)
or 403(a). A Plan Document Failure includes any Qualification Failure that is a violation of the
requirements of § 401(a) or 403(a) and that is not an Operational Failure, Demographic Failure,
or Employer Eligibility Failure. This term includes a Nonamender Failure, a failure to adopt Good
Faith Amendments, and a failure to adopt Interim Amendments. A Plan Document Failure does
not include a failure to adopt a discretionary plan amendment by the plan amendment deadline
set forth in section 8.02 of Rev. Proc. 2016-37, 2016-29 I.R.B. 136, as modified by Rev. Proc.
2017-41, 2017-29 I.R.B. 92, and Rev. Proc. 2020-40, 2020-38 I.R.B. 575 (or section 5.05(2)
of Rev. Proc. 2007-44, 2007-28 I.R.B. 54, as applicable). Pursuant to section 4.01(1)(b), a Plan
Document Failure consisting of the initial failure to adopt a Qualified Plan may not be corrected
under SCP.
(ii) Specific definitions relating to Plan Document Failures:
(A) “Good Faith Amendment” includes the EGTRRA good faith amendments described in Notice
2001-42, 2001-2 C.B. 70, the amendment required for the plan to comply with the final regula-
tions under § 401(a)(9) (see Rev. Proc. 2002-29, 2002-1 C.B. 1176, as modified by Rev. Proc.
2003-10, 2003-1 C.B. 259), the amendment updating the mortality table to reflect the guidance
in Rev. Rul. 2001-62, 2001-2 C.B. 632, and the amendment updating the definition of compensa-
tion, for purposes of § 415(c)(3), to include “deemed § 125 compensation” pursuant to Rev. Rul.
2002-27, 2002-1 C.B. 925. For rules relating to a failure to adopt a Good Faith Amendment, see
Rev. Proc. 2013-12.
(B) “Interim Amendment” means an amendment with respect to a disqualifying provision that
results in the failure of the plan to satisfy the qualification requirements of the Code by reason
of a change in those requirements that is effective after December 31, 2001, or that is integral to
such disqualifying provision. See section 15.02 of Rev. Proc. 2016-37, as modified, for Interim
Amendment requirements for Pre-approved Plans. For Interim Amendments required to be adopt-
ed in individually designed plans before January 1, 2017 (or before February 1, 2017, for Cycle A
plans), see section 5.04 of Rev. Proc. 2007-44.
(C) “Nonamender Failure” means a failure to adopt an amendment that corrects a disqualifying
provision described in §1.401(b)-1(b) within the applicable remedial amendment period. In gener-

Bulletin No. 2021–31 185 August 2, 2021
al, a disqualifying provision includes a provision in the plan document that violates a qualification
requirement of the Code or the absence of a provision that causes the plan to fail to satisfy a quali-
fication requirement of the Code. A disqualifying provision also includes any provision designated
by the Commissioner as a disqualifying provision under §1.401(b)-1(b)(3). See sections 5 and
15 of Rev. Proc. 2016-37, as modified. For an individually designed plan, a Nonamender Failure
includes the failure to timely amend for provisions that appear on the Required Amendments List,
as described in Rev. Proc. 2016-37, as modified. For purposes of VCP, the initial failure to adopt
a Qualified Plan is not considered a Nonamender Failure.
(b) Operational Failure. The term “Operational Failure” means a Qualification Failure (other than
an Employer Eligibility Failure) that arises solely from the failure to follow plan provisions. A
failure to follow the terms of the plan providing for the satisfaction of the requirements of § 401(k)
and (m) is considered to be an Operational Failure. A plan does not have an Operational Failure
to the extent the plan is permitted to be amended retroactively to reflect the plan’s operations (for
example, pursuant to § 401(b)). In the situation where a Plan Sponsor timely adopted an amend-
ment and the plan was not operated in accordance with the terms of such amendment, the plan is
considered to have an Operational Failure.
(c) Demographic Failure. The term “Demographic Failure” means a failure to satisfy the require-
ments of § 401(a)(4), 401(a)(26), or 410(b) that is not an Operational Failure or an Employer El-
igibility Failure. The correction of a Demographic Failure generally requires a corrective amend-
ment to the plan adding more benefits or increasing existing benefits (see §1.401(a)(4)-11(g)).
(d) Employer Eligibility Failure. The term “Employer Eligibility Failure” means the adoption of a
plan intended to include a qualified cash or deferred arrangement under § 401(k) by an employer
that fails to satisfy the employer eligibility requirements to establish a § 401(k) plan. An Employer
Eligibility Failure is not a Plan Document, Operational, or Demographic Failure.
(3) Excess Amount; Excess Allocations; Overpayment. (a) Excess Amount. The term “Excess
Amount” means a Qualification Failure due to a contribution, allocation, or similar credit that is
made on behalf of a participant or beneficiary to a plan in excess of the maximum amount per-
mitted to be contributed, allocated, or credited on behalf of the participant or beneficiary under
the terms of the plan or that exceeds a limitation on contributions or allocations provided in the
Code or regulations. Excess Amounts include: (i) an elective deferral or after-tax employee con-
tribution that is in excess of the maximum contribution under the plan; (ii) an elective deferral
or after-tax employee contribution made in excess of the limitation under § 415; (iii) an elective
deferral in excess of the limitation of § 402(g); (iv) an excess contribution or excess aggregate
contribution under § 401(k) or (m); (v) an elective deferral or after-tax employee contribution
that is made with respect to compensation in excess of the limitation of § 401(a)(17); and (vi)
any other employer contribution that exceeds a limitation under § 401(m) (but only with respect
to the forfeiture of nonvested matching contributions that are excess aggregate contributions),
411(a)(3)(G), or 415, or that is made with respect to compensation in excess of the limitation
under § 401(a)(17). However, an Excess Amount does not include a contribution, allocation, or
other credit that is made pursuant to a correction method provided under this revenue procedure
for a different Qualification Failure. Excess Amounts are limited to contributions, allocations, or
annual additions under a defined contribution plan, after-tax employee contributions to a defined
benefit plan, and contributions or allocations that are to be made to a separate account (with actual
Earnings) under a defined benefit plan. See generally section 6.06 for the treatment and correction
of certain Excess Amounts.
(b) Excess Allocation. The term “Excess Allocation” means an Excess Amount for which the
Code or regulations do not provide any corrective mechanism. Excess Allocations include Excess
Amounts as defined in section 5.01(3)(a)(i), (ii), (v), and (vi) (except with respect to § 401(m) or
411(a)(3)(G) violations). Excess Allocations must be corrected in accordance with section 6.06(2).
(c) Overpayment. The term “Overpayment” means a Qualification Failure due to a payment being
made to a participant or beneficiary (“Overpayment recipient”) that exceeds the amount payable

August 2, 2021 186 Bulletin No. 2021–31
to the Overpayment recipient under the terms of the plan or that exceeds a limitation provided in
the Code or regulations. Overpayments include both payments from a defined benefit plan and
payments from a defined contribution plan that are either not made from the Overpayment recip-
ient’s account under the plan or not permitted to be paid under the Code, the regulations, or the
terms of the plan. However, an Overpayment does not include a payment that is made pursuant to
a correction method provided under this revenue procedure for a different Qualification Failure.
Overpayments must be corrected in accordance with section 6.06(3) for defined benefit plans and
section 6.06(4) for defined contribution plans.
(4) Favorable Letter. With respect to a Qualified Plan, the term “Favorable Letter” is defined in
the following manner.
(a) Favorable Letter for individually designed Qualified Plans. In the case of an individually
designed Qualified Plan, the term “Favorable Letter” means a determination letter issued with
respect to the plan.
(b) Favorable Letter for Pre-approved Plans. In the case of a Pre-approved Plan, the term “Favor-
able Letter” means a favorable opinion or advisory letter issued with respect to the most recently
expired six-year remedial amendment cycle under Rev. Proc. 2016-37, as modified. In the case of
a terminated Pre-approved Plan, the plan is treated as having a favorable opinion letter or advisory
letter if the plan is terminated prior to the expiration of the plan’s current remedial amendment cy-
cle determined under the provisions of Rev. Proc. 2016-37, as modified, and the plan was amend-
ed to reflect the qualification requirements that applied as of the date of termination.
(5) Maximum Payment Amount. The term “Maximum Payment Amount” means a monetary
amount that is approximately equal to the tax the IRS could collect upon plan disqualification and
is the sum for the open taxable years of the:
(a) tax on the trust (Form 1041, U.S. Income Tax Return for Estates and Trusts) (and any interest
or penalties applicable to the trust return);
(b) additional income tax resulting from the loss of employer deductions for plan contributions
(and any interest or penalties applicable to the Plan Sponsor’s return);
(c) additional income tax resulting from income inclusion for participants in the plan (Form 1040,
U.S. Individual Income Tax Return), including the tax on plan distributions that have been rolled
over to other qualified trusts (as defined in § 402(c)(8)(A)) or eligible retirement plans (as defined
in § 402(c)(8)(B)) and any interest or penalties applicable to the participants’ returns;
(d) in the case of any participant loan that did not comply with the requirements of § 72(p)(2),
the tax the IRS could collect as a result of the loan not being excluded from gross income under
§ 72(p)(2); and
(e) any other tax that results from a Qualification Failure that would apply but for correction under
this revenue procedure.
(6) Plan Sponsor. The term “Plan Sponsor” means the employer that establishes or maintains a
Qualified Plan for its employees.
(7) Transferred Assets. The term “Transferred Assets” means plan assets that were received, in
connection with a corporate merger, acquisition, or other similar employer transaction, by the plan
in a transfer (including a merger or consolidation of plan assets) under § 414(l) from a plan spon-
sored by an employer that was not a member of the same controlled group as the Plan Sponsor
immediately prior to the corporate merger, acquisition, or other similar employer transaction. If a
transfer of plan assets related to the same employer transaction is accomplished through several
transfers, then the date of the transfer is the date of the first transfer.

Bulletin No. 2021–31 187 August 2, 2021
(8) Pre-approved Plan. For purposes of this revenue procedure, the term “Pre-approved Plan”
means:
(a) a master plan, a prototype plan, or a volume submitter plan as described in Rev. Proc. 2015-36,
2015-27 I.R.B. 20, sections 4.01, 4.02 and 13.01, respectively; and
(b) a pre-approved plan described in section 4.07 of Rev. Proc. 2017-41, 2017-29 I.R.B. 92.
.02 Definitions for § 403(b) Plans. The definitions in this section 5.02 apply to § 403(b) Plans. For
§ 403(b) Plans, the definitions under Rev. Proc. 2008-50 apply to failures that occurred in taxable
years beginning before January 1, 2009.
(1) Section 403(b) Plan. The term “§ 403(b) Plan” means a plan or program intended to satisfy the
requirements of § 403(b).
(2) Section 403(b) Failure. The term “§ 403(b) Failure” means a failure that adversely affects
the exclusion from income provided by § 403(b). There are four types of § 403(b) Failures: (a)
Plan Document Failures; (b) Operational Failures; (c) Demographic Failures; and (d) Employer
Eligibility Failures.
(a) Plan Document Failure. The term “Plan Document Failure” means a plan provision (or the
absence of a plan provision) that, on its face, violates the requirements of § 403(b). Thus, for
example, the failure of a plan to be adopted in written form or to be amended to reflect a new re-
quirement within the plan’s applicable remedial amendment period is a Plan Document Failure. If
a plan has not been timely or properly amended during an applicable remedial amendment period
with respect to provisions required to maintain the status of the plan under § 403(b), the plan has
a Plan Document Failure. For purposes of this revenue procedure, a Plan Document Failure in-
cludes any § 403(b) Failure that adversely affects the status of the plan under § 403(b) and that is
not an Operational Failure, Demographic Failure, or Employer Eligibility Failure. Pursuant to sec-
tion 4.01(1)(b), a Plan Document Failure consisting of the failure to adopt a written § 403(b) Plan
timely in accordance with §1.403(b)-3(b)(3) and Notice 2009-3 may not be corrected under SCP.
(b) Operational Failure. The term “Operational Failure” means a § 403(b) Failure (other than an
Employer Eligibility Failure) that arises solely from the failure to follow plan provisions. A fail-
ure to follow the terms of the plan providing for the satisfaction of the requirements of §§ 403(b)
(12)(ii) (relating to the availability of elective deferral contributions) and 401(m) (as applied to
§ 403(b) Plans pursuant to § 403(b)(12)(A)(i)) is an Operational Failure. A plan does not have an
Operational Failure to the extent the plan is permitted to be amended retroactively to reflect the
plan’s operations.
(c) Demographic Failure. The term “Demographic Failure” means a failure to satisfy the require-
ments of § 401(a)(4), 401(a)(26), or 410(b) (as applied to § 403(b) Plans pursuant to § 403(b)(12)
(A)(i)) that is not an Operational Failure or an Employer Eligibility Failure. The correction of a
Demographic Failure generally requires a corrective amendment to the plan adding more benefits
or increasing existing benefits (see §1.401(a)(4)-11(g)).
(d) Employer Eligibility Failure. The term “Employer Eligibility Failure” means the adoption of
a plan intended to satisfy the requirements of § 403(b) by a Plan Sponsor that is not a tax-exempt
organization described in § 501(c)(3) or a public educational organization described in § 170(b)
(1)(A)(ii). An Employer Eligibility Failure is not a Plan Document, Operational, or Demographic
Failure.
(3) Excess Amount. The term “Excess Amount” means a contribution or other credit that is made
on behalf of a participant or beneficiary to a plan in excess of the maximum amount permitted to
be contributed or credited on behalf of the participant or beneficiary under the terms of the plan
or that exceeds a limitation on contributions provided in the Code or regulations. The term “Ex-
cess Amount” includes any amount in excess of the amount permitted under the requirements of

August 2, 2021 188 Bulletin No. 2021–31
§ 402(g), 401(m), or 415. A contribution in excess of the limitation of § 415(c) is not an Excess
Amount (or a § 403(b) Failure) if that excess is maintained in a separate account in accordance
with the rules in the regulations under §§ 403(b) and 415. Such separate account is considered to
be a § 403(c) annuity contract (or, if applicable, an amount to which § 61, 83, or 402(b) applies).
A contribution in excess of the limitation of § 415(c) that is not maintained in a separate account
in accordance with the rules set forth in regulations under §§ 403(b) and 415 is an Excess Amount.
Thus, the correction principles in section 6.06 apply.
(4) Overpayment. The term “Overpayment” means a § 403(b) Failure due to a payment being
made to a participant or beneficiary (“Overpayment recipient”) that exceeds the amount payable
to the Overpayment recipient under the terms of the plan or that exceeds a limitation provided in
the Code or regulations. Overpayments include payments made from the Overpayment recipient’s
§ 403(b) custodial account or annuity contract under the plan that are not permitted to be paid un-
der the Code, the regulations, or the terms of the plan. However, an Overpayment does not include
a payment that is made pursuant to a correction method provided under this revenue procedure for
a different § 403(b) Failure. Overpayments must be corrected in accordance with section 6.06(4).
(5) Favorable Letter. The term “Favorable Letter” means a Favorable Letter as described in sec-
tion 6.10(2).
(6) Maximum Payment Amount. The term “Maximum Payment Amount” means a monetary
amount that is approximately equal to the tax the IRS could collect as a result of the § 403(b)
Failure and is the sum for the open taxable years of the:
(a) additional income tax resulting from income inclusion for employees or other participants
(Form 1040), including the tax on distributions that have been rolled over to other qualified trusts
(as defined in § 402(c)(8)(A)) or eligible retirement plans (as defined in § 402(c)(8)(B)) and any
interest or penalties applicable to the participants’ returns; and
(b) any other tax that results from a § 403(b) Failure that would apply but for correction under this
revenue procedure.
(7) Plan Sponsor. The term “Plan Sponsor” means the employer that offers a § 403(b) Plan to its
employees.
(8) Section 403(b) Pre-approved Plan. The term “§ 403(b) Pre-approved Plan” means a plan de-
scribed in section 3.17 of Rev. Proc. 2013-22, 2013-18 I.R.B. 985.
.03 Definitions for Orphan Plans.
(1) Orphan Plan. With respect to VCP and Audit CAP, the term “Orphan Plan” means any Quali-
fied Plan, § 403(b) Plan, or other plan with respect to which an “Eligible Party” (defined in section
5.03(2)) has determined that the Plan Sponsor (a) no longer exists, (b) cannot be located, or (c) is
unable to maintain the plan. However, the term “Orphan Plan” does not include any plan subject
to Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”) that is terminated
pursuant to 29 CFR 2578.1 of the Department of Labor regulations governing the termination of
abandoned individual account plans.
(2) Eligible Party. The term “Eligible Party” means:
(a) A court appointed representative with authority to terminate the plan and dispose of the plan’s
assets;
(b) In the case of an Orphan Plan under investigation by the Department of Labor, a person or
entity determined by the Department of Labor to have accepted responsibility for terminating the
plan and distributing the plan’s assets; or

Bulletin No. 2021–31 189 August 2, 2021
(c) In the case of a Qualified Plan to which Title I of ERISA has never applied, a surviving spouse
who is the sole beneficiary of a plan that provided benefits to a participant who was (i) the sole
owner of the business that sponsored the plan and (ii) the only participant in the plan.
.04 Earnings. The term “Earnings” refers to the adjustment of a principal amount to reflect subse-
quent investment gains and losses, unless otherwise provided in a specific section of this revenue
procedure.
.05 IRA. The term “IRA” means an individual retirement account (as defined in § 408(a)) or an
individual retirement annuity (as defined in § 408(b)).
.06 SEP. The term “SEP” means a plan intended to satisfy the requirements of § 408(k). For pur-
poses of this revenue procedure, the term SEP also includes a salary reduction SEP (“SARSEP”)
described in § 408(k)(6), if applicable.
.07 SIMPLE IRA Plan. The term “SIMPLE IRA Plan” means a plan intended to satisfy the re-
quirements of § 408(p).
.08 Under Examination. (1) The term “Under Examination” means: (a) a plan that is under an Em-
ployee Plans examination (that is, an examination of a Form 5500 series or other Employee Plans
examination); (b) a Plan Sponsor that is under an Exempt Organizations examination (that is, an
examination of a Form 990 series or other Exempt Organizations examination); or (c) a plan that
is under investigation by the Criminal Investigation Division of the IRS.
(2) A plan that is under an Employee Plans examination includes any plan for which the Plan
Sponsor, or an authorized representative, has received verbal or written notification from Em-
ployee Plans of an impending Employee Plans examination, or of an impending referral for an
Employee Plans examination, and also includes any plan that has been under an Employee Plans
examination and is in Appeals or in litigation for issues raised in an Employee Plans examination.
A plan is considered to be Under Examination if it is aggregated for purposes of satisfying the
nondiscrimination requirements of § 401(a)(4), the minimum coverage requirements of § 410(b),
or the requirements of § 403(b)(12)(A)(i), with any plan that is Under Examination. In addition, a
plan is considered to be Under Examination with respect to a failure of a qualification requirement
(other than those described in the preceding sentence) if the plan is aggregated with another plan
for purposes of satisfying that qualification requirement (for example, § 401(a)(30), 415, or 416)
and that other plan is Under Examination. For example, assume Plan A has a § 415 failure, Plan
A is aggregated with Plan B only for purposes of § 415, and Plan B is Under Examination. In this
case, Plan A is considered to be Under Examination with respect to the § 415 failure. However,
if Plan A has a failure relating to the spousal consent rules under § 417 or the vesting rules of
§ 411, Plan A is not considered to be Under Examination with respect to the § 417 or 411 failure.
For purposes of this revenue procedure, the term aggregation does not include consideration of
benefits provided by various plans for purposes of the average benefits test set forth in § 410(b)(2).
(3) An Employee Plans examination also includes a case in which a Plan Sponsor has submitted
any Form 5300 (Application for Determination for Employee Benefit Plan), Form 5307 (Appli-
cation for Determination for Adopters of Modified Volume Submitter Plans), or Form 5310 (Ap-
plication for Determination for Terminating Plan) and the Employee Plans agent notifies the Plan
Sponsor, or an authorized representative, of possible failures, whether or not the Plan Sponsor
is officially notified of an “examination.” This would include a case where, for example, a Plan
Sponsor has applied for a determination letter on plan termination, and an Employee Plans agent
notifies the Plan Sponsor that there are partial termination concerns. In addition, if, during the
review process, the agent requests additional information that indicates the existence of a failure
not previously identified by the Plan Sponsor, the plan is considered to be under an Employee
Plans examination. If, in such a case, the determination letter request under review is subsequently
withdrawn, the plan is nevertheless considered to be under an Employee Plans examination for
purposes of eligibility under SCP and VCP with respect to those issues raised by the agent review-
ing the determination letter application. The fact that a Plan Sponsor voluntarily submits a deter-

August 2, 2021 190 Bulletin No. 2021–31
mination letter application does not constitute a voluntary identification of a failure to the IRS. In
order to be eligible for VCP, the Plan Sponsor (or the authorized representative) must identify each
failure, in writing, to the reviewing agent before the agent recognizes the existence of the failure or
addresses the failure in communications with the Plan Sponsor (or the authorized representative).
(4) A Plan Sponsor that is under an Exempt Organizations examination includes any Plan Sponsor
that has received (or whose authorized representative has received) verbal or written notification
from Exempt Organizations of an impending Exempt Organizations examination or of an impend-
ing referral for an Exempt Organizations examination and also includes any Plan Sponsor that has
been under an Exempt Organizations examination and is now in Appeals or in litigation for issues
raised in an Exempt Organizations examination.
SECTION 6. CORRECTION PRINCIPLES AND RULES OF GENERAL APPLICABILITY
.01 Correction principles; rules of general applicability. The general correction principles in sec-
tion 6.02 and rules of general applicability in sections 6.03 through 6.13 apply for purposes of this
revenue procedure.
.02 Correction principles. Generally, a failure is not corrected unless full correction is made with
respect to all participants and beneficiaries, and for all taxable years (whether or not the taxable
year is closed). Even if correction is made for a closed taxable year, the tax liability associated
with that year will not be redetermined because of the correction. Correction is determined taking
into account the terms of the plan at the time of the failure. Correction should be accomplished
taking into account the following principles:
(1) Restoration of benefits. The correction method should restore the plan to the position it would
have been in had the failure not occurred, including restoration of current and former participants
and beneficiaries to the benefits and rights they would have had if the failure had not occurred.
(2) Reasonable and appropriate correction. The correction should be reasonable and appropriate
for the failure. Depending on the nature of the failure, there may be more than one reasonable
and appropriate correction for the failure. For Qualified Plans and § 403(b) Plans, any correction
method permitted under Appendix A or Appendix B is deemed to be a reasonable and appropriate
method of correcting the related failure. Any correction method permitted under Appendix A or
Appendix B applicable to a SEP, or a SIMPLE IRA Plan is similarly deemed to be a reasonable
and appropriate method of correcting the related failure. If a plan has a different but analogous
failure to one set forth in Appendix A or B (such as the failure to provide a matching contribution
by a governmental plan that is not subject to § 401(m)), then the analogous correction method
under Appendix A or B is generally available to correct the failure. Whether any other particular
correction method is reasonable and appropriate is determined taking into account the applicable
facts and circumstances and the following principles:
(a) The correction method should, to the extent possible, resemble one already provided for in the
Code, regulations, or other guidance of general applicability. For example, for Qualified Plans and
§ 403(b) Plans, the correction method set forth in §1.402(g)-1(e)(2) would be the typical means of
correcting a failure under § 402(g).
(b) The correction method should keep plan assets in the plan, except to the extent the Code, regu-
lations, or other guidance of general applicability provide for correction by distribution to partici-
pants or beneficiaries or return of assets to the employer. For example, if an excess allocation (not
in excess of the § 415 limits) made under a Qualified Plan was made for a participant under a plan

Bulletin No. 2021–31 191 August 2, 2021
(other than a § 401(k) plan), the excess should be reallocated to other participants or, depending
on the facts and circumstances, used to reduce future employer contributions.
(c) The correction method for failures relating to nondiscrimination should provide benefits for
nonhighly compensated employees. For example, for Qualified Plans, the correction method set
forth in §1.401(a)(4)-11(g) (rather than methods making use of the special testing provisions set
forth in §1.401(a)(4)-8 or §1.401(a)(4)-9) would be the typical means of correcting a failure to
satisfy nondiscrimination requirements. Similarly, the correction of a failure to satisfy the require-
ments of § 401(k)(3) or 401(m)(2), or, for plan years beginning on or before December 31, 2001,
the multiple use test of § 401(m)(9) (relating to nondiscrimination), solely by distributing excess
amounts to highly compensated employees would not be the typical means of correcting such a
failure.
(d) The correction method should not violate another applicable specific requirement of § 401(a)
or 403(b) (for example, § 401(a)(4), 411(d)(6), or 403(b)(12), as applicable), 408(k) for SEPs, or
408(p) for SIMPLE IRA Plans, or a parallel requirement in Part 2 of Subtitle B of Title I of ERISA
(for plans that are subject to Part 2 of Subtitle B of Title I of ERISA). If an additional failure is
nevertheless created as a result of the use of a correction method in this revenue procedure, then
that failure also must be corrected in conjunction with the use of that correction method and in
accordance with the requirements of this revenue procedure.
(e) If a correction method is one that another government agency has authorized with respect to
a violation of legal requirements within its interpretive authority and that correction relates to a
violation for which there is a failure to which this revenue procedure applies, then the IRS may
take the correction method of the other governmental agency into account for purposes of this
revenue procedure. For example:
(i) If the plan is subject to ERISA, for a failure that results from the employer having ceased to
exist, the employer no longer maintaining the plan, or similar reasons, the permitted correction
is to terminate the plan and distribute plan assets to participants and beneficiaries in accordance
with standards and procedures substantially similar to those set forth in 29 CFR 2578.1 of the
Department of Labor regulations (relating to abandoned plans). This correction must satisfy four
conditions. First, the correction must comply with standards and procedures substantially similar
to those set forth in 29 CFR 2578.1. Second, the qualified termination administrator, based on
plan records located and updated in accordance with the Department of Labor regulations, must
have reasonably determined whether, and to what extent, the survivor annuity requirements of
§§ 401(a)(11) and 417 apply to any benefit payable under the plan and must take reasonable steps
to comply with those requirements (if applicable). Third, each participant and beneficiary must
have been provided a nonforfeitable right to his or her accrued benefits as of the date of deemed
termination under the Department of Labor regulations, subject to Earnings between that date and
the date of distribution. Fourth, participants and beneficiaries must receive notification of their
rights under § 402(f). In addition, notwithstanding correction under this revenue procedure, the
IRS reserves the right to pursue appropriate remedies under the Code against any party who is
responsible for the plan, such as the Plan Sponsor, plan administrator, or owner of the business,
even in its capacity as a participant or beneficiary under the plan. See also Appendix A, section
.09(1), for parallel rules for plans that are not subject to ERISA.
(ii) In the case of a violation of the fiduciary standards imposed by Part 4 of Subtitle B of Title I of
ERISA, correction under the Voluntary Fiduciary Correction Program (VFCP) established by the
Department of Labor for a fiduciary violation for which there is a similar failure under this reve-
nue procedure would generally be taken into account as correction under this revenue procedure.
(See also section 7.3(b) of the Department of Labor’s VFCP under which correction of a defaulted
participant loan that provides for repayment in accordance with § 72(p)(2) requires only submis-
sion of the correction under VCP and inclusion of the VCP compliance statement (with proof of
any required corrective payment).)

August 2, 2021 192 Bulletin No. 2021–31
(3) Consistency requirement. Generally, if more than one correction method is available to correct
a type of failure for a plan year (or if there are alternative ways to apply a correction method),
the correction method (or one of the alternative ways to apply the correction method) should be
applied consistently in correcting all failures of that type for that plan year. Similarly, Earnings ad-
justment methods generally should be applied consistently with respect to corrective contributions
or allocations for a particular type of failure for a plan year. In the case of a group submission, the
consistency requirement applies on a plan-by-plan basis.
(4) Principles regarding corrective allocations and corrective distributions. The following prin-
ciples apply where an appropriate correction method includes the use of corrective allocations or
corrective distributions:
(a) Corrective allocations under a defined contribution plan should be based upon the terms of the
plan and other applicable information at the time of the failure (including the compensation that
would have been used under the plan for the period with respect to which a corrective allocation
is being made) and should be adjusted for Earnings and forfeitures that would have been allocated
to the participant’s account if the failure had not occurred. However, a corrective allocation is not
required to be adjusted for losses. Accordingly, corrective allocations must include gains and may
be adjusted for losses. For additional information, see Appendix B, section 3, Earnings Adjust-
ment Methods and Examples.
(b) A corrective allocation to a participant’s account because of a failure to make a required allo-
cation in a prior limitation year is not considered an annual addition with respect to the participant
for the limitation year in which the correction is made, but is considered an annual addition for
the limitation year to which the corrective allocation relates. However, the normal rules of § 404,
regarding deductions, apply.
(c) Corrective allocations should come only from employer nonelective contributions (including
forfeitures if the plan permits their use to reduce employer contributions). For purpose of correct-
ing a failed ADP, actual contribution percentage (“ACP”), or multiple use test, any amounts used
to fund qualified nonelective contributions (“QNECs”) must satisfy the definition of QNEC in
§1.401(k)-6.
(d) In the case of a defined benefit plan, a corrective distribution for an individual should be in-
creased to take into account the delayed payment, in accordance with the plan’s provisions for
actuarial equivalence (after considering the applicable requirements of §§ 417(e)(3) and 415(b)
or any other applicable provision) that were in effect on the date that the distribution should have
been made. A corrective distribution is not subject to the requirements of § 417(e)(3) if it is made
to make up for missed payments with respect to a benefit that is not subject to the requirements
of § 417(e)(3).
(e)(i) In the case of a single employer defined benefit plan, a payment of benefits that fails to
satisfy the requirements of § 436(b), (c), or (e) can be corrected by the Plan Sponsor (including
another person acting on behalf of the Plan Sponsor) making a contribution to the plan equal to the
following amount (with interest up to the date of the contribution): (A) in the case of a failure to
satisfy § 436(b) with respect to an unpredictable contingent event benefit, the amount described in
§ 436(b)(2) with respect to that benefit; (B) in the case of a failure to satisfy § 436(c) with respect
to an amendment, the amount described in § 436(c)(2) with respect to that amendment; and (C)
in the case of a failure to satisfy § 436(e), the amount described in § 436(e)(2) with respect to that
failure. See also section 6.06(3) for correction of an Overpayment (including a payment of bene-
fits that exceeds the limitations imposed by § 436(d) or 436(b), (c), or (e)).
(ii) A corrective distribution or a corrective amendment (where a correction is accomplished
through a plan amendment) is not subject to the requirements of § 436, but, if the plan is subject to
a restriction pursuant to § 436 at the time of the correction, generally the Plan Sponsor must make
a contribution to the plan at the time of the correction in the following amount: (A) if a corrective
distribution is made in a single-sum payment or other prohibited payment (as defined in § 436(d)

Bulletin No. 2021–31 193 August 2, 2021
(5)) at a time when the plan is subject to a restriction pursuant to § 436(d), the Plan Sponsor must
generally contribute to the plan the amount of that corrective distribution (but only half of the cor-
rective distribution must be contributed if the payment is made at a time when the plan is subject
to a restriction pursuant to § 436(d)(3)); and (B) if a corrective amendment is made at a time when
the plan is subject to a restriction pursuant to § 436(c), the Plan Sponsor must generally contribute
to the plan an amount equal to the increase in the funding target of the plan (as defined in § 430)
attributable to that amendment. No contribution is required to be made under this paragraph (e)
(ii) if the corrective distribution is made in a form that is not a prohibited payment (for example,
if the correction is made by actuarially increasing future payments that are made in a form that is
not a prohibited payment).
(iii) Any contribution made by the Plan Sponsor pursuant to this paragraph (e) is treated in the
same manner as a “section 436 contribution” (as defined in §1.436-1(j)(7)). Thus, the contribu-
tion is treated as separate from a minimum required contribution under § 430 and is disregarded
in determining the amount added to a prefunding balance under § 430(f)(6). See §1.436-1(f)(2)
generally for rules relating to § 436 contributions.
(f) In the case of a defined contribution plan, a corrective contribution or distribution should be ad-
justed for Earnings from the date of the failure (determined without regard to any Code provision
which permits a corrective contribution or distribution to be made at a later date).
(5) Special exceptions to full correction. In general, a failure must be fully corrected. Although the
mere fact that correction is inconvenient or burdensome is not enough to relieve a Plan Sponsor
of the need to make full correction, full correction may not be required in certain situations if it
is unreasonable or not feasible. Even in these situations, the correction method adopted must be
one that does not have significant adverse effects on participants and beneficiaries or the plan, and
that does not discriminate significantly in favor of highly compensated employees. The exceptions
described below specify those situations in which full correction is not required.
(a) Reasonable estimates. If either (i) it is possible to make a precise calculation but the probable
difference between the approximate and the precise restoration of a participant’s benefits is insig-
nificant and the administrative cost of determining precise restoration would significantly exceed
the probable difference or (ii) it is not possible to make a precise calculation (for example, where
it is impossible to provide plan data), reasonable estimates may be used in calculating appropriate
correction. If it is not feasible to make a reasonable estimate of what the actual investment results
would have been, a reasonable interest rate may be used. For this purpose, the interest rate used
by the Department of Labor’s VFCP Online Calculator is deemed to be a reasonable interest
rate. The calculator can be found at https://www.dol.gov/agencies/ebsa/employers-and-advisers/
plan-administration-and-compliance/correction-programs/vfcp.
(b) Delivery of small benefits. If the total corrective distribution due a participant or beneficiary is
$75 or less, the Plan Sponsor is not required to make the corrective distribution if the reasonable
direct costs of processing and delivering the distribution to the participant or beneficiary would
exceed the amount of the distribution. This section 6.02(5)(b) does not apply to corrective con-
tributions. Corrective contributions are required to be made with respect to a current or former
participant, without regard to the amount of the corrective contributions.
(c) Recovery of small Overpayments. Generally, if the total amount of an Overpayment to an
Overpayment recipient is $250 or less, the Plan Sponsor is not required to seek the return of the
Overpayment from the Overpayment recipient. Also, the Plan Sponsor is not required to notify the
Overpayment recipient that an Overpayment of $250 or less is ineligible for favorable tax treat-
ment accorded to distributions from the plan (and, specifically, is ineligible for tax-free rollover).
(d) Locating lost participants. (i) Reasonable actions must be taken to find all current and former
participants and beneficiaries to whom additional benefits are due, but who have not been located
after a mailing to the last known address. In general, such actions include, but are not limited to,
a mailing to the individual’s last known address using certified mail, and, if that is unsuccessful,

August 2, 2021 194 Bulletin No. 2021–31
an additional search method, such as the use of a commercial locator service, a credit reporting
agency, or internet search tools. Depending on the facts and circumstances, the use of more than
one of these additional search methods may be appropriate. A Plan Sponsor will not be considered
to have failed to correct a failure due to the inability to locate an individual if reasonable actions
to locate the individual have been undertaken in accordance with this paragraph; provided that, if
the individual is later located, the additional benefits are provided to the individual at that time.
(ii) The IRS Letter Forwarding Program was modified to provide that the IRS would no longer
forward letters from individuals, companies or organizations that control assets that may be due
taxpayers. See Rev. Proc. 2012-35, 2012-37 I.R.B. 341. Therefore, the IRS Letter Forwarding
Program is not available as a means to search for participants and beneficiaries to whom benefits
under the plan are due.
(e) Small Excess Amounts. Generally, if the total amount of an Excess Amount with respect to the
benefit of a participant or beneficiary is $250 or less, the Plan Sponsor is not required to distribute
or forfeit such Excess Amount. However, if the Excess Amount exceeds a statutory limit, the par-
ticipant or beneficiary must be notified that the Excess Amount, including any investment gains, is
not eligible for favorable tax treatment accorded to distributions from the plan (and, specifically, is
not eligible for tax-free rollover). See section 6.06(1) for such notice requirements.
(f) Orphan Plans. The IRS retains the discretion to determine under VCP and Audit CAP whether
full correction will be required with respect to a terminating Orphan Plan.
(6) Correction principle for plan loan failures. In the case of a plan loan failure corrected in ac-
cordance with section 6.07(3)(b), (c), or (d), the participant is generally responsible for paying the
corrective payment. However, with respect to the failure listed in section 6.07(3)(d), the employer
should pay a portion of the correction payment on behalf of the participant equal to the interest
that accumulates as a result of such failure, generally determined at a rate equal to the greater of
the plan loan interest rate or the rate of return under the plan.
(7) Correction for exclusion of employees with respect to elective deferrals or after-tax employee
contributions. If a Qualified Plan or § 403(b) Plan has an Operational Failure that consists of
excluding an employee that should have been eligible to make an elective deferral or an after-tax
employee contribution, the employer should contribute to the plan on behalf of the excluded em-
ployee an amount that makes up for the value of the lost opportunity for the employee to have a
portion of his or her compensation contributed to the plan accumulated with earnings tax deferred
in the future. This correction principle applies solely to this limited circumstance. It does not, for
example, extend to the correction of a failure to satisfy a nondiscrimination test, such as, the ADP
test pursuant to § 401(k)(3) and the ACP test pursuant to § 401(m)(2). Specific methods and exam-
ples to correct this failure are provided in Appendix A, section .05, and Appendix B, section 2.02.
Similarly, the methods and examples provided for correcting this failure do not extend to other
failures. Thus, the correction methods and the examples in Appendix A, section .05 and Appendix
B, section 2.02, cannot, for example, be used to correct ADP/ACP failures.
(8) Correction by plan amendment in VCP, Audit CAP, and SCP. For the availability of correction
by plan amendment, see section 4.05.
(9) Reporting. Any corrective distributions from the plan should be properly reported.
.03 Correction of an Employer Eligibility Failure. (1) The permitted correction of an Employer
Eligibility Failure is the cessation of all contributions (including elective deferrals and after-tax
employee contributions). For VCP submissions, the cessation must occur no later than the date
the submission under VCP is filed. The assets in such a plan are to remain in the trust, annuity
contract, or custodial account and are to be distributed no earlier than the occurrence of one of the
applicable distribution events, for example, for § 403(b) Plans, an event described in § 403(b)(7)
(to the extent the assets are held in custodial accounts) or § 403(b)(11) (for those assets invested in
annuity contracts that would be subject to § 403(b)(11) restrictions if the employer were eligible).

Bulletin No. 2021–31 195 August 2, 2021
(2) Cessation of contributions is not required if continuation of contributions would not be an Em-
ployer Eligibility Failure (for example, with respect to a tax-exempt employer that may maintain a
§ 401(k) plan after 1996). In the case of a § 403(b) Failure that is an Employer Eligibility Failure,
correction may include treating contributions as not being excluded under § 403(b) (and thus the
contributions would be treated as having been contributed, for example, to an annuity contract to
which § 403(c) applies).
(3) A plan that is corrected through VCP or Audit CAP is treated as subject to all of the require-
ments and provisions of §§ 401(a) for a Qualified Plan, 403(b) for a § 403(b) Plan, 408(k) for
a SEP, and 408(p) for a SIMPLE IRA Plan (including Code provisions relating to rollovers).
Therefore, the Plan Sponsor must also correct all other failures in accordance with this revenue
procedure.
(4) If correction is accomplished under VCP or Audit CAP in accordance with the requirements
of this section 6.03, then any rollovers made from the plan pursuant to a distributable event are
deemed to have been made from an eligible retirement plan (as defined in § 402(c)(8)(B)) for the
purpose of determining whether the amounts qualify as an eligible rollover distribution under
§ 402(c) or 403(b)(8) (including the determination of excess contributions that are subject to the
§ 4973 excise tax).
.04 Correction of a failure to obtain spousal consent. (1) In general. Failures to obtain spousal
consent described in this section 6.04 may be corrected under VCP, SCP, or Audit CAP. Normally,
the correction method for a failure to obtain spousal consent for a distribution that is subject to the
spousal consent rules under §§ 401(a)(11) and 417 is similar to the correction method described
in Appendix A, section .07. The Plan Sponsor must notify the affected participant and spouse (the
spouse to whom the participant was married at the time of the distribution), so that the spouse can
provide spousal consent to the distribution actually made or the participant may repay the distri-
bution and receive a qualified joint and survivor annuity.
(2) Alternative correction methods when spousal consent is not obtained. (a) In general. As al-
ternatives to the correction method in section 6.04(1), correction for a failure to obtain spousal
consent may be made under either section 6.04(2)(b) or section 6.04(2)(c).
(b) QJSA option. In the event that spousal consent to the prior distribution is not obtained (for
example, because the spouse chooses not to consent, the spouse does not respond to the notice, or
the spouse cannot be located), the spouse is entitled to a benefit under the plan equal to the portion
of the qualified joint and survivor annuity that would have been payable to the spouse upon the
death of the participant had a qualified joint and survivor annuity been provided to the participant
under the plan at the annuity starting date for the prior distribution. Such spousal benefit must be
provided if a claim is made by the spouse.
(c) Election between annuity and single-sum payment. In the event that spousal consent to the
prior distribution is not obtained, the plan may offer the spouse the choice between (i) the survivor
annuity benefit described in section 6.04(2)(b) or (ii) a single-sum payment equal to the actuarial
present value of that survivor annuity benefit (calculated using the applicable interest rate and
mortality table under § 417(e)(3)). Any such single-sum payment is treated in the same manner
as a distribution under § 402(c)(9) for purposes of rolling over the payment to an IRA or other
eligible retirement plan. In the event that the plan is subject to a restriction on the payment of sin-
gle sums pursuant to § 436(d) at the time the plan offers this choice to the spouse and the spouse
elects to receive a single-sum payment, the Plan Sponsor must contribute to the plan the applicable
amount under section 6.02(4)(e)(ii)(A).
.05 Determination letter application not permitted. (1) In general. A determination letter applica-
tion may not be submitted with a VCP submission.
(a) Issuance of compliance statement or closing agreement for Plan Document Failures corrected
through plan amendment under VCP or Audit CAP. The issuance of a compliance statement or

August 2, 2021 196 Bulletin No. 2021–31
closing agreement for Plan Document Failures corrected through plan amendment under VCP or
Audit CAP does not constitute a determination that the terms of the plan, including the corrective
plan amendment, satisfy the qualification requirements in form. See section 10.08(2)(a) and (b).
(b) Issuance of compliance statement or closing agreement for Operational Failures corrected
through plan amendment under VCP or Audit CAP. If a Plan Sponsor submits a VCP filing cor-
recting an Operational Failure through a plan amendment or corrects such a failure under Audit
CAP, and the plan amendment is accepted as a proper correction, then the compliance statement
under VCP or closing agreement issued under Audit CAP constitutes a determination that the
Operational Failure has been corrected, but is not a determination that the terms of the plan, in-
cluding the corrective plan amendment, satisfy the qualification requirements in form. See section
10.08(2)(c).
(2) Corrective amendments to Pre-approved Plans. (a) Effect of corrective amendment. Generally,
under VCP or Audit CAP, a Plan Sponsor that is an adopter of a Pre-approved Plan or a § 403(b)
Pre-approved Plan may amend its plan to correct a Qualification Failure or a § 403(b) Failure
(provided the requirements of EPCRS are satisfied and the amendment satisfies the requirements
of the Code). In some cases, the corrective amendment is not provided for among plan provision
options that were pre-approved when the opinion or advisory letter was issued with respect to the
plan. As a result, adopting such a corrective amendment would cause the Plan Sponsor to lose
reliance on the plan’s opinion or advisory letter, except in the limited circumstances provided in
section 6.05(2)(b).
(b) Exception for certain amendments. In the case of a Pre-approved Plan or a § 403(b) Pre-ap-
proved Plan, the adoption of a plan provision required to correct a failure under VCP or Audit
CAP that is not provided for in the adoption agreement will not cause the Plan Sponsor to lose
its reliance on the plan’s opinion or advisory letter, provided that: (i) the corrective amendment
would otherwise be permitted under the rules for Pre-approved Plans or § 403(b) Pre-approved
Plans, as applicable, and (ii) no other modification has been made to the plan that would cause the
plan to lose its reliance on the opinion or advisory letter. If these conditions are satisfied, the Plan
Sponsor will be allowed to continue to rely on the plan’s opinion or advisory letter. In addition, the
adoption of the corrective amendment will not cause the Pre-approved Plan to lose its eligibility
to remain within the six-year remedial amendment cycle provided for in Rev. Proc. 2016-37, as
modified, on a continuing basis until the expiration of the next six-year remedial amendment cycle
described in section 16.01 of Rev. Proc. 2016-37, as modified.
.06 Special rules relating to Excess Amounts. (1) Treatment of Excess Amounts. A distribution of
an Excess Amount is not eligible for the favorable tax treatment accorded to distributions from
Qualified Plans or § 403(b) Plans (such as eligibility for tax-free rollover). Thus, for example, if
such a distribution was contributed to an IRA, the contribution is not a valid rollover contribution
for purposes of determining the amount of excess contributions (within the meaning of § 4973) to
the individual’s IRA. A distribution of an Excess Amount is generally treated in the manner de-
scribed in section 3 of Rev. Proc. 92-93, 1992-2 C.B. 505 (relating to the corrective disbursement
of elective deferrals). The distribution must be reported on Form 1099-R, Distributions From
Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., for the
year of distribution with respect to each participant or beneficiary receiving such a distribution.
Except as otherwise provided in section 6.02(5)(c) with respect to recovery of small Overpay-
ments, where an Excess Amount has been or is being distributed, the Plan Sponsor must notify the
recipient that (a) an Excess Amount has been or will be distributed and (b) an Excess Amount is
not eligible for favorable tax treatment accorded to distributions from an eligible retirement plan,
as defined in § 402(c)(8)(B) (and, specifically, is not eligible for rollover).
(2) Correction of Excess Allocations. In general, an Excess Allocation is corrected in accordance
with the Reduction of Account Balance Correction Method set forth in this paragraph. Under this
method, the account balance of an employee who received an Excess Allocation is reduced by the
Excess Allocation (adjusted for Earnings). If the Excess Allocation would have been allocated to
other employees in the year of the failure had the failure not occurred, then that amount (adjusted

Bulletin No. 2021–31 197 August 2, 2021
for Earnings) is reallocated to those employees in accordance with the plan’s allocation formula.
If the improperly allocated amount would not have been allocated to other employees absent the
failure, that amount (adjusted for Earnings) is placed in a separate account that is not allocated
on behalf of any participant or beneficiary (an unallocated account) established for the purpose of
holding Excess Allocations, adjusted for Earnings, to be used to reduce employer contributions
(other than elective deferrals) in the current year or succeeding year. While such amounts remain
in the unallocated account, the employer is not permitted to make contributions to the plan other
than elective deferrals. Excess Allocations that are attributable to elective deferrals or after-tax
employee contributions (adjusted for Earnings) must be distributed to the participant. For quali-
fication purposes, an Excess Allocation that is corrected pursuant to this paragraph is disregarded
for purposes of §§ 402(g) and 415, the ADP test of § 401(k)(3), and the ACP test of § 401(m)(2).
If an Excess Allocation resulting from a violation of § 415 consists of annual additions attributable
to both employer contributions and elective deferrals or after-tax employee contributions, then the
correction of the Excess Allocation is completed by first distributing the unmatched employee’s
after-tax contributions (adjusted for Earnings) and then the unmatched employee’s elective defer-
rals (adjusted for Earnings). If any excess remains, and is attributable to either elective deferrals
or after-tax employee contributions that are matched, the excess is apportioned first to after-tax
employee contributions with the associated matching employer contributions and then to elective
deferrals with the associated matching employer contributions. Any matching contribution or non-
elective employer contribution (adjusted for Earnings) which constitutes an Excess Allocation is
then forfeited and placed in an unallocated account established for the purpose of holding Excess
Allocations to be used to reduce employer contributions in the current year and succeeding year.
Such unallocated account is adjusted for Earnings. While such amounts remain in the unallocated
account, the employer is not permitted to make contributions (other than elective deferrals) to the
plan.
(3) Correction of Overpayments (defined benefit plans). An Overpayment from a defined benefit
plan is corrected in accordance with the rules set forth in this section 6.06(3) and Appendix B,
section 2.05.
(a) In general, subject to the conditions set forth in section 4.05 (which permits correction by plan
amendment under VCP, Audit CAP, and, under limited circumstances, SCP), a Plan Sponsor may
correct an Overpayment by adopting a retroactive amendment to conform to the plan’s operation.
(b) If the Overpayment is not corrected by plan amendment, the Plan Sponsor may correct the
Overpayment in accordance with the correction methods set forth in section 6.06(3)(c) and (d) and
Appendix B, section 2.05. In those cases, the following rules apply:
(i) With regard to Overpayments involving periodic payments, future payments must be reduced
as soon as practicable either to reflect the correct amount payable to the Overpayment recipient
under the terms of the plan, or to satisfy a limitation provided in the Code or regulations;
(ii) Except as provided in section 6.02(5)(c) with respect to the recovery of small Overpayments,
the Plan Sponsor must notify the Overpayment recipient in writing that the Overpayment is not
eligible for favorable tax treatment accorded to distributions from an eligible retirement plan, as
defined in § 402(c)(8)(B) (and, specifically, is not eligible for tax-free rollover); and
(iii) Except as provided in section 6.02(5)(c) with respect to the recovery of small Overpayments,
and except as otherwise provided in this section 6.06(3) and Appendix B, section 2.05, to the ex-
tent the amount of an Overpayment adjusted for Earnings at the plan’s earnings rate is not repaid
to the plan, the Plan Sponsor or another person must contribute the difference to the plan.
(c) An Overpayment may be corrected in accordance with the return of Overpayment correction
method (including repayment through an installment agreement) or the adjustment of future pay-
ments correction method, as described in Appendix B, section 2.05(2). Plan Sponsors may permit
an Overpayment recipient to choose the method of repayment that will apply to the correction of
the Overpayment.

August 2, 2021 198 Bulletin No. 2021–31
(d) If the applicable requirements are satisfied, an Overpayment may be corrected in accordance
with the funding exception correction method described in Appendix B, section 2.05(3), or the
contribution credit correction method described in Appendix B, section 2.05(4).
(i) In general, under the funding exception correction method, in the case of a plan subject to
§ 436, no corrective payments are necessary with regard to an Overpayment, provided that the
certified or presumed AFTAP determined under § 436 that is applicable to the plan at the date of
correction is equal to at least 100 percent (or, in the case of a multiemployer plan, the plan’s most
recent annual funding certification indicates that the plan is not in critical, critical and declining,
or endangered status, as defined in § 432, determined at the date of correction). As provided in
section 6.06(3)(b)(i), future benefit payments to an Overpayment recipient must be reduced to the
correct benefit payment amount. For purposes of EPCRS, no further corrective payments from
any party are required, no further reductions to future benefit payments to an Overpayment recip-
ient, or any spouse or beneficiary of an Overpayment recipient, are permitted, and no further cor-
rective payments from an Overpayment recipient, or any spouse or beneficiary of an Overpayment
recipient, are permitted. See Appendix B, section 2.05(3), for additional details and eligibility
requirements regarding the funding exception correction method.
(ii) Under the contribution credit correction method, in general, the amount of Overpayments
required to be repaid to the plan is the amount of the Overpayments reduced (but not below
zero) by: (A) the cumulative increase in the plan’s minimum funding requirements attributable to
the Overpayments (including the increase attributable to the overstatement of liabilities, whether
funded through cash contributions or through the use of a funding standard carryover balance,
prefunding balance, or funding standard account credit balance) beginning with (1) the plan year
for which the Overpayments are taken into account for funding purposes, through (2) the end of
the plan year preceding the plan year for which the corrected benefit payment amount is taken
into account for funding purposes; and (B) certain additional contributions in excess of minimum
funding requirements paid to the plan after the first of the Overpayments was made. This reduction
is referred to as a “contribution credit.” As provided in section 6.06(3)(b)(i), future benefit pay-
ments to an Overpayment recipient must be reduced to the correct benefit payment amount. For
purposes of EPCRS, if the amount of the Overpayments is reduced to zero after the contribution
credit is applied, no further corrective payments from any party are required, no further reduc-
tions to future benefit payments to an Overpayment recipient, or any spouse or beneficiary of an
Overpayment recipient, are permitted, and no further corrective payments from an Overpayment
recipient, or any spouse or beneficiary of an Overpayment recipient, are permitted. However, if
a net Overpayment remains after the application of the contribution credit, the Plan Sponsor or
another party must take further action to reimburse the plan for the remainder of the Overpayment.
See Appendix B, section 2.05(4), for additional details and eligibility requirements regarding the
contribution credit correction method.
(e) Depending on the nature of the Overpayment, other appropriate correction methods may be
used. An appropriate correction method may include using rules similar to the correction methods
described in Appendix B, section 2.05, but having the Plan Sponsor or another person contribute
the amount of the Overpayment (with appropriate interest) to the plan instead of seeking recoup-
ment from an Overpayment recipient. Any other correction method used must satisfy the correc-
tion principles of section 6.02 and any other applicable rules in this revenue procedure.
(4) Correction of Overpayments (defined contribution plans and § 403(b) Plans). An Overpay-
ment from a defined contribution plan or § 403(b) Plan is corrected in accordance with the rules
set forth in this section 6.06(4) and Appendix B, section 2.04.
(a) Correction by plan amendment. In general, subject to the conditions set forth in section 4.05
(which permits correction by plan amendment under VCP, Audit CAP, and, under limited circum-
stances, SCP), a Plan Sponsor may correct an Overpayment by amending the plan to conform to
the plan’s operation.

Bulletin No. 2021–31 199 August 2, 2021
(b) Rules relating to Overpayment correction methods. If the Overpayment is not corrected by
plan amendment, the Plan Sponsor may correct the Overpayment in accordance with the correc-
tion methods set forth in sections 6.06(4)(c), (d), and (e), and Appendix B, section 2.04. In those
cases, the following rules apply:
(i) With regard to Overpayments involving periodic payments, future payments must be reduced
as soon as practicable either to reflect the correct amount payable to the Overpayment recipient
under the terms of the plan, or to satisfy a limitation provided in the Code or regulations;
(ii) Except as provided in section 6.02(5)(c) with respect to the recovery of small Overpayments,
the Plan Sponsor must notify the Overpayment recipient in writing that the Overpayment was not
eligible for favorable tax treatment accorded to distributions from an eligible retirement plan, as
defined in § 402(c)(8)(B), (and, specifically, was not eligible for tax-free rollover); and
(iii) Except as provided in section 6.02(5)(c) with respect to the recovery of small Overpayments,
to the extent the amount of an Overpayment adjusted for Earnings at the plan’s earnings rate from
the date of distribution to the date of the correction is not repaid to the plan, the Plan Sponsor or
another person must contribute the difference to the plan. The preceding sentence does not apply
when the failure arose solely because a payment was made from the plan to an Overpayment re-
cipient in the absence of a distributable event (but was otherwise determined in accordance with
the terms of the plan (for example, an impermissible in-service distribution)).
(c) Return of Overpayment correction method. An Overpayment may be corrected in accordance
with the return of Overpayment correction method (including repayment through an installment
agreement). Under this method, the employer takes reasonable steps to have the Overpayment
repaid to the plan by the Overpayment recipient, adjusted for Earnings at the plan’s earnings rate
from the date of the distribution to the date of the correction of the Overpayment. Plan Sponsors
may permit an Overpayment recipient to choose the method of repayment that will apply to the
correction of the Overpayment.
(d) Unallocated account. Except as provided in section 6.06(4)(e), a corrected Overpayment,
adjusted for Earnings at the plan’s earnings rate to the date of the repayment, is to be placed in an
unallocated account, as described in section 6.06(2), to be used to reduce employer contributions
(other than elective deferrals) in the current year and succeeding year(s) (or, if the amount would
have been allocated to other eligible employees who were in the plan for the year of the failure
if the failure had not occurred, then that amount is reallocated to the other eligible employees in
accordance with the plan’s allocation formula).
(e) Repayment by the Overpayment recipient. To the extent an Overpayment results solely from a
distribution of an Overpayment recipient’s benefit under the plan in the absence of a distributable
event but the Overpayment was otherwise determined in accordance with the terms of the plan,
any amount returned to the plan by the Overpayment recipient is to be allocated to his or her
account.
(f) Other appropriate correction methods. Depending on the nature of the Overpayment, other
appropriate correction methods may be used. An appropriate correction method may include using
rules similar to the correction method in section 6.06(4)(b) but having the employer or another
person contribute the amount of the Overpayment (with appropriate interest) to the plan instead
of seeking recoupment from an Overpayment recipient. Any other correction method used must
satisfy the correction principles of section 6.02 and any other applicable rules of this revenue
procedure.
.07 Correction of plan loan failures. (1) In general. Plan loan failures may be corrected under VCP,
SCP, or Audit CAP, unless otherwise specified in this section 6.07.
(2) Plan loan failures treated as deemed distributions under § 72(p). Unless correction is made in
accordance with section 6.07(3) (to the extent applicable), a deemed distribution under § 72(p)(1)

August 2, 2021 200 Bulletin No. 2021–31
in connection with a failure relating to a plan loan to a participant must be reported on Form 1099-
R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance
Contracts, etc., with respect to the affected participant, and any applicable income tax withholding
amount that was required to be paid in connection with the failure (see §1.72(p)-1, Q&A-15) must
be paid by the employer. In this case, the deemed distribution may be reported on Form 1099-R
with respect to the affected participant for the year of correction (instead of the year of the failure).
(3) Correction methods for certain § 72(p) plan loan failures. (a) In general. The correction meth-
ods set forth in section 6.07(3)(b), (c), and (d) apply to plan loans that do not comply with one
or more requirements of § 72(p)(2); however, these correction methods are not available if the
maximum period for repayment of the loan pursuant to § 72(p)(2)(B) has expired. Further, the
IRS reserves the right to limit the use of these correction methods to situations that it considers
appropriate, for example, if the loan failure is caused by employer action. A deemed distribution
corrected under section 6.07(3)(b), (c), or (d) is not required to be reported on Form 1099-R, and
corrective payments under section 6.07(3) do not result in the affected participant having addition-
al basis in the plan for purposes of determining the tax treatment of subsequent distributions from
the plan to the affected participant.
(b) Loans in excess of § 72(p)(2)(A). A failure of plan loan terms to satisfy § 72(p)(2)(A) may be
corrected only under VCP or Audit CAP. The failure may be corrected by a corrective payment to
the plan based on the excess of the loan amount over the maximum loan amount under § 72(p)(2)
(A). In the event that loan repayments were made in accordance with the amortization schedule for
the loan before correction, such prior repayments may be applied (i) solely to reduce the portion of
the loan that did not exceed the maximum loan amount under § 72(p)(2)(A) (so that the corrective
payment would equal the original loan excess plus interest thereon), (ii) to reduce the loan excess
to the extent of the interest thereon, with the remainder of the repayments applied to reduce the
portion of the loan that did not exceed the maximum loan amount under § 72(p)(2)(A) (so that the
corrective payment would equal the original loan excess), or (iii) pro rata against the loan excess
and the maximum loan amount under § 72(p)(2)(A) (so that the corrective payment would equal
the outstanding balance remaining on the original loan excess on the date that the corrective pay-
ment is made). After the corrective payment is made, the loan may be reformed to amortize the
remaining principal balance as of the date of the corrective payment over the remaining period of
the original loan. This is permissible as long as the recalculated repayments over the remaining
loan period would not cause the loan to violate the maximum repayment term requirement under
§ 72(p)(2)(B). The maximum repayment term is determined from the date the original loan was
made. In addition, the amortized repayments determined for the remaining loan period must com-
ply with the level amortization requirement of § 72(p)(2)(C).
(c) Plan loan terms that do not satisfy § 72(p)(2)(B) or (C). A failure of plan loan terms to satisfy
the maximum repayment term requirement of § 72(p)(2)(B) or the level amortization requirement
of § 72(p)(2)(C) may be corrected only under VCP or Audit CAP. The failure may be corrected by
a reamortization of the loan balance in accordance with § 72(p)(2)(C) over the remainder of the
maximum period that complies with § 72(p)(2)(B), as measured from the original date of the loan.
(d) Defaulted loans. A failure to repay a loan in accordance with loan terms that satisfy § 72(p)
(2) may be corrected by (i) a single-sum corrective payment equal to the amount that the affected
participant would have paid to the plan if there had been no failure to repay the plan, plus interest
accrued on the missed payments, (ii) reamortizing the outstanding balance of the loan, including
accrued interest, over the remaining payment schedule of the original term of the loan or the peri-
od remaining had the loan been amortized over the maximum period that complies with § 72(p)(2)
(B), as measured from the original date of the loan, or (iii) any combination of (i) or (ii).
(e) No requirement for plan provisions. This section 6.07 applies even if the plan does not require
loans to satisfy the requirements of § 72(p)(2). However, under the Department of Labor’s VFCP,
to correct the ERISA fiduciary violations associated with the failures described in section 6.07(3)
(b), (c), and (d), the plan must include plan provisions requiring that loans comply with § 72(p)
(2)(A), (B), and (C).

Bulletin No. 2021–31 201 August 2, 2021
(4) Failure to obtain spousal consent for a plan loan. (a) Spousal consent obtained. The correction
method for the failure to obtain spousal consent for a plan loan is that the Plan Sponsor must notify
the affected participant and spouse (the spouse to whom the participant was married at the time of
the plan loan), so that the spouse can provide spousal consent to the plan loan.
(b) No spousal consent obtained. If spousal consent is not obtained, as described in section 6.07(4)
(a), the failure to obtain spousal consent for a plan loan must be corrected under either VCP or
Audit CAP.
(5) Number of loans exceeds a loan limitation established by plan. An Operational Failure that
results from a participant obtaining a number of loans that exceeds the number of loans permitted
under the terms of the plan may be corrected by adopting a plan amendment in accordance with
the correction method set forth in Appendix B, section 2.07(3).
.08 Correction under statute or regulations. Generally, none of the correction programs is available
to correct failures that can be corrected under the Code and related regulations. For example, as
a general rule, a Plan Document Failure that is a disqualifying provision for which the remedial
amendment period under § 401(b) has not expired can be corrected under provisions of the Code
through retroactive remedial amendment.
.09 Matters subject to excise or other taxes. (1) General rule. Except as provided in this revenue
procedure, the correction programs are not available for events for which the Code provides tax
consequences other than plan disqualification (such as the imposition of an excise tax or additional
income tax). For example, funding deficiencies (failures to make the required contributions to a
plan subject to § 412), prohibited transactions, and failures to file the Form 5500 series cannot be
corrected under this revenue procedure.
(2) Section 4974. As part of VCP and Audit CAP, if a failure involves the failure to satisfy the min-
imum required distribution requirements of § 401(a)(9), in appropriate cases, the IRS will waive
the excise tax under § 4974 applicable to plan participants or beneficiaries. The waiver will be
included in the compliance statement or in the closing agreement in the case of Audit CAP. Under
VCP, the Plan Sponsor, as part of the submission, must request the waiver and, in cases where the
participant subject to the excise tax is either an owner-employee as defined in § 401(c)(3) or a 10
percent owner of a corporation, the Plan Sponsor must also provide an explanation supporting the
request. Under Audit CAP, the Plan Sponsor must make a specific request for waiver of the excise
tax under § 4974. The Plan Sponsor should also provide an explanation supporting the request for
a waiver. Upon reviewing the request, the reasons for the failure, and other facts or circumstances
of the case under examination, the IRS will determine whether it is appropriate to approve the
waiver of the excise tax as part of the closing agreement negotiated under Audit CAP.
(3) Section 4972. As part of VCP, if the failure involves a correction that requires the Plan Sponsor
to make a plan contribution that is not deductible, in appropriate cases, the IRS will not pursue
the excise tax under § 4972 on such nondeductible contributions. The Plan Sponsor, as part of the
submission must request the relief and provide an explanation supporting the request.
(4) Section 4979. As part of VCP, if a failure results in excess contributions as defined in § 4979(c)
or excess aggregate contributions as defined in § 4979(d) under a plan, in appropriate cases, the
IRS will not pursue the excise tax under § 4979, for example, where correction is made for any
case in which the ADP test was timely performed but, due to reliance on inaccurate data, resulted
in an insufficient amount of excess elective deferrals having been distributed to HCEs. The Plan
Sponsor, as part of the submission, must request the relief and provide an explanation supporting
the request.
(5) Section 4973. Subject to section 6.03(4), as part of VCP, in appropriate cases, the IRS will not
pursue the excise tax under § 4973 relating to excess contributions made to a § 403(b) Plan or IRA
under any of the following circumstances:

August 2, 2021 202 Bulletin No. 2021–31
(a) As part of the proposed correction for Overpayments, the Overpayment recipient removes the
Overpayment (adjusted for Earnings) from the Overpayment recipient’s § 403(b) Plan or IRA and
returns that amount to the plan.
(b) As part of the proposed correction for Excess Amounts, the recipient removes the Excess
Amount (adjusted for Earnings) from the recipient’s § 403(b) Plan or IRA and reports that amount
(reduced by any applicable after-tax employee contribution) as a taxable distribution for the year
in which the Excess Amount (adjusted for Earnings) is removed from the recipient’s § 403(b)
Plan or IRA. The amount removed is generally taxed in a manner that is similar to the manner in
which the corrective disbursement of elective deferrals is taxed, as described in section 3 of Rev.
Proc. 92-93.
(c) The Plan Sponsor, as part of the submission, must request relief from the § 4973 excise tax and
provide an explanation supporting the request.
(6) Section 72(t). As part of VCP, in appropriate cases, the IRS will not pursue the 10 percent ad-
ditional income tax under § 72(t) (or will pursue only a portion thereof) if, as part of the proposed
correction of an Overpayment that occurred solely because an employee received a distribution
from his or her vested account balance that was not a distributable event, the participant or bene-
ficiary (“recipient”) returns the improperly distributed amount, adjusted for Earnings, to the plan.
If the improperly distributed amount was rolled over to the recipient’s IRA, then correction will
include removing the amount improperly distributed and rolled over (adjusted for Earnings) from
the recipient’s IRA and returning that amount to the plan. In appropriate cases, as a condition for
not pursuing all or a portion of the additional tax, the IRS may require the Plan Sponsor to pay a
sanction not in excess of the 10 percent additional income tax under § 72(t). The Plan Sponsor, as
part of the submission, must request the relief and provide an explanation supporting the request.
.10 Correction for § 403(b) Plans. (1) Correction for § 403(b) Plans generally. Except as provided
in sections 6.03(2) and 6.10(2), the correction for a § 403(b) Plan is expected to be the same as the
correction required for a Qualified Plan with the same Failure (that is, a Plan Document Failure,
Operational Failure, Demographic Failure, or Employer Eligibility Failure).
(2) Special correction principles. In general, a § 403(b) Failure can be corrected by treating a
contract as a § 403(c) annuity contract (or, if applicable, as an amount to which § 61, 83, or 402(b)
applies), such as for purposes of correcting an Employer Eligibility Failure, a failure to provide for
full vesting (including a failure to maintain a separate account), or an exchange made to a vendor
which is not part of the plan (and for which there is no information sharing agreement). In addi-
tion, for purposes of this revenue procedure, a § 403(b) Plan will be treated as having a Favorable
Letter if either (a) the employer is an eligible employer and, on or before December 31, 2009 (or
the date a § 403(b) Plan is established, if later), the employer has adopted a written § 403(b) Plan
that is intended to satisfy § 403(b) (including the regulations thereunder) effective as of January
1, 2009 (or the first day of the plan year in which a § 403(b) Plan is established, if later), or (b) the
employer has failed to adopt a written § 403(b) Plan timely and corrects the failure in accordance
with section 6.10(3) below. In addition, for purposes of section 4.04 (requiring that the Plan Spon-
sor or administrator of the plan have established practices and procedures reasonably designed
to promote and facilitate overall compliance with applicable Code requirements in order to be
eligible for SCP to be available to correct Operational Failures and Plan Document Failures), the
requirement to have established practices and procedures only applies for failures during periods
after December 31, 2009.
(3) Correction for failure to adopt a written § 403(b) Plan timely. A failure to adopt a written
§ 403(b) Plan timely in accordance with the final regulations under § 403(b) and Notice 2009-3
may be corrected under VCP or Audit CAP. The issuance of a compliance statement or closing
agreement for the failure to adopt a written § 403(b) Plan timely will result in the written § 403(b)
Plan being treated as if it had been adopted timely for the purpose of making available the extend-
ed remedial amendment period set forth in Rev. Proc. 2017-18, 2017-5 I.R.B. 743, as modified by
Notice 2020-35, 2020-25 I.R.B. 948. However, the issuance of a compliance statement or closing

Bulletin No. 2021–31 203 August 2, 2021
agreement does not constitute a determination as to whether the written plan, as drafted, complies
with the applicable requirements of § 403(b) of the Code and the final § 403(b) regulations.
.11 Correction for SEPs and SIMPLE IRA Plans. (1) Correction for SEPs and SIMPLE IRA Plans
generally. Generally, the correction for a SEP or a SIMPLE IRA Plan is expected to be similar
to the correction required for a Qualified Plan with a similar Qualification Failure (that is, a Plan
Document Failure, Operational Failure, Demographic Failure, or Employer Eligibility Failure).
(2) Special correction for SEPs and SIMPLE IRA Plans. In any case in which correction under
section 6.11(1) is not feasible for a SEP or SIMPLE IRA Plan or in any other case determined by
the IRS in its discretion (including failures relating to § 402(g), 415, or 401(a)(17), failures relat-
ing to deferral percentages, discontinuance of contributions to a SARSEP or SIMPLE IRA Plan,
and retention of Excess Amounts for cases in which there has been no violation of a statutory lim-
itation with respect to a SEP or SIMPLE IRA Plan), the IRS may provide for a different correction.
(3) Correction of failure to satisfy deferral percentage test. If the failure involves a violation of
the deferral percentage test under § 408(k)(6)(A)(iii) applicable to a SARSEP, the failure may be
corrected in either of the following ways:
(a) The Plan Sponsor may make contributions that are 100 percent vested to all eligible nonhighly
compensated employees (to the extent permitted by § 415) necessary to raise the deferral percent-
age to an amount sufficient to pass the test. This amount may be calculated as the same percentage
of compensation (regardless of the terms of the SEP); or
(b) The Plan Sponsor may effect distribution of excess contributions, adjusted for Earnings through
the date of correction, to highly compensated employees to correct the failure. The Plan Sponsor
must also contribute to the SEP an amount equal to the total amount distributed. This amount must
be allocated to (i) current employees who were nonhighly compensated employees in the year of
the failure, (ii) current nonhighly compensated employees who were nonhighly compensated em-
ployees in the year of the failure, or (iii) employees (both current and former) who were nonhighly
compensated employees in the year of the failure.
(4) Treatment of undercontributions to a SEP or a SIMPLE IRA Plan. (a) Make-up contributions;
Earnings. The Plan Sponsor should correct undercontributions to a SEP or a SIMPLE IRA Plan
by contributing make-up amounts that are fully vested, adjusted for Earnings from the date of the
failure to the date of correction.
(b) Earnings adjustment methods. Insofar as SEP and SIMPLE IRA Plan assets are held in IRAs,
there is no earnings rate under the SEP or SIMPLE IRA Plan as a whole. If it is not feasible to
make a reasonable estimate of what the actual investment results would have been, a reasonable
interest rate may be used.
(5) Treatment of Excess Amounts under a SEP or a SIMPLE IRA Plan. (a) Distribution of Excess
Amounts. For purposes of this section 6.11, an Excess Amount is an amount contributed on behalf
of an employee that is in excess of an employee’s benefit under the plan, or an elective deferral
in excess of the limitations of § 402(g) or 408(k)(6)(A)(iii). If an Excess Amount is attributable
to elective deferrals, the Plan Sponsor may effect distribution of the Excess Amount, adjusted for
Earnings through the date of correction, to the affected participant. The amount distributed to the
affected participant is includible in gross income in the year of distribution. The distribution is
reported on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing
Plans, IRAs, Insurance Contracts, etc. for the year of distribution with respect to each participant
receiving the distribution. In addition, the Plan Sponsor must inform affected participants that the
distribution of an Excess Amount is not eligible for favorable tax treatment accorded to distribu-
tions from a SEP or a SIMPLE IRA Plan (and, specifically, is not eligible for tax-free rollover). If
the Excess Amount is attributable to employer contributions, the Plan Sponsor may effect distri-
bution of the employer Excess Amount, adjusted for Earnings through the date of correction, to
the Plan Sponsor. The amount distributed to the Plan Sponsor is not includible in the gross income

August 2, 2021 204 Bulletin No. 2021–31
of the affected participant. The Plan Sponsor is not entitled to a deduction for such employer Ex-
cess Amount. The distribution is reported on Form 1099-R issued to the participant indicating the
taxable amount as zero.
(b) Retention of Excess Amounts. If the failure involves an Excess Amount under a SEP or a SIM-
PLE IRA Plan and the Plan Sponsor retains the Excess Amount in the SEP or SIMPLE IRA Plan,
a sanction applies, in addition to the SEP or SIMPLE IRA Plan user fee described in Appendix
A of Rev. Proc. 2021-4 (and its annual successors). A sanction equal to at least 10 percent of the
Excess Amount with no adjustment for Earnings is imposed. In addition, the Plan Sponsor is not
entitled to a deduction for an Excess Amount retained in the SEP or SIMPLE IRA Plan. In the case
of an Excess Amount retained in a SEP that is attributable to a § 415 failure, the Excess Amount,
adjusted for Earnings through the date of correction, must reduce an affected participant’s appli-
cable § 415 limit for the year following the year of correction (or for the year of correction if the
Plan Sponsor so chooses), and subsequent years, until the excess is eliminated.
(c) De minimis Excess Amounts. If the total Excess Amount in a SEP or SIMPLE IRA Plan, wheth-
er attributable to elective deferrals or employer contributions, is $250 or less, the Plan Sponsor
is not required to distribute the Excess Amount and the sanction described in section 6.11(5)(b)
does not apply.
.12 Confidentiality and disclosure. Because each correction program relates directly to the en-
forcement of Code requirements, the information received or generated by the IRS under the
program is subject to the confidentiality requirements of § 6103 and is not a written determination
within the meaning of § 6110.
.13 No effect on other law. Correction under these programs has no effect on the rights or obliga-
tions of any party under any other law, including the rights of any persons and the obligations of
fiduciaries or employers under Title I of ERISA. The Department of Labor maintains the VFCP,
under which certain ERISA fiduciary violations may be corrected. The Department of Labor also
maintains a Delinquent Filer Voluntary Compliance Program under which certain failures to com-
ply with the annual reporting requirements (Form 5500 series) under ERISA may be corrected.
PART IV.
SELF-CORRECTION (SCP)
SECTION 7. AVAILABILITY OF SCP FOR CERTAIN OPERATIONAL FAILURES AND PLAN DOCUMENT FAILURES
.01 In general. (1) Operational Failures. The requirements of this section 7 are satisfied with
respect to an Operational Failure if the Plan Sponsor of a Qualified Plan, a § 403(b) Plan, a SEP,
or a SIMPLE IRA Plan satisfies the requirements of section 7.02, and either section 8 (relating to
insignificant Operational Failures), or, in the case of a Qualified Plan or a § 403(b) Plan, section 9
(relating to significant Operational Failures).
(2) Plan Document Failures. The requirements of this section 7 are satisfied with respect to an
eligible Plan Document Failure if the Plan Sponsor of a Qualified Plan or a § 403(b) Plan satisfies
the requirements of section 7.03 and section 9.
.02 Operational Failures. (1) In general. Operational Failures may be corrected under SCP in
accordance with the correction principles and rules of general applicability set forth in section 6.

Bulletin No. 2021–31 205 August 2, 2021
(2) Corrective amendments for Operational Failures. Operational Failures may be corrected un-
der SCP by adoption of a plan amendment that conforms the terms of the plan to the plan’s prior
operations, provided the requirements of section 4.05(2) are satisfied.
(3) Plan loan failures. The following plan loan failures may be corrected under SCP: defaulted
loans (described in section 6.07(3)(d)); the failure to obtain spousal consent (described in section
6.07(4)(a)); and the failure to abide by a limitation on the number of plan loans permitted per par-
ticipant as set forth under the terms of the plan (described in section 6.07(5)).
.03 Plan Document Failures. An eligible Plan Document Failure, as described in section 4.01(1)
(b), may be corrected under SCP provided that the requirements described in section 4.05(2)(c)(i)
(Favorable Letter requirement) and 4.05(2)(c)(ii) (treating Plan Document Failures under SCP as
significant failures) are satisfied.
SECTION 8. SELF-CORRECTION OF INSIGNIFICANT OPERATIONAL FAILURES
.01 Requirements. The requirements of this section 8 are satisfied with respect to an Operational
Failure if the Plan Sponsor of a Qualified Plan, a § 403(b) Plan, a SEP, or a SIMPLE IRA Plan
corrects the Operational Failure and, given all the facts and circumstances, the Operational Failure
is insignificant. This section 8 is available for correcting an insignificant Operational Failure even
if the plan or Plan Sponsor is Under Examination and even if the Operational Failure is discovered
on examination.
.02 Factors. The factors to be considered in determining whether an Operational Failure under a
plan is insignificant include, but are not limited to: (1) whether other failures occurred during the
period being examined (for this purpose, a failure is not considered to have occurred more than
once merely because more than one participant is affected by the failure); (2) the percentage of
plan assets and contributions involved in the failure; (3) the number of years the failure occurred;
(4) the number of participants affected relative to the total number of participants in the plan; (5)
the number of participants affected as a result of the failure relative to the number of participants
who could have been affected by the failure; (6) whether correction was made within a reasonable
time after discovery of the failure; and (7) the reason for the failure (for example, data errors such
as errors in the transcription of data, the transposition of numbers, or minor arithmetic errors). No
single factor is determinative. Additionally, factors (2), (4), and (5) should not be interpreted to
exclude small businesses.
.03 Multiple failures. In the case of a plan with more than one Operational Failure in a single year,
or Operational Failures that occur in more than one year, the Operational Failures are eligible
for correction under this section 8 only if all of the Operational Failures are insignificant in the
aggregate. Operational Failures that have been corrected under SCP in section 9 and VCP in sec-
tions 10 and 11 are not taken into account for purposes of determining if Operational Failures are
insignificant in the aggregate.
.04 Examples. (1) In general. The following examples illustrate the application of this section
8. The IRS plans to provide additional examples illustrating whether an Operational Failure is
insignificant. The additional examples will be provided on the IRS.gov website. It is expected
that a link to these examples will appear on the “Correcting Plan Errors” webpage on the IRS.gov
website.
(2) Assumptions for examples in section 4.04. It is assumed, in each example, that the eligibility
requirements of section 4 relating to SCP (for example, the requirements of section 4.04 relating

August 2, 2021 206 Bulletin No. 2021–31
to established practices and procedures) have been satisfied and that no Operational Failures oc-
curred other than the Operational Failures identified below.
Example 1: In 1991, Employer X established Plan A, a profit-sharing plan that satisfies the requirements of § 401(a) in
form. In 2005, the benefits of 50 of the 250 participants in Plan A were limited by § 415(c). However, when the IRS exam-
ined Plan A in 2008, it discovered that, during the 2005 limitation year, the annual additions allocated to the accounts of 3
of these employees exceeded the maximum limitations under § 415(c). Employer X contributed $3,500,000 to the plan for
the plan year. The amount of the excesses totaled $4,550. Under these facts, because the number of participants affected
by the failure relative to the total number of participants who could have been affected by the failure, and the monetary
amount of the failure relative to the total employer contribution to the plan for the 2005 plan year, are insignificant, the
§ 415(c) failure in Plan A that occurred in 2005 would be eligible for correction under this section 8.
Example 2: The facts are the same as in Example 1, except that the failure to satisfy § 415 occurred during each of the
2005 and 2007 limitation years. In addition, the three participants affected by the § 415 failure were not identical each year.
The fact that the § 415 failures occurred during more than one limitation year does not cause the failures to be significant;
accordingly, the failures are still eligible for correction under this section 8.
Example 3: The facts are the same as in Example 1, except that the annual additions of 18 of the 50 employees whose ben-
efits were limited by § 415(c) nevertheless exceeded the maximum limitations under § 415(c) during the 2005 limitation
year, and the amount of the excesses ranged from $1,000 to $9,000, and totaled $150,000. Under these facts, taking into
account the number of participants affected by the failure relative to the total number of participants who could have been
affected by the failure for the 2005 limitation year (and the monetary amount of the failure relative to the total employer
contribution), the failure is significant. Accordingly, the § 415(c) failure in Plan A that occurred in 2005 is ineligible for
correction under this section 8 as an insignificant failure.
Example 4: Employer J maintains Plan C, a money purchase pension plan established in 1992. The plan document sat-
isfies the requirements of § 401(a). The formula under the plan provides for an employer contribution equal to 10% of
compensation, as defined in the plan. During its examination of the plan for the 2005 plan year, the IRS discovered that
the employee responsible for entering data into the employer’s computer made minor arithmetic errors in transcribing the
compensation data with respect to 6 of the plan’s 40 participants, resulting in excess allocations to those 6 participants’
accounts. Under these facts, the number of participants affected by the failure relative to the number of participants that
could have been affected is insignificant, and the failure is due to minor data errors. Thus, the failure occurring in 2005 is
insignificant and therefore eligible for correction under this section 8.
Example 5: Public School maintains for its 200 employees a salary reduction § 403(b) Plan (“Plan B”) that is intended
to satisfy the requirements of § 403(b). The business manager has primary responsibility for administering Plan B, in
addition to other administrative functions within Public School. During the 2005 plan year, a former employee should
have received an additional minimum required distribution of $278 under § 403(b)(10). Another participant received an
impermissible hardship withdrawal of $2,500. Another participant made elective deferrals of which $1,000 was in excess
of the § 402(g) limit. Under these facts, even though multiple failures occurred in a single plan year, the failures are eligible
for correction under this section 8 because in the aggregate the failures are insignificant.
SECTION 9. SELF-CORRECTION OF CERTAIN SIGNIFICANT OPERATIONAL FAILURES AND
PLAN DOCUMENT FAILURES
.01 Requirements. The requirements of this section 9 are satisfied with respect to a significant
Operational Failure or a Plan Document Failure if the Plan Sponsor of a Qualified Plan or § 403(b)
Plan corrects the failure, and the correction is either completed or, in the case of an Operational
Failure, is substantially completed (in accordance with section 9.03) by the last day of the correc-
tion period described in section 9.02.
.02 Correction period. (1) End of correction period. The last day of the correction period is the last
day of the third plan year following the plan year for which the failure occurred. However, in the
case of a failure to satisfy the requirements of § 401(k)(3) or 401(m)(2), the correction period does
not end until the last day of the third plan year following the plan year that includes the last day of
the additional period for correction permitted under § 401(k)(8) or 401(m)(6). If a § 403(b) Plan
does not have a designated plan year, the plan year is deemed to be the calendar year for purposes
of this section 9.02.

Bulletin No. 2021–31 207 August 2, 2021
(2) Extension of correction period for Transferred Assets. In the case of an Operational Failure or
Plan Document Failure that relates only to Transferred Assets, or to a plan assumed in connection
with a corporate merger, acquisition, or other similar employer transaction, the correction period
will not end before the last day of the first plan year that begins after the corporate merger, ac-
quisition, or other similar employer transaction between the Plan Sponsor and the sponsor of the
transferor plan or the prior sponsor of an assumed plan.
(3) Effect of examination. The correction period for an Operational Failure or Plan Document
Failure that occurs for any plan year ends, in any event, on the first date the plan or Plan Sponsor
is Under Examination for that plan year (determined without regard to the second sentence of
section 9.02). (But see section 9.03 for special rules permitting completion of correction of an
Operational Failure after the end of the correction period.)
.03 Substantial completion of correction. Correction of an Operational Failure is substantially
completed by the last day of the correction period only if the requirements of either paragraph (1)
or (2) of this section 9.03 are satisfied.
(1) The requirements of this paragraph (1) are satisfied if:
(a) during the correction period, the Plan Sponsor is reasonably prompt in identifying the Opera-
tional Failure, formulating a correction method, and initiating correction in a manner that demon-
strates a commitment to completing correction of the failure as expeditiously as practicable; and
(b) within 120 days after the last day of the correction period, the Plan Sponsor completes correc-
tion of the failure.
(2) The requirements of this paragraph (2) are satisfied if:
(a) during the correction period, correction is completed with respect to 65 percent of all partici-
pants affected by the Operational Failure; and
(b) thereafter, the Plan Sponsor completes correction of the Operational Failure with respect to the
remaining affected participants in a diligent manner.
.04 Examples. The following examples illustrate the application of this section 9. It is assumed, in
each example, that the eligibility requirements of section 4 relating to SCP have been met.
Example 1: Employer Z established a qualified defined contribution plan in 2017 and received a favorable determination
letter. During 2021, while doing a self-audit of the operation of the plan for the 2020 plan year, the plan administrator dis-
covered that, despite the practices and procedures established by Employer Z with respect to the plan, several employees
eligible to participate in the plan were excluded from participation. The administrator also found that for 2020 Operational
Failures occurred because the elective deferrals of additional employees exceeded the § 402(g) limit and Employer Z failed
to make the required top-heavy minimum contribution. In addition, during the review of the administration for the 2020
year, it was found that the plan administrator intended to implement correction for the failure to satisfy the ADP test (as
described in § 401(k)(3)) for the 2019 plan year. During the 2023 plan year, the Plan Sponsor made QNECs on behalf of
the excluded employees, distributed the excess deferrals to the affected participants, and made a top-heavy minimum con-
tribution to all participants entitled to that contribution for the 2020 plan year. Each corrective contribution and distribution
was credited with Earnings at a rate appropriate for the plan from the date the corrective contribution or distribution should
have been made to the date of correction. The failed ADP test for 2019 was corrected by making corrective contributions,
adjusted for Earnings, on behalf of nonhighly compensated employees using the method described in Appendix A, section
.03. Under these facts, the Plan Sponsor has corrected the ADP test failure for the 2019 plan year and the Operational Fail-
ures for the 2020 plan year within the correction period and thus satisfied the requirements of this section 9.
Example 2: Employer A established a qualified defined contribution plan, Plan A, in 2007 and has received a favorable
determination letter for the applicable law changes. In April 2021, Employer A purchased all of the stock of Employer B,
a wholly-owned subsidiary of Employer C. Employees of Employer B participated in Plan C, a qualified defined contri-
bution plan sponsored by Employer C. Following Employer A’s review of Plan C, Employer A and Employer C agreed
that Plan A would accept a transfer of plan assets from Plan C attributable to the account balances of the employees of
Employer B who had participated in Plan C. As part of this agreement, Employer C represented to Employer A that Plan C
was tax qualified. Employers A and C also agreed that such transfer would be in accordance with § 414(l) and §1.414(l)-1
and addressed issues related to costs associated with the transfer. Following the transaction, the employees of Employer

August 2, 2021 208 Bulletin No. 2021–31
B began participation in Plan A. Effective July 1, 2021, Plan A accepted the transfer of plan assets from Plan C. After the
transfer, Employer A determined that all the participants in one division of Employer B had been incorrectly excluded from
allocation of the profit-sharing contributions for the 2016 and 2017 plan years. During 2022, Employer A made corrective
contributions on behalf of the affected participants. The corrective contributions were credited with Earnings at a rate
appropriate for the plan from the date the corrective contributions should have been made to the date of correction and
Employer A otherwise complied with the requirements of SCP. Under these facts, Employer A has, within the correction
period, corrected the Operational Failures for the 2016 and 2017 plan years with respect to the assets transferred to Plan
A, and thus satisfied the requirements of this section 9.
PART V.
VOLUNTARY CORRECTION PROGRAM WITH IRS APPROVAL (VCP)
SECTION 10. VCP PROCEDURES
.01 VCP pre-submission conference. (1) Effective January 1, 2022, prior to submitting a VCP
application, a representative of a Plan Sponsor may request an anonymous VCP pre-submission
conference regarding corrective actions with respect to any failure that is eligible to be submitted
under VCP. A VCP pre-submission conference may be requested only (1) for matters on which a
compliance statement may be issued under this revenue procedure, (2) with respect to requested
correction methods that are not described as safe harbor correction methods in Appendix A or
B, and (3) if the Plan Sponsor is eligible and intends to submit an application under VCP. VCP
pre-submission conferences are held only at the discretion of the IRS, and as time permits.
(2) The Plan Sponsor’s representative must submit the VCP pre-submission conference request
via the Pay.gov website by submitting a Form 8950, Application for Voluntary Correction Pro-
gram (VCP) Submission Under the Employee Plans Compliance Resolution System. The request
should also include (1) a description of the failure(s), including how and why the failure(s) oc-
curred; (2) a description of the proposed method(s) of correction; (3) a description of all relevant
facts, including the type of affected participants (for example, highly compensated employees or
nonhighly compensated employees); (4) plan provisions and amendments that are relevant to the
request; and (5) any other information the IRS would need to evaluate the request. It is anticipat-
ed that the published IRS instructions associated with the Form 8950 will be modified in order
to provide specificity on the information that needs to be included with the VCP pre-submission
conference request.
(3) At the conference, the IRS will provide the representative of the Plan Sponsor with oral feed-
back regarding the failure(s) and proposed correction method(s) described in the request. Any
discussion of substantive issues at the conference, however, is advisory only, is not binding on the
IRS, and cannot be relied upon as a basis for obtaining relief under EPCRS or retroactive relief
under the provisions of § 7805(b). After the conference, the IRS will provide a written confirma-
tion that the conference took place, and the matter will be closed. If the Plan Sponsor subsequently
files a VCP submission regarding the issues discussed, the Plan Sponsor must follow the proce-
dures set forth in this section 10 and section 11 (which require submission of a new Form 8950
and payment of an applicable user fee).
.02 VCP requirements. The requirements of VCP are satisfied with respect to a failure if, on the
Pay.gov website, the Plan Sponsor files a VCP submission and pays the applicable user fee set
forth in Appendix A of Rev. Proc. 2021-4 (and its annual successors), in accordance with the re-
quirements of this section 10 and section 11, and implements the corrective actions and satisfies
any other conditions set forth in the compliance statement described in section 10.08. As provided
in section 11.09, a Plan Sponsor may designate an authorized representative to file a VCP submis-
sion with the IRS on its behalf, if specific requirements are satisfied.

Bulletin No. 2021–31 209 August 2, 2021
.03 Identification of failures. VCP is not based upon an examination of the plan by the IRS.
Only the failures raised by the Plan Sponsor or failures identified by the IRS in processing the
submission are addressed under VCP, and only those failures are covered by a VCP compliance
statement. The IRS will not make any investigation or finding under VCP concerning whether
there are other failures.
.04 Effect of VCP submission on examination. Because VCP does not arise out of an examination,
consideration under VCP does not preclude or impede (under § 7605(b) or any administrative
provisions adopted by the IRS) a subsequent examination of the Plan Sponsor or the plan by the
IRS with respect to the taxable year (or years) involved with respect to matters that are outside the
compliance statement. However, a Plan Sponsor’s statements describing failures are made only
for purposes of VCP and will not be regarded by the IRS as an admission of a failure for purposes
of any subsequent examination. See section 5.08 for the definition of Under Examination.
.05 No concurrent examination activity. Except in unusual circumstances, a plan that has been
properly submitted under VCP will not be examined while the submission is pending. However,
a plan that is included in a group submission under section 10.11 may be examined while the
group submission is pending with respect to issues not identified in the group submission at the
time such plan comes Under Examination. Also, if it is determined that either the plan or the Plan
Sponsor was, or may have been, a party to an abusive tax avoidance transaction (as defined in
section 4.12(2)), the IRS may authorize the examination of the plan, even if a submission pursuant
to VCP is pending. In addition, this practice regarding concurrent examinations does not extend
to other plans of the Plan Sponsor. Thus, any plan of the Plan Sponsor that is not pending under
VCP could be subject to examination.
.06 Determination letter applications not related to a VCP submission. (1) The IRS may process a
determination letter application (including an application requested on Form 5310) submitted un-
der the determination letter program (as set forth in Rev. Proc. 2021-4 (and its annual successors)
and Rev. Proc. 2016-37, as modified, and any subsequent guidance issued in the Internal Revenue
Bulletin) while separately processing a VCP submission for the same plan. Generally, issuance
of the determination letter in response to an application made on a Form 5310 will be suspended
pending the closure of the VCP submission.
(2) A submission of a plan under the determination letter program does not constitute a submission
under VCP. If the Plan Sponsor discovers a failure, the failure may not be corrected as part of the
determination letter process. The Plan Sponsor may use SCP and VCP instead, as applicable. If
the IRS, in connection with a determination letter application, discovers failures, the IRS may
issue a closing agreement with respect to the failures identified or, if appropriate, refer the case to
Employee Plans Examinations. In such a case, the VCP user fee does not apply. Instead, except
as provided in section 10.06(3), the sanction in section 14.01 relating to Audit CAP applies. See
section 5.08 for a description of when a plan submitted for a determination letter is considered to
be Under Examination for purposes of EPCRS.
(3) If the IRS in connection with a determination letter application discovers the plan has not been
amended timely for tax legislation changes, the fee structure in section 14.04 applies.
.07 Processing of submission.
(1) Screening of submission. Upon receipt of a VCP submission, the IRS will review the submis-
sion to determine whether the eligibility requirements of section 4 and the submission require-
ments of section 11 are satisfied.
(2) Eligibility of submission. If, at any stage of the review process, the IRS determines that a VCP
submission is seriously deficient or that issuing a compliance statement with respect to the VCP
submission would be inappropriate or impracticable, the IRS reserves the right to not issue a com-
pliance statement. If no substantive processing of the case has occurred, the IRS will refund the
user fee submitted with the request. Otherwise, the user fee will not be refunded.

August 2, 2021 210 Bulletin No. 2021–31
(3) Review of submission. Once the IRS determines that the submission is complete under VCP,
the IRS may contact the Plan Sponsor or the Plan Sponsor’s authorized representative to discuss
the proposed corrections and the plan’s administrative procedures. However, if the IRS determines
that the submission is complete and sets forth an acceptable correction method, the IRS may issue
a compliance statement without contacting the Plan Sponsor or the Plan Sponsor’s authorized
representative.
(4) Additional information required. If additional information is required, an IRS representative
generally will contact the Plan Sponsor or the Plan Sponsor’s authorized representative and ex-
plain what is needed to complete the submission. The Plan Sponsor will have 21 calendar days
from the date of this contact to provide the requested information. If the information is not re-
ceived within 21 days, the matter will be closed, the user fee will not be returned, and the case
may be referred to Employee Plans Examinations. Any request for an extension of the 21-day
period must be made in writing within the 21-day period and must be approved by the IRS (by the
applicable group manager).
(5) Additional failures discovered after initial submission. (a) A Plan Sponsor that discovers ad-
ditional unrelated failures after its initial submission may request that such failures be added to
its submission. However, the IRS retains the discretion to reject the inclusion of such failures if
the request is not timely (for example, if the Plan Sponsor makes its request when processing of
the submission is substantially complete) or the application of VCP would be inappropriate or
impracticable.
(b) If the IRS discovers an unrelated failure while the request is pending, the failure generally will
be added to the failures under consideration. However, the IRS retains the discretion to determine
that a failure is outside the scope of the voluntary request for consideration because the Plan Spon-
sor did not voluntarily bring this failure forward. In this case, if the additional failure is significant,
all aspects of the plan may be examined, and the rules pertaining to Audit CAP will apply.
(6) Conference right. If the IRS initially determines that it cannot issue a compliance statement
because the parties cannot agree upon correction or a change in administrative procedures, the
Plan Sponsor (generally through the Plan Sponsor’s authorized representative) will be contacted
by the IRS representative and offered a conference with the IRS. The conference can be held
either in person or by telephone and must be held within 21 calendar days of the date of contact.
The Plan Sponsor will have 21 calendar days after the date of the conference to submit additional
information in support of the submission. Any request for an extension of the 21-day period must
be made in writing within the 21-day period and must be approved by the IRS (by the applicable
group manager). Additional conferences may be held at the discretion of the IRS.
(7) Failure to reach resolution. If the IRS and the Plan Sponsor cannot reach agreement with
respect to the submission, the matter will be closed, the user fee will not be returned, and the case
may be referred to Employee Plans Examinations.
(8) Issuance of compliance statement. (a) In general. If agreement has been reached and all ap-
plicable user fees have been paid, the IRS will send to the Plan Sponsor a compliance statement
signed by the IRS specifying the corrective action required. However, the IRS reserves the right
to require the Plan Sponsor to sign the compliance statement. In such a case, the IRS will send
to the Plan Sponsor an unsigned compliance statement. Within 30 calendar days of the date the
compliance statement is sent, the Plan Sponsor must sign and return the compliance statement and
pay any outstanding user fee that may be required (see sections 4.08 and 11.06). The IRS will then
issue a signed copy of the compliance statement to the Plan Sponsor. If the Plan Sponsor does not
return the compliance statement (and pay any outstanding user fee) within 30 calendar days, the
VCP submission will be closed, and no further action will be taken with respect to the submission.
In appropriate circumstances, the plan may be referred to Employee Plans Examinations.
(b) Model VCP Compliance Statement. If the Plan Sponsor included a completed Form 14568,
Model VCP Compliance Statement with its VCP submission, then the IRS will sign and send to

Bulletin No. 2021–31 211 August 2, 2021
the Plan Sponsor the compliance statement specifying the corrective action required. The format
and content of the Form 14568 as set forth by the IRS may not be modified or changed in any way.
In appropriate circumstances, the IRS reserves the right to issue an individually drafted compli-
ance statement in lieu of the Form 14568. See section 11.02.
(c) Modifications to VCP Submission. If a Plan Sponsor materially modifies a VCP submission
that was previously filed with the IRS, the Plan Sponsor should include the penalty of perjury
statement set forth in section 11.04(16) with respect to such subsequent modifications. If the Plan
Sponsor does not submit a penalty of perjury statement, the Plan Sponsor will be required to sign
and return the compliance statement under the general procedures described in section 10.07(8)
(a). See section 11.03(8) for information concerning submission of any such modification prior to
the assignment of the case to an IRS representative.
(9) Timing of correction. (a) In general. The Plan Sponsor must implement the specific corrections
and administrative changes set forth in the compliance statement within 150 days of the date of
the compliance statement. Any request for an extension of this correction period must be made in
writing prior to the expiration of the correction period and must be approved by the IRS.
(b) Interim Amendments and Nonamender Failures. Correction of the failure to timely adopt In-
terim Amendments or other required amendments, as described in section 5.01(2)(a)(ii)(B) and
(C), must be made by the date of the submission. Thus, the submission must include the executed
amendments that would correct this failure.
(c) Other plan amendments. If a corrective plan amendment is required as part of a VCP submis-
sion, the corrective plan amendment must be adopted no later than 150 days after the date of the
compliance statement. However, for a governmental plan (within the meaning of § 414(d)), the
corrective amendment must be adopted by the later of 150 days after the date of the compliance
statement or the close of the first regular legislative session of the legislative body with the author-
ity to amend the plan that begins on or after 91 days after the date of the compliance statement.
(10) Modification of compliance statement. Once the compliance statement has been issued (based
on the information provided), the Plan Sponsor cannot request a modification of the compliance
terms except by a new request for a compliance statement, accompanied by a new user fee, sub-
mitted in accordance with the submission procedures set forth in section 11.
(11) Verification. Once the compliance statement has been issued, the IRS may require verifi-
cation that the plan has complied with the correction methods and that any plan administrative
procedures required by the compliance statement have been implemented. This verification does
not constitute an examination of the books and records of the employer or the plan (within the
meaning of § 7605(b)). If the IRS determines that the Plan Sponsor did not implement the correc-
tions and procedures within the stated time period, the plan may be referred to Employee Plans
Examinations.
.08 Compliance statement. (1) General description of compliance statement. The compliance
statement issued for a VCP submission only addresses the failures identified in the submission,
the terms of correction (including any revision of administrative procedures), and the time period
within which proposed corrections must be implemented (including any changes in administra-
tive procedures). The compliance statement also provides that the IRS will not treat the plan as
failing to satisfy the applicable requirements of the Code on account of the failures described in
the compliance statement if the conditions of the compliance statement are satisfied. The reliance
provided by a compliance statement is limited to the specific failures and years specified and does
not provide reliance for any other failure or year.
(2) Correction through plan amendment. (a) Interim Amendment Failures. With respect to a fail-
ure to amend a plan timely for Interim Amendments, as described in section 5.01(2)(a)(ii)(B),
the issuance of a compliance statement will result in the corrective amendments being treated as
if they had been adopted timely for the purpose of determining the availability of the remedial

August 2, 2021 212 Bulletin No. 2021–31
amendment period in Rev. Proc. 2007-44 and Rev. Proc. 2016-37, as modified. However, the issu-
ance of such a compliance statement does not constitute a determination as to whether the Interim
Amendment, as drafted, complies with the change in qualification requirement, or whether the
terms of the plan, including the corrective plan amendment, satisfy the qualification requirements
in form.
(b) Nonamender Failures. With respect to a failure to amend a plan timely for disqualifying pro-
visions or a failure to timely adopt applicable required amendments provided on the Required
Amendments List, as described in section 5.01(2)(a)(ii)(C) (the definition of Nonamender Fail-
ure), the issuance of a compliance statement will result in the corrective amendments being treated
as if they had been timely adopted during the applicable remedial amendment period. However,
the issuance of such a compliance statement does not constitute a determination as to whether
the corrective plan amendment as drafted complies with the change in qualification requirement,
whether the corrective plan amendment conforms the terms of the plan to the plan’s prior op-
erations, or whether the terms of the plan, including the corrective plan amendment, satisfy the
qualification requirements in form.
(c) Operational Failures. If a Plan Sponsor submits a VCP filing correcting an Operational Failure
through a plan amendment and the plan amendment is accepted as a proper correction of the Oper-
ational Failure, then the compliance statement issued under VCP constitutes a determination that
the Operational Failure has been corrected, but is not a determination that the terms of the plan,
including the corrective plan amendment, satisfy the qualification requirements in form.
(d) Failure to adopt § 403(b) Plan timely. A failure to adopt a § 403(b) Plan timely in accordance
with the final regulations under § 403(b) and Notice 2009-3 may be corrected under VCP. The
issuance of a compliance statement will result in the § 403(b) Plan being treated as if it had been
adopted timely for the purpose of making available the extended remedial amendment period set
forth in Rev. Proc. 2017-18. However, the issuance of a compliance statement does not constitute
a determination as to whether the written plan, as drafted, complies with the applicable require-
ments of § 403(b) and the final § 403(b) regulations.
(3) Administrative procedures required. Where current procedures are inadequate for operating
the plan in conformance with the applicable requirements of the Code, the compliance statement
will be conditioned upon the implementation of stated administrative procedures. The IRS may
prescribe appropriate administrative procedures in the compliance statement.
(4) Compliance statement conditioned upon timely correction. The compliance statement is con-
ditioned on (i) there being no misstatement or omission of material facts in connection with the
submission, and (ii) the implementation of the specific corrections and satisfaction of any other
conditions in the compliance statement.
(5) Authority delegated. Compliance statements (including relief from any excise tax or other
penalty as provided under section 6.09) are authorized to be signed by managers within Employee
Plans Rulings and Agreements, under the Tax Exempt and Government Entities Operating Divi-
sion of the IRS.
.09 Effect of compliance statement on examination. The compliance statement is binding upon
both the IRS and the Plan Sponsor or Eligible Organization (as defined in section 10.11(1)) with
respect to the specific tax matters identified therein for the periods specified, but does not pre-
clude or impede an examination of the plan by the IRS relating to matters outside the compliance
statement, even with respect to the same taxable year or years to which the compliance statement
relates.
.10 Anonymous submissions not permitted. Effective January 1, 2022, VCP submissions may not
be submitted on an anonymous basis. On or after that date, identifying information for the Plan
Sponsor and plan along with other applicable information must be disclosed on the application
form submitted, as well as any other forms, documents or exhibits included with the submission.

Bulletin No. 2021–31 213 August 2, 2021
Before January 1, 2022, an applicant may submit an anonymous VCP submission to the IRS, and
the requirements of Rev. Proc. 2019-19, including sections 10, 11, and 12, will apply. However,
the IRS will not process anonymous submissions made on or after January 1, 2022.
.11 Special rules relating to group submissions. (1) Eligible Organizations. For purposes of a
group submission, the term “Eligible Organization” means either (a) a sponsor (as that term is de-
fined in section 4.07 of Rev. Proc. 2015-36) of a master or prototype plan, (b) a volume submitter
practitioner (as that term is defined in section 13.05 of Rev. Proc. 2015-36), (c) a mass submitter
(as that term is defined in sections 4.08 and 13.06 of Rev. Proc. 2015-36 and section 4.04 of Rev.
Proc. 2017-41), (d) a provider (as that term is defined in section 4.08 of Rev. Proc. 2017-41), (e)
an insurance company or other entity that has issued annuity contracts or provides services with
respect to assets for § 403(b) Plans, or (f) an entity that provides its clients with administrative
services with respect to Qualified Plans, § 403(b) Plans, SEPs, or SIMPLE IRA Plans. An Eligi-
ble Organization is not eligible to make a group submission unless the failures in the submission
result from a systemic error involving the Eligible Organization that affects at least 20 plans and
results in at least 20 plans implementing correction. If, at any time before the IRS issues the com-
pliance statement, the number of plans falls below 20, the Eligible Organization must notify the
IRS that it is no longer eligible to make a group submission. Under these circumstances, the user
fee may be retained by the IRS.
(2) General rules. An Eligible Organization may submit a VCP request for a Qualified Plan,
a § 403(b) Plan, a SEP, or a SIMPLE IRA Plan under a group submission for Plan Document,
Operational, and Employer Eligibility Failures. A separate user fee must be submitted for each
plan submitted. For this purpose, in the case of a plan that consists of a basic plan document and
adoption agreements, the number of plans submitted is determined by reference to the number of
basic plan documents submitted.
(3) Special group submission procedures. (a) In general, a group submission is subject to the same
procedures as any VCP submission in accordance with sections 10 and 11, except that the Eligible
Organization is responsible for performing the procedural obligations imposed on the Plan Spon-
sor under sections 10 and 11. See section 11.04(13) for a special submission requirement with
respect to group submissions.
(b) The Eligible Organization must provide notice to all Plan Sponsors of the plans included in the
group submission. The notice must be provided at least 90 days before the Eligible Organization
provides the IRS with the information required in section 10.11(3)(c). The purpose of the notice is
to provide each Plan Sponsor with information relating to the group submission request. The no-
tice should explain the reason for the group submission and inform the Plan Sponsor that the Plan
Sponsor’s plan will be included in the group submission unless the Plan Sponsor responds within
the 90-day period requesting that the Plan Sponsor’s plan be excluded from the group submission.
(c) When an Eligible Organization receives an unsigned compliance statement on the proposed
correction and agrees to the terms of the compliance statement, the Eligible Organization must
return the signed compliance statement and any additional user fee required under Appendix A of
Rev. Proc. 2021-4 (and its annual successors) to the IRS within 120 calendar days, in accordance
with section 11.06. In addition, the Eligible Organization must submit a list containing (i) the
employer tax identification numbers for the Plan Sponsors of the plans that have consented to be
included in the group submission and to which the compliance statement may be applicable, (ii)
the plans by name, plan number, type of plan, and number of plan participants, (iii) a certification
that each Plan Sponsor received notice of the group submission, and (iv) a certification that each
Plan Sponsor timely filed the Form 5500 series return for the most recent plan year for which
the Form 5500 series return was required to have been filed. This list can be submitted at any
stage of the submission process provided that the requirements of section 10.11(3)(b) have been
satisfied. If the Eligible Organization submits this list with the initial submission, the list must be
included in the Portable Document Format (“PDF”) file described in section 11.03(2). If the list is
not submitted with the initial submission, then once the submission has been assigned to an IRS
representative, the Eligible Organization must submit the list on a USB drive in Microsoft Word

August 2, 2021 214 Bulletin No. 2021–31
or Excel to the IRS representative. Only those plans for which correction is actually made within
240 calendar days of the date of the signed compliance statement (or within such longer period
as may be agreed to by the IRS at the request of the Eligible Organization) will be covered by the
compliance statement.
(d) Notwithstanding section 4.02, if a Plan Sponsor of a plan that is eligible to be included in the
group submission and has not requested to be excluded from the group submission pursuant to
section 10.11(3)(b) is notified of an impending Employee Plans examination after the Eligible
Organization filed the group submission with the IRS, the Plan Sponsor’s plan will be included in
the group submission. However, with respect to such plan, the group submission will not preclude
or impede an examination of the plan with respect to any failures not identified in the group sub-
mission at the time the plan comes Under Examination.
.12 Multiemployer and multiple employer plans. In the case of a multiemployer or multiple em-
ployer plan, the plan administrator (rather than any contributing or adopting employer) must file
a submission under VCP with respect to any plan failures and is responsible for performing the
procedural obligations imposed on the Plan Sponsor under sections 10 and 11. The plan adminis-
trator may designate an authorized representative to file a VCP submission with the IRS using the
Pay.gov website as described in section 11.08. The request must be with respect to the plan, rather
than a portion of the plan affecting any particular employer.
SECTION 11. SUBMISSION PROCEDURES FOR VCP
.01 General rules. (1) A VCP submission must satisfy the requirements of this section 11.
(2) All VCP submissions must be filed using the Pay.gov website, as described in this section 11.
On the Pay.gov website, applicants (generally, either a Plan Sponsor or a representative authorized
pursuant to a valid Form 2848 as provided in section 11.08) will file a VCP submission and pay
applicable user fees online. Paper VCP submissions postmarked after March 31, 2019, will be
returned to the applicant.
(3) A VCP submission must include a description of the failures, a description of the proposed
methods of correction, and other procedural items set forth in this section 11.
.02 Submission of model forms. (1) Applicants may submit Form 14568 (Model VCP Compliance
Statement) and attach separate narrative documents that describe the qualification failures, correc-
tion methods, and other items described in section 11.04.
(2) Schedules 1 through 9 to Form 14568 (Forms 14568-A through 14568-I) provide descriptions
of common qualification failures and standardized correction methods that may be submitted in
lieu of the separate narrative documents described in section 11.02(1). Even if an applicant does
not submit the Form 14568, the applicant may include Schedules 1-9, as applicable, as part of the
VCP submission to satisfy the requirements of this revenue procedure relating to the description
and correction of identified failures and related changes in administrative procedures.
(3) Applicants who submit the Form 14568 series should complete the forms electronically and
combine all submission documents into a single PDF file that includes the completed forms. See
sections 11.03(2) and 11.04.
(4) Multiple schedules may be included in a single VCP submission.

Bulletin No. 2021–31 215 August 2, 2021
(5) A schedule may be submitted only if its content applies, without modification, to the appli-
cant’s situation.
(6) If an applicant submits the Form 14568 or any of its applicable schedules, the applicant must
submit the current versions of Form 14568 and Forms 14568-A through 14568-I, as applicable,
which are available on the IRS website (https://www.irs.gov/retirement-plans/correcting-plan-er-
rors-fill-in-vcp-submission-documents). The IRS reserves the right to modify the Form 14568
series to improve usability, reflect changes in law, or create additional schedules by adding new
forms to the Form 14568 series.
.03 Mandatory Submission Process using the Pay.gov website. Pursuant to section 11.01, for fil-
ings submitted on or after April 1, 2019, applicants must use the Pay.gov website to file a VCP
submission with the IRS and pay the applicable user fee. The submission process requires the
following actions:
(1) Read the instructions to Form 8950. Prior to using the Pay.gov website, the applicant should
read the instructions to Form 8950, Application for Voluntary Correction Program (VCP) Submis-
sion Under the Employee Plans Compliance Resolution System. The instructions are located at
https://www.irs.gov/pub/irs-pdf/i8950.pdf.
(2) Combine required items into PDF file. The applicant must convert all applicable items required
in section 11.04 into PDF documents and combine them into a single PDF file that follows the
suggested ordering of documents in section 11.11. If the combined PDF file exceeds 15 MB, the
applicant must remove some documents (or parts of documents) so that the PDF file does not
exceed 15 MB. Applicable documents that cannot be included in the PDF file because of the size
limitation must be faxed to the IRS as described in section 11.03(7).
(3) Create a Pay.gov account. The applicant must create a Pay.gov account on the Pay.gov web-
site. Using the Pay.gov account, the applicant must complete and sign Form 8950, Application
for Voluntary Correction Program (VCP) Submission Under the Employee Plans Compliance
Resolution System.
(4) Upload and attach PDF. After completing and signing the Form 8950 on the Pay.gov web-
site, the applicant must upload the single PDF that contains copies of all submission documents
required by this section 11. See section 11.03(7) for instructions for faxing VCP submission doc-
uments that are not included in the PDF file due to the 15 MB limitation.
(5) Pay the applicable user fee. Submit the applicable user fee using the payment methods avail-
able on the Pay.gov website.
(6) Payment confirmation. The Pay.gov website will generate a payment confirmation notice af-
ter the VCP submission has been filed. The Pay.gov Tracking ID on this receipt will serve as the
IRS control number for the VCP submission. The confirmation may be emailed to the Pay.gov
account holder, with copies to other email addresses that the account holder chooses to provide.
The applicant should retain a copy of the payment confirmation notice. If a payment confirmation
is not generated by the Pay.gov website, then the VCP submission process has not been successful
and the applicant should contact IRS customer account services at (877) 829-5500 (a toll-free
number).
(7) Required documents not part of uploaded PDF due to size limitation. If there are required
VCP submission documents that cannot be part of the submitted PDF file due to the Pay.gov at-
tachment file size limitation, the applicant must fax these documents to the IRS using fax number
(855) 203-6996. Include the EIN, applicant name, plan name, and Pay.gov Tracking ID (the IRS
control number) on the fax coversheet. This fax number is to be used only to supplement VCP sub-
missions filed with the IRS on the Pay.gov website. A fax used to submit documents that cannot be
part of the submitted PDF file due to the Pay.gov 15 MB limitation must include the IRS control

August 2, 2021 216 Bulletin No. 2021–31
number in order for the documents to be associated with the appropriate submission in a timely
manner and to avoid significant delays in case processing.
(8) Subsequent changes or revisions. If an applicant needs to revise or amend a filed VCP sub-
mission (or any of its attachments), before it is assigned to an IRS representative, the applicant
should not file a new submission. Instead, the applicant should call the VCP Status Inquiry Line
at (626) 927-2011 (not a toll-free number). The IRS will assist the applicant to determine how the
revised documents should be submitted.
.04 PDF file submission contents. The single PDF file described in section 11.03(2) and this sec-
tion 11.04 that is uploaded to the Pay.gov website must include the following information:
(1) Identification of failures. A complete description of the failures, the years in which the failures
occurred, including closed years (that is, years for which the statutory period has expired), and the
number of employees affected by each failure.
(2) Explanation. An explanation of how and why the failures arose, including a description of
the administrative procedures applicable to the failures in effect at the time the failures occurred.
(3) Proposed method of correction. A detailed description of the method for correcting the failures
that the Plan Sponsor has implemented or proposes to implement. Each step of the correction
method must be described in narrative form. The description must include specific information
needed to support the proposed correction method. This information includes, for example, the
number of employees affected and the expected cost of correction (both of which may be approx-
imated if the exact number cannot be determined at the time of the request), the years involved,
and calculations or assumptions the Plan Sponsor used to determine the amounts needed for cor-
rection.
(4) Earnings or actuarial adjustments. A description of the methodology that will be used to
calculate Earnings or actuarial adjustments on any corrective contributions or distributions (indi-
cating the computation periods and the basis for determining Earnings or actuarial adjustments, in
accordance with section 6.02(4)).
(5) Computations. Specific calculations for each affected employee or a representative sample of
affected employees. The sample calculations must be sufficient to demonstrate each aspect of the
correction method proposed. For example, if a Plan Sponsor requests a compliance statement with
respect to a failure to satisfy the contribution limits of § 415(c) and proposes a correction method
that involves elective deferrals (whether matched or unmatched) and matching contributions, the
Plan Sponsor must submit calculations illustrating the correction method proposed with respect
to each type of contribution. As another example, with respect to a failure to satisfy the ADP test
in § 401(k)(3), the Plan Sponsor must submit the ADP test results both before the correction and
after the correction.
(6) Former employees or beneficiaries. The method(s) that will be used to locate and notify former
employees and beneficiaries, or an affirmative statement that no former employees or beneficia-
ries were affected by the failures or will be affected by the correction.
(7) Change in administrative procedures. A description of the measures that have been or will be
implemented to ensure that the same failures will not recur.
(8) Plan document. A copy of the entire plan document or the relevant portions of the plan doc-
ument. For example, in a case involving an improper exclusion of eligible employees from a
profit-sharing plan with a cash or deferred arrangement, relevant portions of the plan document in-
clude the eligibility, allocation, and cash or deferred arrangement provisions of the plan document
(including an adoption agreement, if applicable), along with applicable definitions in the plan. In
the case of a SEP or a SIMPLE IRA Plan, the entire plan document should be included in the PDF
document. For submissions limited to Plan Document Failures defined in section 5.01 and 5.02 for

Bulletin No. 2021–31 217 August 2, 2021
which an applicant has adopted a Pre-approved Plan that uses an adoption agreement format, as
provided in Rev. Proc. 2015-36, section 4.04 and Rev. Proc. 2017-41, section 4.07(3), a completed
copy of the signed and dated adoption agreement is all that is necessary to be included in the PDF
document; it is not necessary to include a copy of the entire plan document.
(9) Request for excise tax relief (§ 4972, 4973, 4974, or 4979) or additional tax relief under
§ 72(t). If excise tax or additional tax relief is sought, a specific request for that relief should be
included in the submission, along with explanations, where applicable, supporting such request.
(10) Loan failures and income tax reporting relief. A specific request for relief must be made if
the applicant wants relief from reporting a corrected participant loan as a deemed distribution or
wants to report the loan as a deemed distribution in the year of correction instead of the year in
which the deemed distribution occurred.
(11) Transferred Assets. If a submission includes a failure that relates to Transferred Assets and
the failure occurred prior to the transfer, a description of the transaction (including the dates of the
employer change and the plan transfer).
(12) Section 403(b) Plans. In the case of a § 403(b) Plan submission, a statement that the Plan
Sponsor has contacted all other entities involved with the plan and has been assured of coopera-
tion in implementing the applicable correction, to the extent necessary. For example, if the plan’s
failure is the failure to satisfy the requirements of § 403(b)(1)(E) regarding elective deferrals, the
Plan Sponsor must, prior to making the VCP submission, contact the insurance company or cus-
todian with control over the plan’s assets to assure cooperation in effecting a distribution of the
excess deferrals adjusted for Earnings thereon. The VCP submission must also contain a statement
as to the type of employer (for example, a tax-exempt organization described in § 501(c)(3)) that
is making the VCP submission.
(13) Group Submissions. For a group submission, a copy of the relevant portions of the plan doc-
ument(s).
(14) Orphan Plans. If the plan is an Orphan Plan, information that establishes that the applicant is
an Eligible Party, as defined in section 5.03(2). In addition, the applicant should indicate whether
relief from full correction or from the user fee is being requested and the support for such relief.
See sections 4.08 and 6.02(5)(f).
(15) Plan Sponsor Authorization. If the Plan Sponsor is authorizing an individual to represent it
before the IRS, sign and file a VCP submission on its behalf, or inspect and receive confidential
information, a Form 2848, or Form 8821, Tax Information Authorization, as applicable. See sec-
tion 11.08.
(16) Penalty of Perjury. If the Plan Sponsor is authorizing an individual to sign and file the VCP
submission (including any subsequent material modifications of such submission), on its behalf,
the following declaration: “Under penalties of perjury, I declare that I have examined this
submission, including accompanying documents, and, to the best of my knowledge and be-
lief, the facts presented in support of this submission are true, correct, and complete.” The
declaration must be signed by the Plan Sponsor, not the Plan Sponsor’s representative.
.05 User fee due at the time of VCP submission using the Pay.gov website. Except as provided in
sections 4.08 and 11.06, the user fee set forth in Appendix A of Rev. Proc. 2021-4 (and its annual
successors) must be paid on the Pay.gov website as part of the VCP submission process. If the
appropriate user fee is not paid, the VCP submission will not be processed.
.06 Additional user fee due for group submissions. In the case of a group submission, the initial
user fee (described in Rev. Proc. 2021-4 (and its annual successors)) must be paid when the sub-
mission is first made to the IRS on the Pay.gov website. Any additional user fee amount (also
described in Appendix A of Rev. Proc. 2021-4 (and its annual successors)) is due at the time the

August 2, 2021 218 Bulletin No. 2021–31
compliance statement is signed by the Plan Sponsor and returned to the IRS, or when agreement
has been reached between the IRS and the Plan Sponsor regarding correction of the failure(s). The
payment of this additional user fee must be made using the Pay.gov website and the Pay.gov ver-
sion of Form 8951, Additional User Fee Payment for Open Application for Voluntary Correction
Program (VCP) Under the Employee Plans Compliance Resolution System (EPCRS).
.07 Additional amounts due for certain submissions. In the case of a SEP or a SIMPLE IRA Plan,
a sanction may be imposed pursuant to a closing agreement over and above the specified user fee
in limited circumstances. See section 6.11(5)(b) for details. Also, in any case involving § 72(t), a
sanction may be imposed pursuant to a closing agreement. See section 6.09(6).
.08 Power of attorney requirements. (1) To appear before the IRS in connection with a submis-
sion, the Plan Sponsor’s authorized representative must comply with the requirements of section
6.02(11) and (12) of Rev. Proc. 2021-4 (and its annual successors) and include a Form 2848. A
Form 2848 that designates a representative who is not qualified to sign Part II of the Form 2848
(for example, an unenrolled return preparer) will not be accepted. However, a Plan Sponsor may
authorize an individual, such as an unenrolled return preparer, to inspect or receive confidential
information using Form 8821 (see Form 8821 and Instructions). The Form 2848 and Form 8821,
as applicable, must be included in the PDF file uploaded to the Pay.gov website. See sections
11.03(2) and 11.04.
(2) A Plan Sponsor may designate an authorized representative to file a VCP submission with the
IRS using the Pay.gov website as described in this section 11. If the Plan Sponsor is authorizing an
individual to sign and submit a VCP submission on its behalf, the Plan Sponsor must specifically
indicate the scope of such authorization on the Form 2848. In order to properly authorize such
individual, the Plan Sponsor should check the box in line 5a for “Other acts authorized” on Form
2848 and include as a description “signing and filing of the Form 8950 and accompanying docu-
ments as part of a VCP submission.” This option is not available for individuals listed on a Form
8821. See section 11.04(16) requiring a penalty of perjury declaration signed by the Plan Sponsor
to be included in the application.
.09 Acknowledgement of filing. For submissions filed on the Pay.gov website, the IRS will not
mail an acknowledgement letter to an applicant or its authorized representative that has filed a
VCP submission (or non-VCP submission for a § 457(b) plan, as permitted by section 4.09). How-
ever, when a VCP submission is filed through the Pay.gov website, a “Payment Confirmation–Ap-
plication for Voluntary Correction Program” is generated when the VCP submission is success-
fully filed. The Pay.gov Tracking ID on this receipt serves as the IRS control number for the filed
VCP submission and should be considered an official acknowledgement. See section 11.03(6).
.10 Maintenance of copies of submissions. Plan Sponsors and their authorized representatives
should maintain copies of all correspondence submitted to the IRS with respect to their VCP
submissions.
.11 Assembling the submission. The IRS will be able to process a VCP submission more quickly if
the documents in the PDF uploaded on the Pay.gov website, as described in section 11.03(2) and
11.04, are presented in the following order:
(1) Plan Sponsor’s Penalty of Perjury Statement.
(2) Power of Attorney (Form 2848) or Tax Information Authorization (Form 8821).
(3) Applicable cover letter.
(4) The following narrative information:
• Description of the failures (if the failures relate to Transferred Assets, include a description of
the related employer transaction).

Bulletin No. 2021–31 219 August 2, 2021
• An explanation of how and why the failures occurred. This information may be provided
using an applicable schedule in the Form 14568-A through 14568-I series.
• Description of the method for correcting failures, including Earnings methodology (if appli-
cable) and supporting computations (if applicable). This information may be provided using
an applicable schedule in the Form 14568-A through 14568-I series, including required en-
closures.
• Description of the method(s) used to locate or notify former employees or beneficiaries af-
fected by the failures or corrections. If no former employees or beneficiaries are affected
by the failures or corrections, then affirmatively state that fact when addressing this issue.
This description may be provided using an applicable schedule in the Form 14568-A through
14568-I series.
• Description of the administrative procedures that have been or will be implemented to ensure
that the failures do not recur. This description may be provided using an applicable schedule
in the Form 14568-A through 14568-I series.
• Whether a request is being made in order for participant loans corrected under this revenue
procedure to not be treated as deemed distributions under § 72(p) and the supporting rationale
for such request. Alternatively, whether a request is being made for participant loans correct-
ed under this revenue procedure to be treated as deemed distributions under § 72(p) in the
year of correction. In either case, this request may be provided using an applicable schedule
in the Form 14568-A through 14568-I series, including required enclosures.
• Whether relief is being requested from imposition of the excise taxes under § 4972, 4973,
4974, or 4979, or the 10 percent additional income tax under § 72(t), and the supporting ra-
tionale for such relief. This request for relief may be provided using an applicable schedule in
the Form 14568-A through 14568-I series, including required enclosures.
• If the plan is an Orphan Plan, the supporting rationale relating to a request for relief from the
user fee.
(5) If the VCP submission includes either Form 14568, Model Compliance Statement and/or any
schedule (Forms 14568-A through 14568-I), any required information and enclosures, and any
related schedules.
(6) Supporting computations relating to correction, including computations for Earnings (if ap-
plicable).
(7) Relevant plan document language, or plan document (if applicable).
(8) Copy of opinion, advisory, or determination letter (if applicable).
(9) Any other items that may be relevant to the VCP submission.
SECTION 12. VCP USER FEES
.01 User fees. The user fees for all submissions under VCP are set forth in Appendix A of Rev.
Proc. 2021-4 (and its annual successors). Plan Sponsors should refer to the annual Employee Plans
revenue procedure in effect at the time they file their VCP submission with the IRS to determine
the applicable user fee. All user fees must be paid upon filing the VCP submission (except as pro-
vided in sections 4.08 and 11.06).

August 2, 2021 220 Bulletin No. 2021–31
PART VI.
CORRECTION ON AUDIT (AUDIT CAP)
SECTION 13. DESCRIPTION OF AUDIT CAP
.01 Audit CAP requirements. If the IRS identifies a Qualification or § 403(b) Failure (other than
a failure that has been corrected in accordance with SCP or VCP) upon an Employee Plans or
Exempt Organizations examination of a Qualified Plan, § 403(b) Plan, SEP, or SIMPLE IRA Plan,
the requirements of this section 13 are satisfied with respect to the failure if the Plan Sponsor
corrects the failure, pays a sanction in accordance with section 14, satisfies any additional require-
ments of section 13.03, and enters into a closing agreement with the IRS. This section 13 also
applies if the IRS identifies a participant loan that did not comply with the requirements of § 72(p)
(2) (other than a loan failure that is corrected in accordance with SCP or VCP) upon an Employee
Plans or Exempt Organizations examination of a Qualified Plan or § 403(b) Plan.
.02 Payment of sanction. Payment of the sanction under section 14 generally is required at the
time the closing agreement is signed. Beginning January 1, 2022, the Plan Sponsor must pay the
sanction under Audit CAP using the payment methods available on the Pay.gov website, unless
the Plan Sponsor does not have the capability to use the methods on the Pay.gov website. In that
case, the Plan Sponsor may pay the Audit CAP sanction by submitting a certified check or ca-
shier’s check made payable to the United States Treasury. Prior to January 1, 2022, Plan Sponsors
should follow the procedures set forth in section 13.02 of Rev. Proc. 2019-19.
.03 Additional requirements. Depending on the nature of the failure, the IRS will discuss the ap-
propriateness of the plan’s existing administrative procedures with the Plan Sponsor. If existing
administrative procedures are inadequate for operating the plan in conformance with the applica-
ble requirements of the Code, the closing agreement may be conditioned upon the implementation
of stated procedures.
.04 Failure to reach resolution. If the IRS and the Plan Sponsor cannot reach an agreement with
respect to the correction of the failure(s) or the amount of the sanction then the plan will be dis-
qualified, the plan or contract will be treated as if it did not comply with § 403(b), the SEP will be
treated as if it did not comply with § 408(k), or the SIMPLE IRA Plan will be treated as if it did
not comply with § 408(p), as applicable.
.05 Effect of closing agreement. A closing agreement constitutes an agreement between the IRS
and the Plan Sponsor that is binding with respect to the tax matters identified in the agreement for
the periods specified.
.06 Other procedural rules. The procedural rules for Audit CAP are set forth in IRM 4.71.3.3.1,
EPCRS Closing Agreements, and IRM 7.11.8, EP Determinations Closing Agreement Program.
SECTION 14. AUDIT CAP SANCTION
.01 Determination of sanction. The sanction under Audit CAP is a negotiated amount that is de-
termined based on the facts and circumstances, including the relevant factors described in section

Bulletin No. 2021–31 221 August 2, 2021
14.02. Sanctions will not be excessive and will bear a reasonable relationship to the nature, extent,
and severity of the failures, based on the factors below. The sanction generally will not be less than
the VCP user fee applicable to the plan. See section 14.04 for special rules relating to the sanction
for Nonamender Failures discovered during the determination letter application process.
.02 Factors considered. Factors include:
(1) For all plans (as appropriate):
(a) the steps taken by the Plan Sponsor to ensure that the plan had no failures;
(b) the steps taken by the Plan Sponsor to identify failures that may have occurred;
(c) the extent to which correction had progressed before the examination was initiated, including
full correction;
(d) the number and type of employees affected by the failure;
(e) the number of nonhighly compensated employees who would be adversely affected if the plan
were not treated as qualified or as satisfying the requirements of § 403(b), 408(k), or 408(p);
(f) whether the failure is a failure to satisfy the requirements of § 401(a)(4), 401(a)(26), or 410(b),
either directly or through § 403(b)(12);
(g) whether the failure is solely an Employer Eligibility Failure;
(h) the period over which the failure occurred (for example, the time that has elapsed since the
end of the applicable remedial amendment period under § 401(b) for a Plan Document Failure);
(i) the reason for the failure (for example, data errors such as errors in transcription of data, the
transposition of numbers, or minor arithmetic errors), and
(j) the Maximum Payment Amount.
(2) Additional factors for Nonamender Failures in Qualified Plans. The factors considered for
Nonamender Failures in Qualified Plans also include:
(a) whether the plan is the subject of a Favorable Letter;
(b) the internal controls implemented by the Plan Sponsor to ensure the timely adoption of re-
quired amendments;
(c) the extent to which the Plan Sponsor had adopted a timely plan amendment which later is
found not to satisfy the qualification requirements of the Code;
(d) the extent to which the Plan Sponsor had otherwise adopted applicable amendments identified
on the Required Amendments List described in section 9 of Rev. Proc. 2016-37, as modified, and
published annually in the Internal Revenue Bulletin; and
(e) the extent to which the Plan Sponsor had reasonably determined that a provision on the Re-
quired Amendments List described in section 9 of Rev. Proc. 2016-37, as modified, was not appli-
cable to the Plan Sponsor’s plan.
(3) Participant loan failure. An additional factor taken into account with respect to a participant
loan that did not comply with the requirements of § 72(p)(2) is the extent to which the failure is a
result solely of action (or inaction) of the employer or its agents (or the extent to which the failure
is a result of the employee’s or beneficiary’s actions or inaction).

August 2, 2021 222 Bulletin No. 2021–31
.03 Transferred Assets. If the examination involves a plan with Transferred Assets and the IRS
determines that no new incidents of the failures that relate to the Transferred Assets occurred after
the end of the second plan year that begins after the corporate merger, acquisition, or other similar
employer transaction, the sanction under Audit CAP will not exceed the sanction that would apply
if the Transferred Assets were maintained as a separate plan.
.04 Sanction for Nonamender Failures discovered during the determination letter application pro-
cess. (1) Except as provided in section 14.04(2) and (3), if the only failure identified by the IRS
during the determination letter application process is a Nonamender Failure that was not volun-
tarily identified by the Plan Sponsor:
(a) The sanction for an individually designed plan is determined as follows:
(i) 150 percent of the applicable VCP user fee described in Appendix A of Rev. Proc. 2021-4 (and
its annual successors) if the Nonamender Failure arose in connection with an amendment that was
required to be adopted after the end of the plan’s last remedial amendment cycle to which Rev.
Proc. 2007-44 applied, and
(ii) 250 percent of the applicable VCP user fee described Appendix A of Rev. Proc. 2021-4 (and
its annual successors) if the Nonamender Failure arose in connection with an amendment that was
required to be adopted at any time before the end of the plan’s last remedial amendment cycle to
which Rev. Proc. 2007-44 applied.
(b) The sanction for a Pre-approved Plan is determined as follows:
(i) 150 percent of the applicable VCP user fee described in Appendix A of Rev. Proc. 2021-4 (and
its annual successors) if the Nonamender Failure arose in connection with an amendment that was
required to be adopted after the end of the plan’s second six-year remedial amendment cycle, and
(ii) 250 percent of the applicable VCP user fee described in Appendix A of Rev. Proc. 2021-4
(and its annual successors) if the Nonamender Failure arose in connection with an amendment
that was required to be adopted at any time before the end of the plan’s second six-year remedial
amendment cycle.
(2) The sanction prescribed in section 14.04(1) may be reduced or increased in the following
circumstances:
(a) If a plan amendment was timely adopted in order to maintain the plan’s qualified status but is
found not to satisfy the qualification requirements of the Code, the applicable sanction described
in section 14.04(1) may be reduced based on the facts and circumstances, including the factors
described in section 14.02(2)(a), (b) and (c). However, the sanction generally will not be less than
the VCP user fee applicable to the plan.
(b) If a Nonamender Failure is egregious, the sanction will be determined under section 14.01.
Whether a Nonamender Failure is egregious will be determined based on the facts and circum-
stances, including:
(i) the number of plan amendments that were not timely adopted;
(ii) the number of years that had elapsed from the end of the remedial amendment period until
amendments were adopted (if at all); and
(iii) the extent to which the plan lacked internal controls to facilitate the timely adoption of amend-
ments.

Bulletin No. 2021–31 223 August 2, 2021
PART VII.
EFFECT ON OTHER DOCUMENTS; EFFECTIVE DATE; PAPERWORK REDUCTION ACT
SECTION 15. EFFECT ON OTHER DOCUMENTS
Rev. Proc. 2019-19 is modified and superseded by this revenue procedure.
SECTION 16. EFFECTIVE DATE
This revenue procedure is generally effective July 16, 2021; however, the extension of the sunset
of the safe harbor correction method (from December 31, 2020, to December 31, 2023) is effec-
tive January 1, 2021. Also, effective January 1, 2022, (1) VCP submissions may not be submitted
on an anonymous basis, (2) anonymous pre-submission conference requests may be submitted
under VCP, and (3) except as otherwise provided in section 13.02, Audit CAP sanctions must be
paid using the Pay.gov website.
SECTION 17. PUBLIC COMMENTS
The Treasury Department and the IRS invite comments on this revenue procedure. Comments
should be submitted in writing by October 14, 2021, and should include a reference to Revenue
Procedure 2021-30. Comments may be submitted in one of two ways:
(1) Electronically via the Federal eRulemaking Portal at Regulations.gov (type IRS Revenue Pro-
cedure 2021-30 in the search field on the Regulations.gov homepage to find this revenue proce-
dure and submit comments).
(2) Alternatively, by mail to: Internal Revenue Service, Attn: CC:PA:LPD:PR (Revenue Proce-
dure 2021-30), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044.
All commenters are strongly encouraged to submit public comments electronically. The IRS ex-
pects to have limited personnel available to process public comments that are submitted on paper
through mail. Until further notice, any comments submitted on paper will be considered to the
extent practicable. The Treasury Department and the IRS will publish for public availability any
comment submitted electronically and, to the extent practicable, on paper to its public docket.

August 2, 2021 224 Bulletin No. 2021–31
SECTION 18. PAPERWORK REDUCTION ACT
The collection of information contained in this revenue procedure has been reviewed and ap-
proved by the Office of Management and Budget in accordance with the Paperwork Reduction Act
(44 U.S.C. 3507) under control number 1545-1673.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of
information unless the collection of information displays a valid OMB control number.
The collection of information in this revenue procedure is in sections 4.05, 6.02(5)(d), 6.09(5),
6.09(6), 10, 11, 13.01, Appendix A, sections .05(8)(c) and .05(9)(c), and Appendix B, sections
2.01-2.07. This information is required to enable the Commissioner, Tax Exempt and Government
Entities Division of the IRS to consider the issuance of various types of closing agreements and
compliance statements. This information will be used to issue closing agreements and compliance
statements to allow individual plans to continue to maintain their tax favored status. As a result,
favorable tax treatment of the benefits of the eligible employees is retained. The likely respon-
dents are individuals, state or local governments, businesses or other for-profit institutions, non-
profit institutions, and small businesses or organizations.
The estimated total annual reporting or recordkeeping burden is 91,791 hours.
The estimated annual burden per respondent/recordkeeper varies from .5 to 45.5 hours, depending
on individual circumstances, with an estimated average of 25.28 hours. The estimated number of
respondents or recordkeepers is 5,375.
The estimated frequency of responses is occasional.
Books or records relating to a collection of information must be retained as long as their contents
may become material in the administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. § 6103.
DRAFTING INFORMATION
The principal author of this revenue procedure is Matthew Mulling of the Office of the Associate
Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). For further
information regarding this revenue procedure, please contact the Employee Plans’ taxpayer assis-
tance telephone service at (877) 829-5500 (a toll-free number) between the hours of 8:30 a.m. and
4:30 p.m. Eastern Time, Monday through Friday.

Bulletin No. 2021–31 225 August 2, 2021
APPENDIX A
OPERATIONAL FAILURES AND CORRECTION METHODS
.01 General rule. (1) In general. This Appendix A sets forth Operational Failures and Correction
Methods relating to Qualified Plans. In each case, the method described corrects the Operational
Failure identified in the headings below. Corrective allocations and distributions should reflect
Earnings and actuarial adjustments in accordance with section 6.02(4) of this revenue procedure.
The correction methods in this Appendix A are acceptable to correct Qualification Failures under
VCP, and to correct Qualification Failures under SCP that occurred notwithstanding that the plan
has established practices and procedures reasonably designed to promote and facilitate overall
compliance with the Code, as provided in section 4.04 of this revenue procedure. To the extent
a failure listed in this Appendix A could occur under a § 403(b) Plan, a SEP, or a SIMPLE IRA
Plan, the correction method listed for such failure, such as the correction method for an Employee
Elective Deferral failure in section .05(9), may similarly be used to correct the failure. Unless
otherwise specified, section references in this Appendix A refer to sections in this appendix.
(2) Correction methods permitted in Appendix A and Appendix B are safe harbors. Correction
methods permitted in Appendix A and Appendix B are deemed to be reasonable and appropriate
methods of correcting a failure. Both Appendices set forth various correction methods that may be
used to correct a failure, depending on the facts and circumstances. A Plan Sponsor may choose
any correction method by which the plan can satisfy the eligibility requirements. For example, a
§ 401(k) plan that improperly excluded an employee may use the general correction method under
section.05(2). However, if the § 401(k) plan has an automatic contribution feature, the plan may
use the correction method under section .05(8), assuming the plan satisfies the eligibility require-
ments in section .05(8)(a). If the § 401(k) plan doesn’t have an automatic contribution feature but
corrects the failure within a specified time period, the plan may use the correction method under
section .05(9)(a) or (b), assuming the plan satisfies the eligibility requirements in section .05(9)
(a) or (b).
(3) Other reasonable correction methods permitted. As provided in section 6.02(2) of this revenue
procedure, there may be more than one reasonable and appropriate correction of a failure. Any
correction method used that is not described in Appendix A or Appendix B would need to satisfy
the correction principles of section 6.02 of this revenue procedure. For example, the sponsor of
a § 403(b) Plan that failed to satisfy the universal availability requirement of § 403(b)(12)(A)
(ii) might propose to determine the missed deferral for an excluded employee using a percentage
based on the average deferrals for all employees in the plan instead of using the rule for calcu-
lating missed deferrals set out in section .05(6)(b). In doing so, the proposed correction method
would fall outside Appendix A, and the Plan Sponsor would need to satisfy the general correction
principles of section 6.02 and other applicable rules in this revenue procedure.
.02 Failure to properly provide the minimum top-heavy benefit under § 416 to non-key employ-
ees. In a defined contribution plan, the permitted correction method is to properly contribute and
allocate the required top-heavy minimums to the plan in the manner provided for in the plan on
behalf of the non-key employees (and any other employees required to receive top-heavy alloca-
tions under the plan). In a defined benefit plan, the minimum required benefit must be accrued in
the manner provided in the plan.
.03 Failure to satisfy the ADP test set forth in § 401(k)(3), the ACP test set forth in § 401(m)(2),
or, for plan years beginning on or before December 31, 2001, the multiple use test of § 401(m)
(9). The permitted correction method is to make QNECs (as defined in §1.401(k)-6) on behalf of
the nonhighly compensated employees to the extent necessary to raise the actual deferral percent-
age or actual contribution percentage of the nonhighly compensated employees to the percentage
needed to pass the test or tests. For purposes of correcting a failed ADP, ACP, or multiple use test,
any amounts used to fund QNECs must satisfy the definition of QNEC in §1.401(k)-6). The con-
tributions must be made on behalf of all eligible nonhighly compensated employees (to the extent
permitted under § 415) and must be the same percentage of compensation. QNECs contributed

August 2, 2021 226 Bulletin No. 2021–31
to satisfy the ADP test need not be taken into account for determining additional contributions
(for example, a matching contribution), if any. For purposes of this section .03, employees who
would have received a matching contribution had they made elective deferrals must be counted as
eligible employees for the ACP test, and the plan must satisfy the ACP test. Under this correction
method, a plan may not be treated as two separate plans, one covering otherwise excludable em-
ployees and the other covering all other employees (as permitted in §1.410(b)-6(b)(3)), in order
to reduce the number of employees eligible to receive QNECs. Likewise, under this correction
method, the plan may not be restructured into component plans in order to reduce the number of
employees eligible to receive QNECs.
.04 Failure to distribute elective deferrals in excess of the § 402(g) limit (in contravention of
§ 401(a)(30)). The permitted correction method is to distribute the excess deferral to the employee
and to report the amount as taxable in the year of deferral and in the year distributed. The inclu-
sion of the deferral and the distribution in gross income applies whether or not any portion of the
excess deferral is attributable to a designated Roth contribution (see § 402A(d)(3)). In accordance
with §1.402(g)-1(e)(1)(ii), a distribution to a highly compensated employee is included in the
ADP test and a distribution to a nonhighly compensated employee is not included in the ADP test.
.05 Exclusion of an eligible employee from all contributions or accruals under the plan for one or
more plan years. (1) Improperly excluded employees: employer provided contributions or benefits.
For plans with employer provided contributions or benefits (which are neither elective deferrals
under a qualified cash or deferred arrangement under § 401(k) nor matching or after-tax employee
contributions that are subject to § 401(m)), the permitted correction method is to make a contribu-
tion to the plan on behalf of the employees excluded from a defined contribution plan or to provide
benefit accruals for the employees excluded from a defined benefit plan.
(2) Improperly excluded employees: contributions subject to § 401(k) or 401(m). (a) For plans
providing benefits subject to § 401(k) or 401(m), the corrective contribution for an improperly
excluded employee is described in the following paragraphs of this section .05(2). (See Appendix
B, Examples 3 through 12.)
(b) If the employee was not provided the opportunity to elect and make elective deferrals (other
than designated Roth contributions) to a § 401(k) plan that does not satisfy § 401(k)(3) by apply-
ing the safe harbor contribution requirements of § 401(k)(12) or 401(k)(13), the employer must
make a QNEC to the plan on behalf of the employee that replaces the “missed deferral opportu-
nity.” The missed deferral opportunity is equal to 50 percent of the employee’s “missed deferral.”
The missed deferral is determined by multiplying the actual deferral percentage for the year of ex-
clusion (whether or not the plan is using current or prior year testing) for the employee’s group in
the plan (either highly compensated or nonhighly compensated) by the employee’s compensation
for that year. The employee’s missed deferral amount is reduced further to the extent necessary to
ensure that the missed deferral does not exceed applicable plan limits, including the annual defer-
ral limit under § 402(g) for the calendar year in which the failure occurred. Under this correction
method, a plan may not be treated as two separate plans, one covering otherwise excludable em-
ployees and the other covering all other employees (as permitted in §1.410(b)-6(b)(3)) in order to
reduce the applicable ADP, the corresponding missed deferral, and the required QNEC. Likewise,
restructuring the plan into component plans is not permitted in order to reduce the applicable ADP,
the corresponding missed deferral, and the required QNEC. The QNEC required for the employee
for the missed deferral opportunity for the year of exclusion is adjusted for Earnings to the date
the corrective QNEC is made on behalf of the affected employee.
(c) If the employee should have been eligible for but did not receive an allocation of employer
matching contributions under a non-safe harbor plan because he or she was not given the oppor-
tunity to make elective deferrals, the employer must make a corrective employer nonelective con-
tribution on behalf of the affected employee. The corrective employer nonelective contribution is
equal to the matching contribution the employee would have received had the employee made a
deferral equal to the missed deferral determined under section .05(2)(b). The corrective employer

Bulletin No. 2021–31 227 August 2, 2021
nonelective contribution must be adjusted for Earnings to the date the corrective contribution is
made on behalf of the affected employee.
(d)(i) If the employee was not provided the opportunity to elect and make elective deferrals (other
than designated Roth contributions) to a safe harbor § 401(k) plan that uses a rate of matching
contributions to satisfy the safe harbor requirements of § 401(k)(12), then the missed deferral is
deemed equal to the greater of 3 percent of compensation or the maximum deferral percentage for
which the employer provides a matching contribution rate that is at least as favorable as 100 per-
cent of the elective deferral made by the employee. If the employee was not provided the opportu-
nity to elect and make elective deferrals (other than Roth contributions) to a safe harbor § 401(k)
plan that uses nonelective contributions to satisfy the safe harbor requirements of § 401(k)(12),
then the missed deferral is deemed equal to 3 percent of compensation. In either event, this esti-
mate of the missed deferral replaces the estimate based on the ADP test in a traditional § 401(k)
plan. The required QNEC on behalf of the excluded employee is equal to (i) 50 percent of the
missed deferral, plus (ii) either (A) an amount equal to the contribution that would have been
required as a matching contribution based on the missed deferral in the case of a safe harbor
§ 401(k) plan that uses a rate of matching contributions to satisfy the safe harbor requirements of
§ 401(k)(12) or (B) the nonelective contribution that would have been made on behalf of the em-
ployee in the case of a safe harbor § 401(k) plan that uses nonelective contributions to satisfy the
safe harbor requirements of § 401(k)(12). The QNEC required to replace the employee’s missed
deferral opportunity and the corresponding matching or nonelective contribution is adjusted for
Earnings to the date the corrective QNEC is made on behalf of the employee.
(ii) If the employee was not provided the opportunity to make an affirmative election with respect
to elective deferrals (other than designated Roth contributions) to a safe harbor § 401(k) plan that
uses an automatic contribution arrangement to satisfy the safe harbor requirements of § 401(k)
(13) and the failure occurs for a period that does not extend past the last day of the first plan year
which begins after the date on which the first deferral would have been made (but for the failure),
then the missed deferral is deemed to equal 3 percent of the employee’s compensation under the
plan. If the failure occurs for a plan year or plan years subsequent to the period described in the
prior sentence, then the missed deferral for each subsequent plan year is equal to the qualified per-
centage specified in the plan document to comply with § 401(k)(13)(C)(iii). The missed deferral
determined in accordance with this section .05(2)(d)(ii) replaces the estimate based on the ADP
test in a traditional § 401(k) plan. The required corrective employer contribution on behalf of the
excluded employee is equal to (i) the missed deferral opportunity, which is an amount equal to 50
percent of the missed deferral, plus (ii) an amount equal to either the matching contribution that
would apply under § 401(k)(13) based on the missed deferral or the nonelective contribution that
would have been made on behalf of the employee under § 401(k)(13), whichever applies under
the plan. The employer contribution for the missed deferral opportunity must be a QNEC. The cor-
rective employer contribution consisting of the QNEC required to replace the employee’s missed
deferral opportunity and the corresponding matching or nonelective contribution is adjusted for
Earnings to the date the corrective employer contribution is made on behalf of the employee.
(iii) In the case of a failure to make the required nonelective contribution for a plan year under
a safe harbor § 401(k) plan that uses the nonelective contribution under § 401(k)(12)(C) to sat-
isfy the safe harbor requirements of § 401(k)(12) or that uses the nonelective contribution under
§ 401(k)(13)(D)(i)(I) to satisfy the safe harbor requirements of § 401(k)(13), the nonelective con-
tribution (which must be a QNEC in the case of a plan that uses § 401(k)(12) to satisfy ADP) re-
quired to be made on behalf of the employee is equal to 3 percent of the employee’s compensation
during the period of the failure. For this purpose, the period of the failure for any plan year ends
at the end of the plan year or, if earlier, the later of June 18, 2009 or the date 30 days after notice
was provided to employees as required under applicable Treasury Regulations (see §1.401(k)-3(g)
(ii) of the proposed regulations, at 74 FR 23134).
(e) If the employee should have been eligible to elect and make after-tax employee contribu-
tions (other than designated Roth contributions), the employer must make a QNEC to the plan
on behalf of the employee that is equal to the “missed opportunity for making after-tax employee

August 2, 2021 228 Bulletin No. 2021–31
contributions.” The missed opportunity for making after-tax employee contributions is equal to 40
percent of the employee’s “missed after-tax contributions.” The employee’s missed after-tax con-
tributions are equal to the ACP for the employee’s group (either highly compensated or nonhighly
compensated) times the employee’s compensation, but with the resulting amount not to exceed
applicable plan limits. If the ACP consists of both matching and after-tax employee contributions,
then, in lieu of basing the employee’s missed after-tax employee contributions on the ACP for the
employee’s group, the employer is permitted to determine separately the portion of the ACP that
is attributable to after-tax employee contributions for the employee’s group (either highly com-
pensated or nonhighly compensated), multiplied by the employee’s compensation for the year of
exclusion. The QNEC must be adjusted for Earnings to the date the corrective QNEC is made on
behalf of the affected employee.
(f) If the employee was improperly excluded from an allocation of employer matching contribu-
tions because he or she was not given the opportunity to make after-tax employee contributions
(other than designated Roth contributions), the employer must make a corrective employer non-
elective contribution on behalf of the affected employee. The corrective employer nonelective
contribution is equal to the matching contribution the employee would have received had the
employee made an after-tax employee contribution equal to the missed after-tax employee contri-
bution determined under section .05(2)(e). The corrective employer nonelective contribution must
be adjusted for Earnings to the date the corrective contribution is made on behalf of the affected
employee.
(g) The methods for correcting the failures described in this section .05(2) do not apply until after
the correction of other qualification failures. Thus, for example, if, in addition to the failure of
excluding an eligible employee, the plan also failed the ADP or ACP test, the correction methods
described in section .05(2)(b) through (f) cannot be used until after correction of the ADP or ACP
test failures. For purposes of this section .05(2), in order to determine whether the plan passed the
ADP or ACP test, the plan may rely on a test performed with respect to those eligible employees
who were provided with the opportunity to make elective deferrals or after-tax employee contribu-
tions and receive an allocation of employer matching contributions, in accordance with the terms
of the plan, and may disregard the employees who were improperly excluded.
(3) Improperly excluded employees: designated Roth contributions. For employees who were
improperly excluded from plans that (i) are subject to § 401(k) (as described in section .05(2))
and (ii) provide for the optional treatment of elective deferrals as designated Roth contributions,
the correction is the same as described under section .05(2). Thus, for example, the corrective em-
ployer contribution required to replace the missed deferral opportunity is made in accordance with
the method described in section .05(2)(b) in the case of a § 401(k) plan that is not a safe harbor
§ 401(k) plan or section .05(2)(d) in the case of a safe harbor § 401(k) plan. However, none of the
corrective contributions made by the employer may be treated as designated Roth contributions
(and may not be included in an employee’s gross income) and thus may not be contributed or
allocated to a Roth account (as described in § 402A(b)(2)). The corrective employer contribution
must be allocated to an account established for receiving a QNEC or any other employer contri-
bution in which the employee is fully vested and subject to the withdrawal restrictions that apply
to elective deferrals.
(4) Improperly excluded employees: catch-up contributions only. (a) Correction for missed catch-
up contributions. If an eligible employee was not provided the opportunity to elect and make
catch-up contributions to a § 401(k) plan, the employer must make a QNEC to the plan on behalf
of the employee that replaces the “missed deferral opportunity” attributable to the failure to permit
an eligible employee to make a catch-up contribution pursuant to § 414(v). The missed deferral
opportunity for catch-up contributions is equal to 50 percent of the employee’s missed deferral
attributable to catch-up contributions. For this purpose, the missed deferral attributable to catch-
up contributions is one half of the applicable catch-up contribution limit for the year in which the
employee was improperly excluded. Thus, for example if an eligible employee was improperly
precluded from electing and making catch-up contributions in 2006, the missed deferral attribut-
able to catch-up contributions is $2,500, which is one half of $5,000, the 2006 catch-up contribu-

Bulletin No. 2021–31 229 August 2, 2021
tion limit for a § 401(k) plan. The eligible employee’s missed deferral opportunity is $1,250 (that
is, 50 percent of the missed deferral attributable to catch-up contributions of $2,500). The QNEC
required to replace the missed deferral opportunity for the year of exclusion is adjusted for Earn-
ings to the date the corrective QNEC is made on behalf of the affected employee. For purposes
of this correction, an eligible employee, pursuant to § 414(v)(5), refers to any participant who
(i) would have attained age 50 by the end of the plan’s taxable year and (ii) in the absence of the
plan’s catch-up provision, could not make additional elective deferrals on account of the plan or
statutory limitations described in § 414(v)(3) and §1.414(v)-1(b)(1).
(b) Correction for missed matching contributions on catch-up contributions. If an employee was
precluded from making catch-up contributions under this section .05(4), the Plan Sponsor should
ascertain whether the affected employee would have been entitled to an additional matching con-
tribution on account of the missed deferral. If the employee would have been entitled to an ad-
ditional matching contribution, then the employer must make a corrective employer nonelective
contribution for the matching contribution on behalf of the affected employee. The corrective
employer nonelective contribution is equal to the additional matching contribution the employee
would have received had the employee made a deferral equal to the missed deferral determined
under paragraph (a) of this section .05(4). The corrective employer nonelective contribution must
be adjusted for Earnings to the date the corrective contribution is made on behalf of the affected
employee. If in addition to the failure to provide matching contributions under this section .05(4)
(b), the plan also failed the ACP test, the correction methods described in this section cannot be
used until after correction of the ACP test failure. For purposes of this section, in order to deter-
mine whether the plan passed the ACP test the plan may rely on a test performed with respect to
those eligible employees who were provided with the opportunity to make elective deferrals or
after-tax employee contributions and receive an allocation of employer matching contributions, in
accordance with the terms of the plan, and may disregard any employer matching contribution that
was not made on account of the plan’s failure to provide an eligible employee with the opportunity
to make a catch-up contribution.
(5) Failure to implement an employee election. (a) Missed opportunity for elective deferrals. For
eligible employees who filed elections to make elective deferrals under the Plan which the Plan
Sponsor failed to implement on a timely basis, the Plan Sponsor must make a QNEC to the plan on
behalf of the employee to replace the “missed deferral opportunity.” The missed deferral opportu-
nity is equal to 50 percent of the employee’s “missed deferral.” The missed deferral is determined
by multiplying the employee’s elected deferral percentage by the employee’s compensation. If
the employee elected a dollar amount for an elective deferral, the missed deferral would be the
specified dollar amount. The employee’s missed deferral amount is reduced further to the extent
necessary to ensure that the missed deferral does not exceed applicable plan limits, including
the annual deferral limit under § 402(g) for the calendar year in which the failure occurred. The
QNEC must be adjusted for Earnings to the date the corrective QNEC is made on behalf of the
affected employee.
(b) Missed opportunity for after-tax employee contributions. For eligible employees who filed
elections to make after-tax employee contributions under the Plan which the Plan Sponsor failed
to implement on a timely basis, the Plan Sponsor must make a QNEC to the plan on behalf of
the employee to replace the employee’s missed opportunity for after-tax employee contributions.
The missed opportunity for making after-tax employee contributions is equal to 40 percent of
the employee’s “missed after-tax contributions.” The missed after-tax employee contribution is
determined by multiplying the employee’s elected after-tax employee contribution percentage by
the employee’s compensation. The QNEC must be adjusted for Earnings to the date the corrective
QNEC is made on behalf of the affected employee.
(c) Missed opportunity affecting matching contributions. In the event of failure described in para-
graph (a) or (b) of this section .05(5), if the employee would have been entitled to an addition-
al matching contribution had either the missed deferral or after-tax employee contribution been
made, then the Plan Sponsor must make a corrective employer nonelective contribution for the
matching contribution on behalf of the affected employee, or a corrective QNEC in the case of a

August 2, 2021 230 Bulletin No. 2021–31
safe harbor plan under § 401(k)(12). The corrective employer nonelective contribution or QNEC
is equal to the matching contribution the employee would have received had the employee made
a deferral equal to the missed deferral determined under this paragraph. The corrective employer
nonelective contribution or QNEC must be adjusted for Earnings to the date the corrective contri-
bution or QNEC is made on behalf of the affected employee.
(d) Coordination with correction of other Qualification Failures. The method for correcting the
failures described in this section .05(5) does not apply until after the correction of other qualifica-
tion failures. Thus, for example, if in addition to the failure to implement an employee’s election,
the plan also failed the ADP test or ACP test, the correction methods described in section .05(5)
(a), (b), or (c) cannot be used until after correction of the ADP or ACP test failures. For purposes
of this section .05(5), in order to determine whether the plan passed the ADP or ACP test the plan
may rely on a test performed with respect to those eligible employees who were not impacted by
the Plan Sponsor’s failure to implement employee elections and received allocations of employer
matching contributions, in accordance with the terms of the plan, and may disregard employees
whose elections were not properly implemented.
(6) Failure of a § 403(b) Plan to satisfy the universal availability requirement of § 403(b)(12)(A)
(ii). (a) Subject to the specific rules in this section .05(6), the correction methods set forth in this
section .05 (and Appendix B, section 2.02) for a Qualified Plan also apply to a § 403(b) Plan that
has a similar failure.
(b) If the employee was not provided the opportunity to elect and make elective deferrals to a §
403(b) Plan, then, in lieu of determining the missed deferral based on the actual deferral percent-
age as described in section .05(2)(b), the missed deferral is deemed equal to the greater of 3 per-
cent of compensation or the maximum deferral percentage for which the Plan Sponsor provides a
matching contribution rate that is at least as favorable as 100 percent of the elective deferral made
by the employee.
(7) Improper exclusion of an eligible employee from a SIMPLE IRA plan subject to the require-
ments of § 408(p). (a) Subject to the specific rules in this section .05(7), the correction methods set
forth in this section .05 for a Qualified Plan also apply to a SIMPLE IRA plan that has a similar
failure.
(b) If the employee was not provided the opportunity to elect and make elective deferrals to a
SIMPLE IRA plan, then, in lieu of determining the missed deferral based on the actual deferral
percentage as described in section .05(2)(b), the missed deferral is deemed to be 3 percent of
compensation.
(8) Special safe harbor correction method for failures related to automatic contribution features
in a § 401(k) plan or a § 403(b) Plan. (a) Eligibility to use safe harbor correction method. This
safe harbor correction method is available for certain Employee Elective Deferral Failures (as
defined in section .05(10) associated with missed elective deferrals for eligible employees who
are subject to an automatic contribution feature in a § 401(k) plan or § 403(b) Plan (including
employees who made affirmative elections in lieu of automatic contributions but whose elections
were not implemented correctly). If the failure to implement an automatic contribution feature
for an affected eligible employee or the failure to implement an affirmative election of an eligible
employee who is otherwise subject to an automatic contribution feature does not extend beyond
the end of the 9½-month period after the end of the plan year of the failure (which is generally the
filing deadline of the Form 5500 series return, including automatic extensions), no QNEC for the
missed elective deferrals is required, provided that the following conditions are satisfied:
(i) Correct deferrals begin no later than the earlier of the first payment of compensation made on
or after the last day of the 9½-month period after the end of the plan year in which the failure first
occurred for the affected eligible employee or, if the Plan Sponsor was notified of the failure by
the affected eligible employee, the first payment of compensation made on or after the end of the
month after the month of notification;

Bulletin No. 2021–31 231 August 2, 2021
(ii) Notice of the failure that satisfies the content requirements of section .05(8)(c) is given to the
affected eligible employee not later than 45 days after the date on which correct deferrals begin;
and
(iii) If the eligible employee would have been entitled to additional matching contributions had
the missed deferrals been made, the Plan Sponsor makes a corrective allocation (adjusted for
Earnings) on behalf of the employee equal to the matching contributions that would have been
required under the terms of the plan as if the missed deferrals had been contributed to the plan in
accordance with timing requirements under SCP for significant operational failures (described in
section 9.02 of this revenue procedure).
(b) Calculation of Earnings for certain failures to implement automatic contribution features.
This correction method provides an alternative safe harbor method for calculating Earnings for
Employee Elective Deferral Failures under § 401(k) plans or § 403(b) Plans that have automatic
contribution features and that are corrected in accordance with the procedures in this section
.05(8). If an affected eligible employee has not affirmatively designated an investment alternative,
missed Earnings may be calculated based on the plan’s default investment alternative, provided
that, with respect to a correction made in accordance with the procedures in this section .05(8),
any cumulative losses reflected in the Earnings calculation will not result in a reduction in the
required corrective contributions relating to any matching contributions. The Plan Sponsor may
also use the Earnings adjustment methods set forth in Appendix B, section 3.
(c) Content of notice requirement. The notice required under section .05(8)(a)(ii) must include the
following information:
(i) General information relating to the failure, such as the percentage of eligible compensation that
should have been deferred and the approximate date that the compensation should have begun
to be deferred. The general information need not include a statement of the dollar amounts that
should have been deferred.
(ii) A statement that appropriate amounts have begun to be deducted from compensation and con-
tributed to the plan (or that appropriate deductions and contributions will begin shortly).
(iii) A statement that corrective allocations relating to missed matching contributions have been
made (or that corrective allocations will be made). Information relating to the date and the amount
of corrective allocations need not be provided.
(iv) An explanation that the affected participant may increase his or her deferral percentage in
order to make up for the missed deferral opportunity, subject to applicable limits under § 402(g).
(v) The name of the plan and plan contact information (including name, street address, email ad-
dress, and telephone number of a plan contact).
(d) Sunset of safe harbor correction method. The safe harbor correction method described in sec-
tion .05(8) is available for plans only with respect to failures that begin on or before December
31, 2023.
(9) Safe harbor correction methods for Employee Elective Deferral Failures in § 401(k) plans or
§ 403(b) Plans. (a) Safe harbor correction method for Employee Elective Deferral Failures that
do not exceed three months. Under this safe harbor correction method, an Employee Elective De-
ferral Failure (as defined in section .05(10)) can be corrected without a QNEC for missed elective
deferrals if the following conditions are satisfied:
(i) Correct deferrals begin no later than the earlier of the first payment of compensation made on
or after the last day of the three-month period that begins when the failure first occurred for the
affected eligible employee or, if the Plan Sponsor was notified of the failure by the affected eligi-

August 2, 2021 232 Bulletin No. 2021–31
ble employee, the first payment of compensation made on or after the end of the month after the
month of notification;
(ii) Notice of the failure that satisfies the content requirements of section .05(9)(c) is given to the
affected eligible employee not later than 45 days after the date on which correct deferrals begin;
and
(iii) If the eligible employee would have been entitled to additional matching contributions had the
missed deferrals been made, the Plan Sponsor makes a corrective allocation (adjusted for Earn-
ings, which may be calculated as described in section .05(8)(b)) on behalf of the employee equal
to the matching contributions that would have been required under the terms of the plan as if the
missed deferrals had been contributed to the plan in accordance with the timing requirements un-
der SCP for significant operational failures (described in section 9.02 of this revenue procedure).
(b) Safe harbor correction method for Employee Elective Deferral Failures that extend beyond
three months but do not extend beyond the SCP correction period for significant failures. This safe
harbor correction is for failures that exceed three months (or the conditions for the safe harbor
correction method described in section .05(8) or .05(9)(a) are not met by the Plan Sponsor). Under
this safe harbor correction, the required corrective employer contribution is equal to 25 percent
of the missed deferrals (25 percent QNEC) in lieu of the higher QNEC required in sections .05(2)
(b) and .05(5)(a). In order to use this safe harbor correction method, the Plan Sponsor must satisfy
the following conditions:
(i) Correct deferrals begin no later than the earlier of the first payment of compensation made on
or after the last day of the third plan year following the plan year in which the failure occurred or,
if the Plan Sponsor was notified of the failure by the affected eligible employee, the first payment
of compensation made on or after the end of the month after the month of notification;
(ii) Notice of the failure that satisfies the content requirements of section .05(9)(c) is given to an
affected participant not later than 45 days after the date on which correct deferrals begin; and
(iii) Corrective allocations, as described in section 6.02(4) of this revenue procedure (including
the 25 percent QNEC and employer contributions to make up for any missed matching contribu-
tions), are made in accordance with timing requirements under SCP for significant operational
failures (described in section 9.02 of this revenue procedure), including adjustments for Earnings,
which may be calculated as described in section .05(8)(b).
(c) Content of notice requirement. The notice required under sections .05(9)(a)(ii) and .05(9)(b)(ii)
must include the following information:
(i) General information relating to the failure, such as the percentage of eligible compensation that
should have been deferred and the approximate date that the compensation should have begun
to be deferred. The general information need not include a statement of the dollar amounts that
should have been deferred.
(ii) A statement that appropriate amounts have begun to be deducted from compensation and con-
tributed to the plan (or that appropriate deductions and contributions will begin shortly).
(iii) A statement that corrective allocations have been made (or that corrective allocations will
be made). Information relating to the date and the amount of corrective allocations need not be
provided.
(iv) An explanation that the affected participant may increase his or her deferral percentage in
order to make up for the missed deferral opportunity, subject to applicable limits under § 402(g).
(v) The name of the plan and plan contact information (including name, street address, email ad-
dress, and telephone number of a plan contact).

Bulletin No. 2021–31 233 August 2, 2021
(10) Employee Elective Deferral Failure. For purposes of sections .05(8) and .05(9), an “Employ-
ee Elective Deferral Failure” is a failure to implement elective deferrals correctly in a § 401(k)
plan or § 403(b) Plan, including elective deferrals pursuant to an affirmative election or pursu-
ant to an automatic contribution feature under a § 401(k) plan or § 403(b) Plan, and a failure to
afford an employee the opportunity to make an affirmative election because the employee was
improperly excluded from the plan. Automatic contribution features include automatic enrollment
and automatic escalation features (including automatic escalation features that were affirmatively
elected).
.06 Failure to timely pay the minimum distribution required under § 401(a)(9). In a defined con-
tribution plan, the permitted correction method is to distribute the required minimum distributions
(with Earnings from the date of the failure to the date of the distribution). The amount required to
be distributed for each year in which the initial failure occurred should be determined by divid-
ing the adjusted account balance on the applicable valuation date by the applicable distribution
period. For this purpose, adjusted account balance means the actual account balance, determined
in accordance with §1.401(a)(9)-5, Q&A-3, reduced by the amount of the total missed minimum
distributions for prior years. In a defined benefit plan, the permitted correction method is to dis-
tribute the required minimum distributions, plus an interest payment based on the plan’s actuarial
equivalence factors in effect on the date that the distribution should have been made. See section
6.02(4)(d) of this revenue procedure. If this correction is made at the time the plan is subject to a
restriction on single-sum payments pursuant to § 436(d), the Plan Sponsor must contribute to the
plan the applicable amount under section 6.02(4)(e)(ii)(A) of this revenue procedure as part of the
correction.
.07 Failure to obtain participant or spousal consent for a distribution subject to the participant
and spousal consent rules under §§ 401(a)(11), 411(a)(11), and 417. (1) The permitted correction
method is to give each affected participant a choice between providing informed consent for the
distribution actually made or receiving a qualified joint and survivor annuity. In the event that
participant or spousal consent is required but cannot be obtained, the participant must receive a
qualified joint and survivor annuity based on the monthly amount that would have been provided
under the plan at his or her retirement date. This annuity may be actuarially reduced to take into
account distributions already received by the participant. However, the portion of the qualified
joint and survivor annuity payable to the spouse upon the death of the participant may not be
actuarially reduced to take into account prior distributions to the participant. Thus, for example,
if, in accordance with the automatic qualified joint and survivor annuity option under a plan, a
married participant who retired would have received a qualified joint and survivor annuity of
$600 per month payable for life with $300 per month payable to the spouse for the spouse’s life
beginning upon the participant’s death, but instead received a single-sum distribution equal to the
actuarial present value of the participant’s accrued benefit under the plan, then the $600 monthly
annuity payable during the participant’s lifetime may be actuarially reduced to take the single-sum
distribution into account. However, the spouse must be entitled to receive an annuity of $300 per
month payable for life beginning at the participant’s death.
(2) An alternative permitted correction method is to give each affected participant a choice be-
tween (i) providing informed consent for the distribution actually made, (ii) receiving a qualified
joint and survivor annuity (both (i) and (ii) of this section .07(2) are described in section .07(1)),
or (iii) a single-sum payment to the participant’s spouse equal to the actuarial present value of
that survivor annuity benefit (calculated using the applicable interest rate and mortality table un-
der § 417(e)(3)). For example, assuming the actuarial present value of a $300 per month annuity
payable to the spouse for the spouse’s life beginning upon the participant’s death was $7,837
(calculated using the applicable interest rate and applicable mortality table under § 417(e)(3)), the
single-sum payment to the spouse under clause (iii) of this section .07(2) is equal to $7,837. If the
single-sum payment is made to the spouse, then the payment is treated in the same manner as a
distribution under § 402(c)(9) for purposes of rolling over the payment to an IRA or other eligible
retirement plan. If correction is made at the time the plan is subject to a restriction on single-sum
payments pursuant to § 436(d), then the alternative permitted correction in this section .07(2) is

August 2, 2021 234 Bulletin No. 2021–31
available only if the Plan Sponsor (or other person) contributes to the plan the applicable amount
under section 6.02(4)(e)(ii)(A) of this revenue procedure as part of the correction.
.08 Failure to satisfy the § 415 limits in a defined contribution plan. For limitation years begin-
ning before January 1, 2009, the permitted correction for failure to limit annual additions (other
than elective deferrals and after-tax employee contributions) allocated to participants in a defined
contribution plan as required in § 415 (even if the excess did not result from the allocation of
forfeitures or from a reasonable error in estimating compensation) is to place the excess annual
additions into an unallocated account, similar to the suspense account described in §1.415-6(b)(6)
(iii) (as it appeared in the April 1, 2007 edition of 26 CFR part 1) prior to amendments made by
the final regulations under § 415, to be used as an employer contribution, other than elective de-
ferrals, in the succeeding year(s). While such amounts remain in the unallocated account, the Plan
Sponsor is not permitted to make additional contributions to the plan. The permitted correction
for failure to limit annual additions that are elective deferrals or after-tax employee contributions
(even if the excess did not result from a reasonable error in determining compensation, the amount
of elective deferrals or after-tax employee contributions that could be made with respect to an
individual under the § 415 limits) is to distribute the elective deferrals or after-tax employee con-
tributions using a method similar to that described under §1.415-6(b)(6)(iv) (as it appeared in the
April 1, 2007 edition of 26 CFR part 1) prior to amendments made by the final regulations under
§ 415. Elective deferrals and after-tax employee contributions that are matched may be returned
to the employee, provided that the matching contributions relating to such contributions are for-
feited (which will also reduce excess annual additions for the affected individuals). The forfeited
matching contributions are to be placed into an unallocated account to be used as an employer
contribution, other than elective deferrals, in succeeding periods. For limitation years beginning
on or after January 1, 2009, the failure to limit annual additions allocated to participants in a de-
fined contribution plan as required in § 415 is corrected in accordance with sections 6.06(2) and
(4) of this revenue procedure.
.09 Orphan Plans; orphan contracts and other assets. (1) Orphan Plans. If (a) a plan has one or
more failures (whether a Qualification Failure or a § 403(b) Failure) that result from the Plan
Sponsor having ceased to exist, the Plan Sponsor no longer maintaining the plan, or similar rea-
sons and (b) the plan is an Orphan Plan, the permitted correction is to terminate the plan and dis-
tribute plan assets to participants and beneficiaries. This correction must satisfy four conditions.
First, the correction must comply with conditions, standards, and procedures substantially similar
to those set forth in section 2578.1 of the Department of Labor regulations (relating to abandoned
plans). Second, the Eligible Party must have reasonably determined whether, and to what extent,
the survivor annuity requirements of §§ 401(a)(11) and 417 apply to any benefit payable under
the plan and take reasonable steps to comply with those requirements (if applicable). Third, each
participant and beneficiary must have been provided a nonforfeitable right to his or her accrued
benefits as of the date of deemed termination under the Department of Labor regulations, subject
to income, expenses, gains, and losses between that date and the date of distribution. Fourth,
participants and beneficiaries must receive notification of their rights under § 402(f). In addition,
notwithstanding correction under this revenue procedure, the IRS reserves the right to pursue ap-
propriate remedies under the Code against any party who is responsible for the plan, such as the
Plan Sponsor, plan administrator, or owner of the business, even in its capacity as a participant or
beneficiary under the plan. However, with respect to the first through third conditions above, no-
tice need not be furnished to the Department of Labor, and notices furnished to the Plan Sponsor,
participants, or beneficiaries need not indicate that the procedures followed or notices furnished
actually comply with, or are required under, Department of Labor regulations.
(2) Section 403(b) Failures for orphan contracts or other assets. (a) Former employees or ben-
eficiaries. In any case in which a § 403(b) Failure results from the Plan Sponsor having ceased
involvement with respect to specific assets (including an insurance annuity contract) held under
a defined contribution plan on behalf of a participant who is a former employee or on behalf of a
beneficiary, a permitted correction is to distribute those plan assets to the participant or beneficia-
ry. Compliance with the distribution rules of section 2578.1(d)(2)(vii) of the Department of Labor
regulations satisfies this paragraph .09(2).

Bulletin No. 2021–31 235 August 2, 2021
(b) Failures Relating to Information Sharing Agreements. In any case in which a § 403(b) Failure
results from a contract issued in an exchange not being part of a § 403(b) Plan due to the fail-
ure to have an information sharing agreement pursuant to §1.403(b)-10(b)(2)(i)(C), a permitted
correction is for the assets held under the contract to be transferred to another vendor to which
contributions are being made under the plan in order to become a contract which is held under the
plan without regard to the special rules in §1.403(b)-10(b).

August 2, 2021 236 Bulletin No. 2021–31
APPENDIX B
CORRECTION METHODS AND EXAMPLES; EARNINGS ADJUSTMENT METHODS AND EXAMPLES
SECTION 1. PURPOSE, ASSUMPTIONS FOR EXAMPLES AND SECTION REFERENCES
.01 Purpose. (1) This Appendix B sets forth correction methods relating to Operational Failures
under Qualified Plans. This Appendix B also sets forth Earnings adjustment methods. In each
case, the method described corrects the Operational Failure identified in the headings below. Cor-
rective allocations and distributions should reflect Earnings and actuarial adjustments in accor-
dance with section 6.02(4) of this revenue procedure. The correction methods in this Appendix B
are acceptable to correct Qualification Failures under VCP, and to correct Qualification Failures
under SCP that occurred notwithstanding that the plan has established practices and procedures
reasonably designed to promote and facilitate overall compliance with the Code, as provided in
section 4.04 of this revenue procedure.
(2) To the extent a failure listed in this Appendix B could occur under a § 403(b) Plan, SEP, or
SIMPLE IRA Plan, the correction method listed for such failure may similarly be used to correct
the failure.
.02 Assumptions for Examples. Unless otherwise specified, for ease of presentation, the examples
assume that:
(1) the plan year and the § 415 limitation year are the calendar year;
(2) the Plan Sponsor maintains a single plan intended to satisfy § 401(a) and has never maintained
any other plan;
(3) in a defined contribution plan, the plan provides that forfeitures are used to reduce future em-
ployer contributions;
(4) the Qualification Failures are Operational Failures and the eligibility and other requirements
for SCP, VCP, or Audit CAP, whichever applies, are satisfied; and
(5) there are no Qualification Failures other than the described Operational Failures, and if a cor-
rective action would result in any additional Qualification Failure, appropriate corrective action is
taken for that additional Qualification Failure in accordance with EPCRS.
.03 Designated Roth contributions. The examples in this Appendix B generally do not identify
whether the plan offers designated Roth contributions. The results in the examples, including
corrective contributions, would be the same whether or not the plan offered designated Roth
contributions.
.04 Section references. References in Appendix B to section 2 and section 3 are references to
section 2 and 3 in this Appendix B.

Bulletin No. 2021–31 237 August 2, 2021
SECTION 2. CORRECTION METHODS AND EXAMPLES
.01 ADP/ACP Failures. (1) Correction Methods. (a) Appendix A Correction Method. Appendix A,
section .03, sets forth a correction method for a failure to satisfy the ADP, ACP, or, for plan years
beginning on or before December 31, 2001, multiple use test set forth in §§ 401(k)(3), 401(m)(2),
and 401(m)(9), respectively.
(b) One-to-One Correction Method. (i) General. In addition to the correction method in Appen-
dix A, a failure to satisfy the ADP test or ACP test may be corrected by using the one-to-one
correction method set forth in this section 2.01(1)(b). Under the one-to-one correction method,
an excess contribution amount is determined and assigned to highly compensated employees as
provided in paragraph (1)(b)(ii) below. That excess contribution amount (adjusted for Earnings) is
either distributed to the highly compensated employees or forfeited from the highly compensated
employees’ accounts as provided in paragraph (1)(b)(iii) below. That same dollar amount (that
is, the excess contribution amount, adjusted for Earnings) is contributed to the plan and allocated
to nonhighly compensated employees as provided in paragraph (1)(b)(iv) below. Under this cor-
rection method, a plan may not be treated as two separate plans, one covering otherwise exclud-
able employees and the other covering all other employees (as permitted in §1.410(b)- 6(b)(3)).
Likewise, restructuring the plan into component plans is not permitted. This correction method
may also be used to correct a failure to satisfy the multiple use test for plan years beginning on or
before December 31, 2001.
(ii) Determination of the Excess Contribution Amount. The excess contribution amount for the
year is equal to the excess of (A) the sum of the excess contributions (as defined in § 401(k)(8)
(B)), the excess aggregate contributions (as defined in § 401(m)(6)(B)), and for plan years begin-
ning on or before December 31, 2001 the amount treated as excess contributions or excess aggre-
gate contributions under the multiple use test for the year, as assigned to each highly compensated
employee in accordance with §§ 401(k)(8)(C) and 401(m)(6)(C), over (B) previous corrections
that complied with §§ 401(k)(8) and 401(m)(6), and, for plan years beginning on or before De-
cember 31, 2001, the multiple use test.
(iii) Distributions and Forfeitures of the Excess Contribution Amount. (A) The portion of the ex-
cess contribution amount assigned to a particular highly compensated employee under paragraph
(1)(b)(ii) is adjusted for Earnings from the end of the plan year of the year of the failure through
the date of correction. The amount assigned to a particular highly compensated employee, as ad-
justed, is distributed or, to the extent the amount was forfeitable as of the close of the plan year of
the failure, is forfeited. If the amount is forfeited, it is used in accordance with the plan provisions
relating to forfeitures that were in effect for the year of the failure. If the amount so assigned to a
particular highly compensated employee has been previously distributed, the amount is an Excess
Amount within the meaning of section 5.01(3) of this revenue procedure. Thus, pursuant to sec-
tion 6.06 of this revenue procedure, the Plan Sponsor must notify the employee that the Excess
Amount is not eligible for favorable tax treatment accorded to distributions from qualified plans
(and, specifically, is not eligible for tax-free rollover).
(B) If any matching contributions (adjusted for Earnings) are forfeited in accordance with § 411(a)
(3)(G), the forfeited amount is used in accordance with the plan provisions relating to forfeitures
that were in effect for the year of the failure.
(C) If a payment was made to an employee and that payment is a forfeitable match described in
either paragraph (1)(b)(iii)(A) or (B), then it is an Overpayment defined in section 5.01(3)(c) of
this revenue procedure that must be corrected (see sections 2.04 and 2.05 below).

August 2, 2021 238 Bulletin No. 2021–31
(iv) Contribution and Allocation of Equivalent Amount. (A) The Plan Sponsor makes a contribu-
tion to the plan that is equal to the aggregate amounts distributed and forfeited under paragraph
(1)(b)(iii)(A) (that is, the excess contribution amount adjusted for Earnings, as provided in para-
graph (1)(b)(iii)(A), which does not include any matching contributions forfeited in accordance
with § 411(a)(3)(G) as provided in paragraph (1)(b)(iii)(B)). The contribution must be a QNEC as
defined in §1.401(k)-6.
(B)(1) This paragraph (1)(b)(iv)(B)(1) applies to a plan that uses the current year testing method
described in §§1.401(k)-2(a)(2), 1.401(m)-2(a)(2), and, for periods prior to the effective date of
those regulations, Notice 98-1, 1998-1 C.B. 327. The contribution made under paragraph (1)(b)
(iv)(A) is allocated to the account balances of those individuals who were either (I) the eligible
employees for the year of the failure who were nonhighly compensated employees for that year or
(II) the eligible employees for the year of the failure who were nonhighly compensated employees
for that year and who also are nonhighly compensated employees for the year of correction. Al-
ternatively, the contribution is allocated to account balances of eligible employees described in (I)
or (II) of the preceding sentence, except that the allocation is made only to the account balances
of those employees who are employees on a date during the year of the correction that is no later
than the date of correction. Regardless of which of these four options (described in the two pre-
ceding sentences) the Plan Sponsor selects, eligible employees must receive a uniform allocation
(as a percentage of compensation) of the contribution. (See Examples 1 and 2.) Under the one-
to-one correction method, the amount allocated to the account balance of an employee (that is,
the employee’s share of the total amount contributed under paragraph (1)(b)(iv)(A)) is not further
adjusted for Earnings and is treated as an annual addition under § 415 for the year of the failure
for the employee for whom it is allocated.
(2) This paragraph (1)(b)(iv)(B)(2) applies to a plan that uses the prior year testing method de-
scribed in §§1.401(k)-2(a)(2) and 1.401(m)-2(a)(2) and, for periods prior to the effective date of
those regulations, Notice 98-1. Paragraph (1)(b)(iv)(B)(1) is applied by substituting “the year
prior to the year of the failure” for “the year of the failure.”
(2) Examples.
Example 1:
Employer A maintains a profit-sharing plan with a cash or deferred arrangement that is intended to satisfy § 401(k) using
the current year testing method. The plan does not provide for matching contributions or after-tax employee contributions.
In 2007, it was discovered that the ADP test for 2005 was not performed correctly. When the ADP test was performed cor-
rectly, the test was not satisfied for 2005. For 2005, the ADP for highly compensated employees was 9% and the ADP for
nonhighly compensated employees was 4%. Accordingly, the ADP for highly compensated employees exceeded the ADP
for nonhighly compensated employees by more than two percentage points (in violation of § 401(k)(3)). There were two
highly compensated employees eligible under the § 401(k) plan during 2005, Employee P and Employee Q. Employee P
made elective deferrals of $10,000, which is equal to 10% of Employee P’s compensation of $100,000 for 2005. Employee
Q made elective deferrals of $9,500, which is equal to 8% of Employee Q’s compensation of $118,750 for 2005.
Correction:
On June 30, 2007, Employer A uses the one-to-one correction method to correct the failure to satisfy the ADP test for
2005. Accordingly, Employer A calculates the dollar amount of the excess contributions for the two highly compensated
employees in the manner described in § 401(k)(8)(B). The amount of the excess contribution for Employee P is $4,000
(4% of $100,000) and the amount of the excess contribution for Employee Q is $2,375 (2% of $118,750), or a total of
$6,375. In accordance with § 401(k)(8)(C), $6,375, the excess contribution amount, is assigned $3,437.50 to Employee P
and $2,937.50 to Employee Q. It is determined that the Earnings on the assigned amounts through June 30, 2007 are $687
and $587 for Employees P and Q, respectively. The assigned amounts and the Earnings are distributed to Employees P and
Q. Therefore, Employee P receives $4,124.50 ($3,437.50 + $687) and Employee Q receives $3,524.50 ($2,937.50 + $587).
In addition, on the same date, Employer A makes a corrective contribution to the § 401(k) plan equal to $7,649 (the sum
of the $4,124.50 distributed to Employee P and the $3,524.50 distributed to Employee Q). The corrective contribution is
allocated to the account balances of eligible nonhighly compensated employees for 2005, pro rata based on their compen-
sation for 2005 (subject to § 415 for 2005).

Bulletin No. 2021–31 239 August 2, 2021
Example 2:
The facts are the same as in Example 1, except that for 2005 the plan also provides for (1) after-tax employee contribu-
tions and (2) matching contributions equal to 50% of the sum of an employee’s elective deferrals and after-tax employee
contributions that do not exceed 10% of the employee’s compensation. The plan provides that matching contributions are
subject to the plan’s 20% per year of service vesting schedule and that matching contributions are forfeited and used to
reduce employer contributions if associated elective deferrals or after-tax employee contributions are distributed to correct
an ADP or ACP test failure. For 2005, nonhighly compensated employees made after-tax employee contributions and no
highly compensated employee made any after-tax employee contributions. Employee P received a matching contribution
of $5,000 (50% of $10,000) and Employee Q received a matching contribution of $4,750 (50% of $9,500). Employees
P and Q were 100% vested in 2005. It was determined that the plan satisfied the requirements of the ACP test for 2005.
Correction:
The same corrective actions are taken as in Example 1. In addition, in accordance with the plan’s terms, corrective action is
taken to forfeit Employee P’s and Employee Q’s matching contributions associated with their distributed excess contribu-
tions. Employee P’s distributed excess contributions and associated matching contributions are $3,437.50 and $1,718.75,
respectively. Employee Q’s distributed excess contributions and associated matching contributions are $2,937.50 and
$1,468.75, respectively. Thus, $1,718.75 is forfeited from Employee P’s account and $1,468.75 is forfeited from Employ-
ee Q’s account. In addition, the Earnings on the forfeited amounts are also forfeited. It is determined that the respective
Earnings on the forfeited amount for Employee P is $250 and for Employee Q is $220. The total amount of the forfeitures
of $3,657.50 (Employee P’s $1,718.75 + $250 and Employee Q’s $1,468.75 + $220) is used to reduce contributions for
2007 and subsequent years.
.02 Exclusion of Otherwise Eligible Employees. (1) Exclusion of Eligible Employees in a § 401(k)
or (m) Plan. (a) Correction Method. (i) Appendix A Correction Method for Full Year Exclusion.
Appendix A, section .05(2), sets forth the correction method for the exclusion of an eligible em-
ployee from electing and making elective deferrals (other than designated Roth contributions) and
after-tax employee contributions to a plan that provides benefits that are subject to the require-
ments of § 401(k) or 401(m) for one or more full plan years. (See Example 3.) Appendix A, sec-
tion .05(2), also specifies the method for determining missed elective deferrals and the corrective
contributions for employees who were improperly excluded from electing and making elective
deferrals to a safe harbor § 401(k) plan for one or more full plan years. (See Examples 8, 9, and
10.) Appendix A, section .05(3), sets forth the correction method for the exclusion of an eligible
employee from electing and making elective deferrals in a plan that (i) is subject to § 401(k) and
(ii) provides employees with the opportunity to make designated Roth contributions. Appendix A,
section .05(4), sets forth the correction method for the situation where an eligible employee was
permitted to make an elective deferral, but was not provided with the opportunity to make catch-
up contributions under the terms of the plan and § 414(v), and correction is being made by making
a QNEC on behalf of the excluded employee. (See Example 11.) Appendix A, section .05(5), sets
forth the correction method for the failure by a plan to implement an employee’s election with
respect to elective deferrals (including designated Roth contributions) or after-tax employee con-
tributions. (See Example 12.) In section 2.02(1)(a)(ii) below, the correction methods for (I) the ex-
clusion of an eligible employee from all contributions (including designated Roth contributions)
under a § 401(k) or (m) plan for a full year, as described in Appendix A, sections .05(2) and .05(3),
(II) the exclusion of an eligible employee who was permitted to make elective deferrals, but was
not permitted to make catch-up contributions for a full plan year as described in Appendix A, sec-
tion .05(4), and (III) the exclusion of an eligible employee on account of the failure to implement
an employee’s election to make elective deferrals or after-tax employee contributions to the plan
as described in Appendix A, section .05(5), are expanded to include correction for the exclusion
from these contributions (including designated Roth contributions) under a § 401(k) or (m) plan
for a partial plan year. This correction for a partial year exclusion may be used in conjunction with
the correction for a full year exclusion.
(ii) Expansion of Correction Method to Partial Year Exclusion. (A) In General. The correction
method in Appendix A, section .05, is expanded to cover an employee who was improperly ex-
cluded from electing and making elective deferrals (including designated Roth contributions) or
after-tax employee contributions for a portion of a plan year or from receiving matching contribu-
tions (on either elective deferrals or after-tax employee contributions) for a portion of a plan year.
In such a case, a permitted correction method for the failure is for the Plan Sponsor to satisfy this

August 2, 2021 240 Bulletin No. 2021–31
section 2.02(1)(a)(ii). The Plan Sponsor makes a QNEC on behalf of the excluded employee. The
method and examples described to correct the failure to include otherwise eligible employees do
not apply until after correction of other qualification failures. Thus, for example, in the case of
a § 401(k) plan that does not apply the safe harbor contribution requirements of § 401(k)(12) or
401(k)(13), the correction for improperly excluding an employee from making elective deferrals,
as described in the narrative and the examples in this section cannot be used until after correction
of the ADP test failure. (See Appendix A, section .05(2)(g).)
(B) Elective Deferral Failures. (1) The appropriate QNEC for the failure to allow an employee
to elect and make elective deferrals (including designated Roth contributions) for a portion of
the plan year is equal to the missed deferral opportunity, which is an amount equal to 50 percent
of the employee’s missed deferral. The employee’s missed deferral is determined by multiplying
the ADP of the employee’s group (either highly or nonhighly compensated), determined prior to
correction under this section 2.02(1)(a)(ii), by the employee’s plan compensation for the portion
of the year during which the employee was improperly excluded. In a safe harbor § 401(k) plan,
the employee’s missed deferral is determined by multiplying 3 percent (or, if greater, whatever
percentage of the participant’s compensation which, if contributed as an elective deferral, would
have been matched at a rate of 100 percent or more) by the employee’s plan compensation for the
portion of the year during which the employee was improperly excluded. The missed deferral for
the portion of the plan year during which the employee was improperly excluded from being eli-
gible to make elective deferrals is reduced to the extent that (i) the sum of the missed deferral (as
determined in the preceding two sentences of this paragraph) and any elective deferrals actually
made by the employee for that year would exceed (ii) the maximum elective deferrals permitted
under the plan for the employee for that plan year (including the § 402(g) limit). The corrective
contribution is adjusted for Earnings. For purposes of correcting other failures under this revenue
procedure (including determination of any required matching contribution) after correction has
occurred under this section 2.02(1)(a)(ii)(B), the employee is treated as having made pre-tax elec-
tive deferrals equal to the employee’s missed deferral for the portion of the year during which the
employee was improperly excluded. (See Examples 4 and 5.)
(2) The appropriate corrective contribution for the plan’s failure to implement an employee’s
election with respect to elective deferrals is equal to the missed deferral opportunity, which is
an amount equal to 50 percent of the employee’s missed deferral. Corrective contributions are
adjusted for Earnings. The missed deferral is determined by multiplying the employee’s deferral
percentage by the employee’s plan compensation for the portion of the year during which the
employee was improperly excluded. If the employee elected a fixed dollar amount that can be
attributed to the period of exclusion, then the flat dollar amount for the period of exclusion may be
used for this purpose. If the employee elected a fixed dollar amount to be deferred for the entire
plan year, then that dollar amount is multiplied by a fraction. The fraction is equal to the number
of months, including partial months where applicable, during which the eligible employee was
excluded from making elective deferral contributions divided by 12. The missed deferral for the
portion of the plan year during which the eligible employee was improperly excluded from mak-
ing elective deferrals is reduced to the extent that (i) the sum of the missed deferral (as determined
in the preceding three sentences) and any elective deferrals actually made by the employee for that
year would exceed (ii) the maximum elective deferrals permitted under the plan for the employee
for that plan year (including the § 402(g) limit). The corrective contribution is adjusted for Earn-
ings. The requirements relating to the passage of the ADP test before this correction method can
be used, as described in Appendix A, section .05(5)(d), still apply.
(C) After-Tax Employee Contribution Failures. (1) The appropriate corrective contribution for the
failure to allow employees to elect and make after-tax employee contributions for a portion of the
plan year is equal to the missed after-tax employee contributions opportunity, which is an amount
equal to 40 percent of the employee’s missed after-tax employee contributions. The employee’s
missed after-tax employee contributions are determined by multiplying the ACP of the employ-
ee’s group (either highly or nonhighly compensated), determined prior to correction under this
section 2.02(1)(a)(ii)(C), by the employee’s plan compensation for the portion of the year during
which the employee was improperly excluded. If the ACP consists of both matching and after-tax

Bulletin No. 2021–31 241 August 2, 2021
employee contributions, then, for purposes of the preceding sentence, in lieu of basing the missed
after-tax employee contributions on the ACP for the employee’s group (either highly compensated
or nonhighly compensated), the Plan Sponsor is permitted to determine separately the portions of
the ACP that are attributable to matching contributions and after-tax employee contributions and
base the missed after-tax employee contributions on the portion of the ACP that is attributable to
after-tax employee contributions. The missed after-tax employee contribution is reduced to the ex-
tent that (i) the sum of that contribution and the actual total after-tax employee contributions made
by the employee for the plan year would exceed (ii) the sum of the maximum after-tax employee
contributions permitted under the plan for the employee for the plan year. The corrective contribu-
tion is adjusted for Earnings. The requirements relating to the passage of the ACP test before this
correction method can be used, as described in Appendix A, section .05(2)(g), still apply.
(2) The appropriate corrective contribution for the plan’s failure to implement an employee’s
election with respect to after-tax employee contributions for a portion of the plan year is equal to
the missed after-tax employee contributions opportunity, which is an amount equal to 40 percent
of the employee’s missed after-tax employee contributions. Corrective contributions are adjusted
for Earnings. The missed after-tax employee contribution is determined by multiplying the em-
ployee’s elected after-tax employee contribution percentage by the employee’s plan compensation
for the portion of the year during which the employee was improperly excluded. If the employee
elected a flat dollar amount that can be attributed to the period of exclusion, then the flat dollar
amount for the period of exclusion may be used for this purpose. If the employee elected a flat
dollar amount to be contributed for the entire plan year, then that dollar amount is multiplied by
a fraction. The fraction is equal to the number of months, including partial months where appli-
cable, during which the eligible employee was excluded from making after-tax employee contri-
butions divided by 12. The missed after-tax employee contribution is reduced to the extent that
(i) the sum of that contribution and the actual total after-tax employee contributions made by the
employee for the plan year would exceed (ii) the sum of the maximum after-tax employee contri-
butions permitted under the plan for the employee for the plan year. The requirements relating to
the passage of the ACP test before this correction method can be used, as described in Appendix
A, section .05(5)(d), still apply.
(D) Matching Contribution Failures. (1) The appropriate corrective contribution for the failure to
make matching contributions for an employee because the employee was precluded from making
elective deferrals (including designated Roth contributions) or after-tax employee contributions
for a portion of the plan year is equal to the matching contribution that would have been made for
the employee if (1) the employee’s elective deferrals for that portion of the plan year had equaled
the employee’s missed deferrals (determined under section 2.02(1)(a)(i)(B)) or (2) the employee’s
after-tax contribution for that portion of the plan year had equaled the employee’s missed after-tax
employee contribution (determined under section 2.02(1)(a)(ii)(C)). This matching contribution
is reduced to the extent that (i) the sum of this contribution and other matching contributions ac-
tually made on behalf of the employee for the plan year would exceed (ii) the maximum matching
contribution permitted if the employee had made the maximum matchable contributions permit-
ted under the plan for the plan year. The corrective contribution is adjusted for Earnings. The
requirements relating to the passage of the ACP test before this correction method can be used, as
described in Appendix A, section .05(2)(g), still apply.
(2) The appropriate corrective contribution for the failure to make matching contributions for an
employee because of the failure by the plan to implement an employee’s election with respect to
elective deferrals (including designated Roth contributions) or, where applicable, after-tax em-
ployee contributions for a portion of the plan year is equal to the matching contribution that would
have been made for the employee if the employee made the elective deferral as determined under
section 2.02(1)(a)(ii)(B)(2), or where applicable, the after-tax employee contribution determined
under section 2.02(1)(a)(ii)(C)(2). This matching contribution is reduced to the extent that (i)
the sum of this contribution and other matching contributions actually made on behalf of the
employee for the plan year would exceed (ii) the maximum matching contribution permitted if
the employee had made the maximum matchable contributions permitted under the plan for the
plan year. The corrective contribution is adjusted for Earnings. The requirements relating to the

August 2, 2021 242 Bulletin No. 2021–31
passage of the ACP test before this correction method can be used, as described in Appendix A,
section .05(5)(d), still apply.
(E) Use of Prorated Compensation. For purposes of this paragraph (1)(a)(ii), for administrative
convenience, in lieu of using the employee’s actual plan compensation for the portion of the year
during which the employee was improperly excluded, a pro rata portion of the employee’s plan
compensation that would have been taken into account for the plan year, if the employee had not
been improperly excluded, may be used.
(F) Special Rule for Brief Exclusion from Elective Deferrals and After-Tax Employee Contribu-
tions. An Plan Sponsor is not required to make a corrective contribution with respect to elective
deferrals (including designated Roth contributions) or after-tax employee contributions, as pro-
vided in sections 2.02(1)(a)(ii)(B) and (C), but is required to make a corrective contribution with
respect to any matching contributions, as provided in section 2.02(1)(a)(ii)(D), for an employee
for a plan year if the employee has been provided the opportunity to make elective deferrals or
after-tax employee contributions under the plan for a period of at least the last 9 months in that
plan year and during that period the employee had the opportunity to make elective deferrals or
after-tax employee contributions in an amount not less than the maximum amount that would have
been permitted if no failure had occurred. (See Examples 6 and 7.)
(b) Examples.
Example 3:
Employer B maintains a § 401(k) plan. The plan provides for matching contributions for eligible employees equal to 100%
of elective deferrals that do not exceed 3% of an employee’s compensation. The plan allows employees to make after-tax
employee contributions up to a maximum of the lesser of 2% of compensation or $1,000. The after-tax employee contribu-
tions are not matched. The plan provides that employees who complete one year of service are eligible to participate in the
plan on the next designated entry date. The entry dates are January 1, and July 1. In 2007, it is discovered that Employee
V, an NHCE with compensation of $30,000, was excluded from the plan for the 2006 plan year even though she satisfied
the plan’s eligibility requirements as of January 1, 2006.
For the 2006 plan year, the relevant employee and contribution information is as follows:
Compensation Elective deferral Match After-Tax Employee
Contribution
Highly Compensated Employees (HCEs):
R $200,000 $ 6,000 $6,000 $0
S $150,000 $12,000 $4,500 $1,000
Nonhighly Compensated Employees (NHCEs):
T $80,000 $12,000 $2,400 $1,000
U $50,000 $ 500 $ 500 $0
HCEs:
ADP - 5.5%
ACP - 3.33%
ACP attributable to matching contributions - 3%
ACP attributable to after-tax employee contributions - 0.33%
NHCEs:
ADP - 8%
ACP -2.63%
ACP attributable to matching contributions - 2%
ACP attributable to after-tax employee contributions - 0.63%

Bulletin No. 2021–31 243 August 2, 2021
Correction:
Employer B uses the correction method for a full year exclusion, described in Appendix A, section .05(2), to correct the
failure to include Employee V in the plan for the full plan year beginning January 1, 2006. Employer B calculates the
corrective QNEC to be made on behalf of Employee V as follows:
Elective deferrals: Employee V was eligible to elect and make elective deferrals in 2006, but was not provided with the
opportunity to do so. Thus, Employer B must make a QNEC to the plan on behalf of Employee V equal to the missed
deferral opportunity for Employee V, which is 50% of Employee V’s missed deferral. The QNEC is adjusted for Earnings.
The missed deferral for Employee V is determined by using the ADP for NHCEs for 2006 and multiplying that percentage
by Employee V’s compensation for 2006. Accordingly, the missed deferral for Employee V on account of the employee’s
improper exclusion from the plan is $2,400 (8% x $30,000). The missed deferral opportunity is $1,200 (that is, 50% x
$2,400). Thus, the required corrective contribution for the failure to provide Employee V with the opportunity to make
elective deferrals to the plan is $1,200, adjusted for Earnings. The corrective contribution is made to a pre-tax QNEC
account for Employee V (not to a designated Roth contributions account even if the plan offers designated Roth contribu-
tions, as provided in Appendix A, section .05(3)).
Matching contributions: Employee V should have been eligible for, but did not receive, an allocation of employer match-
ing contributions because Employee V was not provided the opportunity to make elective deferrals in 2006. Thus, Em-
ployer B must make a corrective employer nonelective contribution to the plan on behalf of Employee V that is equal to
the matching contribution Employee V would have received had the missed deferral been made. The corrective employer
nonelective contribution is adjusted for Earnings. Under the terms of the plan, if Employee V had made an elective deferral
of $2,400 or 8% of compensation ($30,000), the employee would have been entitled to a matching contribution equal to
100% of the first 3% of Employee V’s compensation ($30,000) or $900. Accordingly, the contribution required to replace
the missed employer matching contribution is $900, adjusted for Earnings.
After-tax employee contributions: Employee V was eligible to, but was not provided with the opportunity to, elect and
make after-tax employee contributions in 2006. Employer B must make a QNEC to the plan equal to the missed opportuni-
ty for making after-tax employee contributions for Employee V, which is 40% of Employee V’s missed after-tax employee
contribution. The QNEC is adjusted for Earnings. The missed after-tax employee contribution for Employee V is estimated
by using the ACP for NHCEs (to the extent that the ACP is attributable to after-tax employee contributions) for 2006 and
multiplying that percentage by Employee V’s compensation for 2006. Accordingly, the missed after-tax employee contri-
bution for Employee V, on account of the employee’s improper exclusion from the plan is $189 (0.63% x $30,000). The
missed opportunity to make after-tax employee contributions to the plan is $76 (40% x $189). Thus, the required corrective
contribution for the failure to provide Employee V with the opportunity to make the $189 after-tax employee contribution
to the plan is $76, adjusted for Earnings.
The total required corrective contribution, before adjustments for Earnings, on behalf of Employee V is $2,176 ($1,200
for the missed deferral opportunity plus $900 for the missed matching contribution plus $76 for the missed opportunity to
make after-tax employee contributions). The required corrective contribution is further adjusted for Earnings. The correc-
tive contribution for the missed deferral opportunity ($1,200), the missed opportunity for after-tax employee contributions
($76), and related Earnings must be made in the form of a QNEC.
Example 4:
Employer C maintains a § 401(k) plan. The plan provides for matching contributions for each payroll period that are equal
to 100% of an employee’s elective deferrals that do not exceed 2% of the eligible employee’s plan compensation during the
payroll period. The plan provides for after-tax employee contributions. The after-tax employee contribution cannot exceed
$1,000 for the plan year. The plan provides that employees who complete one year of service are eligible to participate in
the plan on the next January 1 or July 1 entry date. Employee X, a nonhighly compensated employee, who met the eligi-
bility requirements and should have entered the plan on January 1, 2006, was not offered the opportunity to elect to have
elective contributions made on his behalf to the plan. In August of 2006, the error was discovered and Employer C offered
Employee X the opportunity to make elective deferrals and after-tax employee contributions as of September 1, 2006.
Employee X made elective deferrals equal to 4% of the employee’s plan compensation for each payroll period from Sep-
tember 1, 2006 through December 31, 2006 (resulting in elective deferrals of $400). Employee X’s plan compensation for
2006 was $36,000 ($26,000 for the first eight months and $10,000 for the last four months). Employer C made matching
contributions equal to $200 on behalf of Employee X, which is 2% of Employee X’s plan compensation for each payroll
period from September 1, 2006 through December 31, 2006 ($10,000). After being allowed to participate in the plan,
Employee X made $250 of after-tax employee contributions for the 2006 plan year. The ADP for nonhighly compensated
employees for 2006 was 3% and the ACP for nonhighly compensated employees for 2006 was 2.3%. The ACP attributable
to matching contributions for nonhighly compensated employees for 2006 was 1.8%. The ACP attributable to employee
contributions for nonhighly compensated employees for 2006 was 0.5%.
Correction:
In accordance with section 2.02(1)(a)(ii), Employer C uses the correction method described in Appendix A, section .05, to
correct for the failure to provide Employee X the opportunity to elect and make elective deferrals and after-tax employee

August 2, 2021 244 Bulletin No. 2021–31
contributions, and, as a result, the failure of Employee X to receive matching contributions for a portion of the plan year
(January 1, 2006 through August 31, 2006). Thus, Employer C makes a corrective contribution on behalf of Employee X
that satisfies the requirements of section 2.02(1)(a)(ii). Employer C elects to utilize the provisions of section 2.02(1)(a)
(ii)(E) to determine Employee X’s compensation for the portion of the year in which Employee X was not provided the
opportunity to make elective deferrals and after-tax employee contributions. Thus, for administrative convenience, in lieu
of using actual plan compensation of $26,000 for the period Employee X was excluded, Employee X’s annual plan com-
pensation is prorated for the 8-month period that the employee was excluded from participating in the plan. The corrective
contribution is determined as follows:
(1) Corrective contribution for missed deferral: Employee X was eligible to, but was not provided with the opportunity to,
elect and make elective deferrals from January 1 through August 31 of 2006. Employer C must make a QNEC to the plan
on behalf of Employee X equal to Employee X’s missed deferral opportunity for that period, which is 50% of Employee
X’s missed deferral. The corrective contribution is adjusted for Earnings. Employee X’s missed deferral is determined by
multiplying the 3% ADP for nonhighly compensated employees by $24,000 (8/12ths of the employee’s 2006 compensa-
tion of $36,000). Accordingly, the missed deferral is $720. The missed deferral is not reduced because when this amount is
added to the amount already deferred, no plan limit (including § 402(g)) was exceeded. Accordingly, the required QNEC
is $360 (that is, 50% multiplied by the missed deferral amount of $720). The required QNEC is adjusted for Earnings.
(2) Corrective contribution for missed matching contribution: Under the terms of the plan, if Employee X had made an
elective deferral of $720 or 3% of compensation for the period of exclusion ($24,000), the employee would have been en-
titled to a matching contribution equal to 2% of $24,000 or $480. The missed matching contribution is not reduced because
no plan limit is exceeded when this amount is added to the matching contribution already contributed for the 2006 plan
year. Accordingly, the required corrective employer contribution is $480. The required corrective employer contribution
is adjusted for Earnings.
(3) Corrective contribution for missed after-tax employee contribution: Employee X was eligible, but was not provided
with the opportunity, to elect and make after-tax employee contributions from January 1 through August 31 of 2006. Em-
ployer C must make a QNEC to the plan on behalf of Employee X equal to the missed opportunity to make after-tax em-
ployee contributions. The missed opportunity to make after-tax employee contributions is equal to 40% of Employee X’s
missed after-tax employee contributions. The QNEC is adjusted for Earnings. The missed after-tax employee contribution
amount is equal to the 0.5% ACP attributable to employee contributions for nonhighly compensated employees multiplied
by $24,000 (8/12ths of the employee’s 2006 plan compensation of $36,000). Accordingly, the missed after-tax employee
contribution amount is $120. The missed after-tax employee contribution is not reduced because the sum of $120 and
the previously made after-tax employee contribution of $250 is less than the overall plan limit of $1,000. Therefore, the
required QNEC is $48 (that is, 40% multiplied by the missed after-tax employee contribution of $120). The QNEC is
adjusted for Earnings.
The total required corrective contribution, before adjustments for Earnings, on behalf of Employee X is $888 ($360 for
the missed deferral opportunity plus $480 for the missed matching contribution plus $48 for the missed opportunity to
make after-tax employee contributions). The corrective contribution for the missed deferral opportunity ($360), the missed
opportunity for after-tax employee contributions ($48), and related Earnings must be made in the form of a QNEC.
Example 5:
The facts (including the ADP and ACP results) are the same as in Example 4, except that it is now determined that Employ-
ee X, after being included in the plan in 2006, made after-tax employee contributions of $950.
Correction:
The correction is the same as in Example 4, except that the QNEC required to replace the missed after-tax employee con-
tribution is re-calculated to take into account applicable plan limits in accordance with the provisions of section 2.02(1)(a)
(ii)(C). The QNEC is determined as follows:
The missed after-tax employee contribution amount is equal to the 0.5% ACP attributable to after-tax employee contribu-
tions for nonhighly compensated employees multiplied by $24,000 (8/12ths of the employee’s 2006 plan compensation
of $36,000). The missed after-tax employee contribution amount, based on this calculation, is $120. However, the sum
of this amount ($120) and the previously made after-tax employee contribution ($950) is $1,070. Because the plan limit
for after-tax employee contributions is $1,000, the missed after-tax employee contribution needs to be reduced by $70, to
ensure that the total after-tax employee contributions comply with the plan limit. Accordingly, the missed after-tax em-
ployee contribution is $50 ($120 minus $70) and the required QNEC is $20 (that is, 40% multiplied by the missed after-tax
employee contribution of $50). The QNEC is adjusted for Earnings.
Example 6:
Employer D sponsors a § 401(k) plan. The plan has a one year of service eligibility requirement and provides for January
1 and July 1 entry dates. Employee Y, who should have been provided the opportunity to elect and make elective deferrals

Bulletin No. 2021–31 245 August 2, 2021
for the plan year beginning on January 1, 2006, was not provided the opportunity to elect and make elective deferrals until
July 1, 2006. Employee Y made $5,000 in elective deferrals to the plan in 2006. Employee Y was a highly compensated
employee with compensation for 2006 of $200,000. Employee Y’s compensation from January 1 through June 30, 2006
was $130,000. The ADP for highly compensated employees for 2006 was 10%. The ADP for nonhighly compensated
employees for 2006 was 8%. The § 402(g) limit for deferrals made in 2006 was $15,000.
Correction:
QNEC for missed deferral: Employee Y’s missed deferral is equal to the 10% ADP for highly compensated employees
multiplied by $130,000 (compensation earned for the portion of the year in which Employee Y was erroneously excluded,
that is, January 1, 2006 through June 30, 2006). The missed deferral amount based on this calculation is $13,000. However,
the sum of this amount ($13,000) and the previously made elective contribution ($5,000) is $18,000. The 2006 § 402(g)
limit for elective deferrals is $15,000. In accordance with the provisions of section 2.02(1)(a)(ii)(B), the missed deferral
needs to be reduced by $3,000 to ensure that the total elective contribution complies with the applicable § 402(g) limit.
Accordingly, the missed deferral is $10,000 ($13,000 minus $3,000) and the required QNEC is $5,000 (that is, 50% mul-
tiplied by the missed deferral of $10,000). The QNEC is adjusted for Earnings.
Example 7:
Employer E maintains a § 401(k) plan. The plan provides for matching contributions for each payroll period that are equal
to 100% of an employee’s elective deferrals that do not exceed 2% of the eligible employee’s plan compensation during
the payroll period. The plan also provides that the annual limit on matching contributions is $750. The plan provides for
after-tax employee contributions. The after-tax employee contribution cannot exceed $1,000 during a plan year. The plan
provides that employees who complete one year of service are eligible to participate in the plan on the next January 1 or
July 1 entry date. Employee Z, a nonhighly compensated employee who met the eligibility requirements and should have
entered the plan on January 1, 2006, was not offered the opportunity to elect to have elective contributions made on his be-
half to the plan. In March of 2006, the error was discovered and Employer E offered the employee an election opportunity
as of April 1, 2006. Employee Z had the opportunity to make the maximum elective deferrals and/or after-tax employee
contributions that could have been made under the terms of the plan for the entire 2006 plan year. The employee made
elective deferrals equal to 3% of the employee’s plan compensation for each payroll period from April 1, 2006 through
December 31, 2006 (resulting in elective deferrals of $960). The employee’s plan compensation for 2006 was $40,000
($8,000 for the first three months and $32,000 for the last nine months). Employer E made matching contributions equal
to $640 for the excluded employee, which is 2% of the employee’s plan compensation for each payroll period from April
1, 2006 through December 31, 2006 ($32,000). After being allowed to participate in the plan, the employee made $500
in after-tax employee contributions. The ADP for nonhighly compensated employees for 2006 was 3% and the ACP for
nonhighly compensated employees for 2006 was 2.3%. The portion of the ACP attributable to matching contributions for
nonhighly compensated employees for 2006 was 1.8%. The portion of the ACP attributable to after-tax employee contri-
butions for nonhighly compensated employees for 2006 was 0.5%.
Correction:
Employer E uses the correction method for partial year exclusions, pursuant to section 2.02(1)(a)(ii), to correct the failure
to include an eligible employee in the plan. Because Employee Z was given an opportunity to make elective deferrals
and after-tax employee contributions to the plan for at least the last 9 months of the plan year (and the amount of the
elective deferrals or after-tax employee contributions that the employee had the opportunity to make was not less than the
maximum elective deferrals or after-tax employee contributions that the employee could have made if the employee had
been given the opportunity to make elective deferrals and after-tax employee contributions on January 1, 2006), under the
special rule set forth in section 2.02(1)(a)(ii)(F), Employer E is not required to make a QNEC for the failure to provide the
employee with the opportunity to make either elective deferrals or after-tax employee contributions. The employer only
needs to make a corrective employer nonelective contribution for the failure to provide the employee with the opportunity
to receive matching contributions on deferrals that could have been made during the first 3 months of the plan year. The
calculation of the corrective employer contribution required to correct this failure is shown as follows:
The missed matching contribution is determined by calculating the matching contribution that the employee would have
received had the employee been provided the opportunity to make elective deferrals during the period of exclusion, that
is, January 1, 2006 through March 31, 2006. Assuming that the employee elected to defer an amount equal to 3% of com-
pensation (which is the ADP for the nonhighly compensated employees for the plan year), then, under the terms of the
plan, the employee would have been entitled to a matching contribution of 2% of compensation. Pursuant to the provisions
of section 2.02(1)(a)(ii)(E), Employer E determines compensation by prorating Employee Z’s annual compensation for
the portion of the year that Employee Z was not given the opportunity to make elective deferrals or after-tax employee
contributions. Accordingly, the missed matching contribution for the period of exclusion is obtained by multiplying 2%
by Employee Z’s compensation of $10,000 (3/12ths of the employee’s 2006 plan compensation of $40,000). Based on this
calculation, the missed matching contribution is $200. However, when this amount is added to the matching contribution
already received ($640), the total ($840) exceeds the $750 plan limit on matching contributions by $90. Accordingly,
pursuant to section 2.02(1)(a)(ii)(D), the missed matching contribution figure is reduced to $110 ($200 minus $90). The
required corrective employer contribution is $110. The corrective contribution is adjusted for Earnings.

August 2, 2021 246 Bulletin No. 2021–31
Example 8:
Employer G maintains a safe harbor § 401(k) plan that requires matching contributions that satisfy the requirements of
§ 401(k)(12), which are equal to: 100% of elective deferrals that do not exceed 3% of an employee’s compensation and
50% of elective deferrals that exceed 3% but do not exceed 5% of an employee’s compensation. Employee M, a nonhighly
compensated employee who met the eligibility requirements and should have entered the plan on January 1, 2006, was not
offered the opportunity to defer under the plan and was erroneously excluded for all of 2006. Employee M’s compensation
for 2006 was $20,000.
Correction:
In accordance with the provisions of section 2.02(1)(a)(ii)(B), Employee M’s missed deferral on account of exclusion from
the safe harbor § 401(k) plan is 3% of compensation. Thus, the missed deferral is equal to 3% multiplied by $20,000, or
$600. Accordingly, the required QNEC for Employee M’s missed deferral opportunity in 2006 is $300, that is, 50% of
$600. The missed matching contribution, based on the missed deferral of $600, is $600. The required corrective contri-
bution for Employee M’s missed matching contribution is $600. Since the matching contribution is required to satisfy the
requirements of § 401(k)(12), the corrective contribution must be made in the form of a QNEC. The total QNEC, before
adjustments for Earnings, on behalf of Employee M is $900 (that is, $300 for the missed deferral opportunity plus $600
for the missed matching contribution). The QNEC is adjusted for Earnings.
Example 9:
Same facts as Example 8, except that the plan provides for matching contributions equal to 100% of elective deferrals that
do not exceed 4% of an employee’s compensation.
Correction:
In accordance with the provisions of section 2.02(1)(a)(ii)(B), Employee M’s missed deferral on account of exclusion
from the safe harbor § 401(k) plan is 4% of compensation. The missed deferral is 4% of compensation because the plan
provides for a 100% match for deferrals up to that level of compensation. (See Appendix A, section .05(2)(d).) Therefore,
in this case, Employee M’s missed deferral is equal to 4% multiplied by $20,000, or $800. The QNEC for Employee M’s
missed deferral opportunity in 2006 is $400, that is, 50% multiplied by $800. The missed matching contribution, based
on the missed deferral of $800, is $800. Thus, the required corrective contribution for Employee M’s missed matching
contribution is $800. Since the matching contribution is required to satisfy the requirements of § 401(k)(12), the correc-
tive contribution must be made in the form of a QNEC. The total QNEC, before adjustments for Earnings, on behalf of
Employee M is $1,200 (that is, $400 for the missed deferral opportunity plus $800 for the missed matching contribution).
The QNEC is adjusted for Earnings.
Example 10:
Same facts as Example 8, except that the plan uses a rate of nonelective contributions to satisfy the requirements of
§ 401(k)(12) and provides for a nonelective contribution equal to 3% of compensation.
Correction:
In accordance with the provisions of section 2.02(1)(a)(ii)(B), Employee M’s missed deferral on account of exclusion
from the safe harbor § 401(k) plan is 3% of compensation. Thus, the missed deferral is equal to 3% multiplied by $20,000,
or $600. Thus, the QNEC for Employee M’s missed deferral opportunity in 2006 is $300 (50% of $600). The required
nonelective contribution, based on the plan’s formula of 3% of compensation for nonelective contributions, is $600. Since
the nonelective contribution is required to satisfy the requirements of § 401(k)(12), the corrective contribution is made in
the form of a QNEC. The total required QNEC, before adjustments for Earnings, on behalf of Employee M is $900 (that
is, $300 for the missed deferral opportunity, plus $600 for the missed nonelective contribution). The QNEC is adjusted
for Earnings.
Example 11:
Employer H maintains a § 401(k) plan. The plan limit on deferrals is the lesser of the deferral limit under § 401(a)(30) or
the limitation under § 415. The plan also provides that eligible participants (as defined in § 414(v)(5)) may make contri-
butions in excess of the plan’s deferral limits, up to the limitations on catch-up contributions for the year. The plan also
provides for a 60% matching contribution on elective deferrals. The deferral limit under § 401(a)(30) for 2006 is $15,000.
The limitation on catch-up contributions under the terms of the plan and § 414(v)(2)(B)(i) is $5,000. Employee R, age
55, was provided with the opportunity to make elective deferrals up to the plan limit, but was not provided the option to
make catch-up contributions. Employee R is a nonhighly compensated employee who earned $60,000 in compensation
and made elective deferrals totaling $15,000 in 2006.

Bulletin No. 2021–31 247 August 2, 2021
Correction:
In accordance with the provisions of Appendix A, section .05(4), Employee R’s missed deferral on account of the plan’s
failure to offer the opportunity to make catch-up contributions is $2,500 (or one half of the limitation on catch-up contri-
butions for 2006). The missed deferral opportunity is $1,250 (or 50% of $2,500). Thus, the required QNEC for Employee
R’s missed deferral opportunity relating to catch-up contributions in 2006 is $1,250 adjusted for Earnings. In addition,
Employee R was entitled to an additional matching contribution, under the terms of the plan, equal to 60% of the missed
deferral that is attributable to the catch-up contribution that the employee would have made had the failure not occurred.
In this case, the missed deferral is $2,500 and the corresponding matching contribution is $1,500 (that is, 60% of $2,500).
Thus, the required corrective contribution for the additional matching contribution that should have been made on behalf
of Employee R is $1,500 adjusted for Earnings.
Example 12:
Employer K maintains a § 401(k) plan. The plan provides for matching contributions for eligible employees equal to 100%
of elective deferrals that do not exceed 3% of an employee’s compensation. On January 1, 2006, Employee T made an
election to contribute 10% of compensation for the 2006 plan year. However, Employee T’s election was not processed,
and the required amounts were not withheld from Employee T’s salary in 2006. Employee T’s salary was $30,000 in 2006.
Correction:
Employer K uses the correction method described in Appendix A, section .05(5), to correct the failure to implement Em-
ployee T’s election to make elective deferrals under the plan for the full plan year beginning January 1, 2006. Employer K
calculates the corrective QNEC to be made on behalf of Employee T as follows:
(1) Elective deferrals: Employee T’s election to make elective deferrals, pursuant to an election, in 2006 was not im-
plemented. Thus, pursuant to Appendix A, section .05(5)(a), Employer K must make a QNEC to the plan on behalf of
Employee T equal to the missed deferral opportunity for Employee T, which is 50% of Employee T’s missed deferral.
The QNEC is adjusted for Earnings. The missed deferral for Employee T is determined by using T’s elected deferral per-
centage (10%) for 2006 and multiplying that percentage by Employee T’s compensation for 2006 ($30,000). Accordingly,
the missed deferral for Employee V, on account of the employee’s improper exclusion from the plan is $3,000 (10% x
$30,000). The missed deferral opportunity is $1,500 (that is, 50% x $3,000). Thus, the required QNEC for the failure to
provide Employee V with the opportunity to make elective deferrals to the plan is $1,500 (adjusted for Earnings).
(2) Matching contributions: Employee T should have been eligible for but did not receive an allocation of employer
matching contributions because no elective deferrals were made on behalf of Employee T in 2006. Thus, pursuant to Ap-
pendix A, section .05(5)(c), Employer K must make a corrective employer nonelective contribution to the plan on behalf
of Employee T that is equal to the matching contribution Employee T would have received had the missed deferral been
made. The corrective employer nonelective contribution is adjusted for Earnings. Under the terms of the plan, if Employee
T had made an elective deferral of $3,000 or 10% of compensation ($30,000), the employee would have been entitled to a
matching contribution equal to 100% of the first 3% of Employee T’s compensation ($30,000) or $900. Accordingly, the
contribution required to replace the missed employer matching contribution is $900, adjusted for Earnings.
The total required corrective contribution, before adjustments for Earnings, on behalf of Employee T is $2,400 ($1,500
for the missed deferral opportunity plus $900 for the missed matching contribution). The corrective contribution for the
missed deferral opportunity ($1,500) and related Earnings must be made in the form of a QNEC.
(2) Exclusion of Eligible Employees In a Profit-Sharing Plan. (a) Correction Methods. (i) Appen-
dix A Correction Method. Appendix A, section .05, sets forth the method for correcting the failure
to make a contribution on behalf of an employee improperly excluded from a defined contribution
plan or to provide benefit accruals for an employee improperly excluded from a defined benefit
plan. In the case of a defined contribution plan, the correction method is to make a contribution
on behalf of an excluded employee. Section 2.02(2)(a)(ii) clarifies the correction method in the
case of a profit-sharing or stock bonus plan that provides for nonelective contributions (within the
meaning of §1.401(k)-6).
(ii) Additional Requirements for Appendix A Correction Method as applied to Profit-Sharing
Plans. To correct for the exclusion of an eligible employee from nonelective contributions in a
profit-sharing or stock bonus plan under the Appendix A correction method, an allocation amount
is determined for each excluded employee on the same basis as the allocation amounts were
determined for the other employees under the plan’s allocation formula (for example, the same
ratio of allocation to compensation), taking into account all of the employee’s relevant factors (for
example, compensation) under that formula for that year. The Plan Sponsor makes a corrective

August 2, 2021 248 Bulletin No. 2021–31
contribution on behalf of the excluded employee that is equal to the allocation amount for the ex-
cluded employee. The corrective contribution is adjusted for Earnings. If, as a result of excluding
an employee, an amount was improperly allocated to the account balance of an eligible employee
who shared in the original allocation of the nonelective contribution, no reduction is made to the
account balance of the employee who shared in the original allocation on account of the improper
allocation. (See Example 15.)
(iii) Reallocation Correction Method. (A) In General. Subject to the limitations set forth in sec-
tion 2.02(2)(a)(iii)(F) below, in addition to the Appendix A correction method, the exclusion of
an eligible employee for a plan year from a profit-sharing or stock bonus plan that provides for
nonelective contributions may be corrected using the reallocation correction method set forth in
this section 2.02(2)(a)(iii). Under the reallocation correction method, the account balance of the
excluded employee is increased as provided in paragraph (2)(a)(iii)(B) below, the account balanc-
es of other employees are reduced as provided in paragraph (2)(a)(iii)(C) below, and the increases
and reductions are reconciled, as necessary, as provided in paragraph (2)(a)(iii)(D) below. (See
Examples 16 and 17.)
(B) Increase in Account Balance of Excluded Employee. The account balance of the excluded em-
ployee is increased by an amount that is equal to the allocation the employee would have received
had the employee shared in the allocation of the nonelective contribution. The amount is adjusted
for Earnings.
(C) Reduction in Account Balances of Other Employees. (1) The account balance of each em-
ployee who was an eligible employee who shared in the original allocation of the nonelective
contribution is reduced by the excess, if any, of (I) the employee’s allocation of that contribution
over (II) the amount that would have been allocated to that employee’s account had the failure not
occurred. This amount is adjusted for Earnings taking into account the rules set forth in section
2.02(2)(a)(iii)(C)(2) and (3) below. The amount after adjustment for Earnings is limited in accor-
dance with section 2.02(2)(a)(iii)(C)(4) below.
(2) This paragraph (2)(a)(iii)(C)(2) applies if most of the employees with account balances that
are being reduced are nonhighly compensated employees. If there has been an overall gain for the
period from the date of the original allocation of the contribution through the date of correction,
no adjustment for Earnings is required to the amount determined under section 2.02(2)(a)(iii)(C)
(1) for the employee. If the amount for the employee is being adjusted for Earnings and the plan
permits investment of account balances in more than one investment fund, for administrative
convenience, the reduction to the employee’s account balance may be adjusted by the lowest rate
of return of any fund for the period from the date of the original allocation of the contribution
through the date of correction.
(3) If an employee’s account balance is reduced and the original allocation was made to more than
one investment fund or there was a subsequent distribution or transfer from the fund receiving the
original allocation, then reasonable, consistent assumptions are used to determine the Earnings
adjustment.
(4) The amount determined in section 2.02(2)(a)(iii)(C)(1) for an employee after the application
of section 2.02(2)(a)(iii)(C)(2) and (3) may not exceed the account balance of the employee on
the date of correction, and the employee is permitted to retain any distribution made prior to the
date of correction.
(D) Reconciliation of Increases and Reductions. If the aggregate amount of the increases under
section 2.02(2)(a)(iii)(B) exceeds the aggregate amount of the reductions under section 2.02(2)(a)
(iii)(C), the Plan Sponsor makes a corrective contribution to the plan for the amount of the excess.
If the aggregate amount of the reductions under section 2.02(2)(a)(iii)(C) exceeds the aggregate
amount of the increases under section 2.02(2)(a)(iii)(B), then the amount by which each employ-
ee’s account balance is reduced under section 2.02(2)(a)(iii)(C) is decreased on a pro rata basis.

Bulletin No. 2021–31 249 August 2, 2021
(E) Reductions Among Multiple Investment Funds. If an employee’s account balance is reduced
and the employee’s account balance is invested in more than one investment fund, then the reduc-
tion may be made from the investment funds selected in any reasonable manner.
(F) Limitations on Use of Reallocation Correction Method. If any employee would be permitted
to retain any distribution pursuant to section 2.02(2)(a)(iii)(C)(4), then the reallocation correction
method may not be used unless most of the employees who would be permitted to retain a distri-
bution are nonhighly compensated employees.
(b) Examples.
Example 13:
Employer D maintains a profit-sharing plan that provides for discretionary nonelective employer contributions. The plan
provides that the employer’s contributions are allocated to account balances in the ratio that each eligible employee’s
compensation for the plan year bears to the compensation of all eligible employees for the plan year and, therefore, the
only relevant factor for determining an allocation is the employee’s compensation. The plan provides for self-directed
investments among four investment funds and daily valuations of account balances. For the 2006 plan year, Employer D
made a contribution to the plan of a fixed dollar amount. However, five employees who met the eligibility requirements
were inadvertently excluded from participating in the plan. The contribution resulted in an allocation on behalf of each of
the eligible employees, other than the excluded employees, equal to 10% of compensation. Most of the employees who re-
ceived allocations under the plan for the year of the failure were nonhighly compensated employees. No distributions have
been made from the plan since 2006. If the five excluded employees had shared in the original allocation, the allocation
made on behalf of each employee would have equaled 9% of compensation. The excluded employees began participating
in the plan in the 2007 plan year.
Correction:
Employer D uses the Appendix A correction method to correct the failure to include the five eligible employees. Thus,
Employer D makes a corrective contribution to the plan. The amount of the corrective contribution on behalf of the five ex-
cluded employees for the 2006 plan year is equal to 10% of compensation of each excluded employee, the same allocation
that was made for other eligible employees, adjusted for Earnings. The excluded employees receive an allocation equal to
10% of compensation (adjusted for Earnings) even though, had the excluded employees originally shared in the allocation
for the 2006 contribution, their account balances, as well as those of the other eligible employees, would have received an
allocation equal to only 9% of compensation.
Example 14:
The facts are the same as in Example 13.
Correction:
Employer D uses the reallocation correction method to correct the failure to include the five eligible employees. Thus, the
account balances are adjusted to reflect what would have resulted from the correct allocation of the employer contribution
for the 2006 plan year among all eligible employees, including the five excluded employees. The inclusion of the excluded
employees in the allocation of that contribution would have resulted in each eligible employee, including each excluded
employee, receiving an allocation equal to 9% of compensation. Accordingly, the account balance of each excluded em-
ployee is increased by 9% of the employee’s 2006 compensation, adjusted for Earnings. The account balance of each of the
eligible employees other than the excluded employees is reduced by 1% of the employee’s 2006 compensation, adjusted
for Earnings. Employer D determines the adjustment for Earnings using the rate of return of each eligible employee’s
excess allocation (using reasonable, consistent assumptions). Accordingly, for an employee who shared in the original al-
location and directed the investment of the allocation into more than one investment fund or who subsequently transferred
a portion of a fund that had been credited with a portion of the 2006 allocation to another fund, reasonable, consistent as-
sumptions are followed to determine the adjustment for Earnings. It is determined that the total of the initially determined
reductions in account balances exceeds the total of the required increases in account balances. Accordingly, these initially
determined reductions are decreased pro rata so that the total of the actual reductions in account balances equals the total of
the increases in the account balances, and Employer D does not make any corrective contribution. The reductions from the
account balances are made on a pro rata basis among all of the funds in which each employee’s account balance is invested.
Example 15:
The facts are the same as in Example 13.

August 2, 2021 250 Bulletin No. 2021–31
Correction:
The correction is the same as in Example 14, except that, because most of the employees whose account balances are
being reduced are nonhighly compensated employees, for administrative convenience, Employer D uses the rate of return
of the fund with the lowest rate of return for the period of the failure to adjust the reduction to each account balance. It is
determined that the aggregate amount (adjusted for Earnings) by which the account balances of the excluded employees
is increased exceeds the aggregate amount (adjusted for Earnings) by which the other employees’ account balances are
reduced. Accordingly, Employer D makes a contribution to the plan in an amount equal to the excess. The reduction from
account balances is made on a pro rata basis among all of the funds in which each employee’s account balance is invested.
.03 Vesting Failures. (1) Correction Methods. (a) Contribution Correction Method. A failure in a
defined contribution plan to apply the proper vesting percentage to an employee’s account balance
that results in forfeiture of too large a portion of the employee’s account balance may be corrected
using the contribution correction method set forth in this paragraph. The Plan Sponsor makes a
corrective contribution on behalf of the employee whose account balance was improperly forfeit-
ed in an amount equal to the improper forfeiture. The corrective contribution is adjusted for Earn-
ings. If, as a result of the improper forfeiture, an amount was improperly allocated to the account
balance of another employee, no reduction is made to the account balance of that employee. (See
Example 16.)
(b) Reallocation Correction Method. In lieu of the contribution correction method, in a defined
contribution plan under which forfeitures of account balances are reallocated among the account
balances of the other eligible employees in the plan, a failure to apply the proper vesting per-
centage to an employee’s account balance which results in forfeiture of too large a portion of the
employee’s account balance may be corrected under the reallocation correction method set forth
in this paragraph. A corrective reallocation is made in accordance with the reallocation correction
method set forth in section 2.02(2)(a)(iii), subject to the limitations set forth in section 2.02(2)(a)
(iii)(F). In applying section 2.02(2)(a)(iii)(B), the account balance of the employee who incurred
the improper forfeiture is increased by an amount equal to the amount of the improper forfeiture
and the amount is adjusted for Earnings. In applying section 2.02(2)(a)(iii)(C)(1), the account
balance of each employee who shared in the allocation of the improper forfeiture is reduced by
the amount of the improper forfeiture that was allocated to that employee’s account. The Earnings
adjustments for the account balances that are being reduced are determined in accordance with
sections 2.02(2)(a)(iii)(C)(2) and (3) and the reductions after adjustments for Earnings are limited
in accordance with section 2.02(2)(a)(iii)(C)(4). In accordance with section 2.02(2)(a)(iii)(D), if
the aggregate amount of the increases exceeds the aggregate amount of the reductions, the Plan
Sponsor makes a corrective contribution to the plan for the amount of the excess. In accordance
with section 2.02(2)(a)(iii)(D), if the aggregate amount of the reductions exceeds the aggregate
amount of the increases, then the amount by which each employee’s account balance is reduced is
decreased on a pro rata basis. (See Example 17.)
(2) Examples.
Example 16:
Employer E maintains a profit-sharing plan that provides for nonelective contributions. The plan provides for self-directed
investments among four investment funds and daily valuation of account balances. The plan provides that forfeitures of
account balances are reallocated among the account balances of other eligible employees on the basis of compensation.
During the 2006 plan year, Employee R terminated employment with Employer E and elected and received a single-sum
distribution of the vested portion of his account balance. No other distributions have been made since 2006. However, an
incorrect determination of Employee R’s vested percentage was made resulting in Employee R receiving a distribution of
less than the amount to which he was entitled under the plan. The remaining portion of Employee R’s account balance was
forfeited and reallocated (and these reallocations were not affected by the limitations of § 415). Most of the employees who
received allocations of the improper forfeiture were nonhighly compensated employees.
Correction:
Employer E uses the contribution correction method to correct the improper forfeiture. Thus, Employer E makes a con-
tribution on behalf of Employee R equal to the incorrectly forfeited amount (adjusted for Earnings) and Employee R’s
account balance is increased accordingly and subsequently distributed to Employee R. No reduction is made from the
account balances of the employees who received an allocation of the improper forfeiture.

Bulletin No. 2021–31 251 August 2, 2021
Example 17:
The facts are the same as in Example 16.
Correction:
Employer E uses the reallocation correction method to correct the improper forfeiture. Thus, Employee R’s account bal-
ance is increased by the amount that was improperly forfeited (adjusted for Earnings) and such increase will be distributed
to Employee R. The account of each employee who shared in the allocation of the improper forfeiture is reduced by the
amount of the improper forfeiture that was allocated to that employee’s account (adjusted for Earnings). Because most
of the employees whose account balances are being reduced are nonhighly compensated employees, for administrative
convenience, Employer E uses the rate of return of the fund with the lowest rate of return for the period of the failure to
adjust the reduction to each account balance. It is determined that the amount (adjusted for Earnings) by which the account
balance of Employee R is increased exceeds the aggregate amount (adjusted for Earnings) by which the other employees’
account balances are reduced. Accordingly, Employer E makes a contribution to the plan in an amount equal to the excess.
The reduction from the account balances is made on a pro rata basis among all of the funds in which each employee’s
account balance is invested.
.04 Section 415(c) Failures and Correction of Overpayments (Defined Contribution Plans and
§ 403(b) Plans).
(1) Correction Methods for Failures Relating to a § 415(c) Excess. (a) Appendix A Correction
Method. Appendix A, section .08, sets forth the correction method for correcting the failure to
satisfy the § 415(c) limits on annual additions.
(b) Forfeiture Correction Method. In addition to the Appendix A correction method, the failure
to satisfy § 415(c) with respect to a nonhighly compensated employee (A) who in the limitation
year of the failure had annual additions consisting of both (I) either elective deferrals or after-tax
employee contributions or both and (II) either matching or nonelective contributions or both, (B)
for whom the matching and nonelective contributions equal or exceed the portion of the employ-
ee’s annual addition that exceeds the limits under § 415(c) (“§ 415(c) excess”) for the limitation
year, and (C) who has terminated with no vested interest in the matching and nonelective contri-
butions (and has not been reemployed at the time of the correction), may be corrected by using
the forfeiture correction method set forth in this paragraph. The § 415(c) excess is deemed to
consist solely of the matching and nonelective contributions. If the employee’s § 415(c) excess
(adjusted for Earnings) has previously been forfeited, the § 415(c) failure is deemed to be cor-
rected. If the § 415(c) excess (adjusted for Earnings) has not been forfeited, that amount is placed
in an unallocated account, as described in section 6.06(2) of this revenue procedure, to be used
to reduce employer nonelective contributions in succeeding year(s) (or if the amount would have
been allocated to other employees who were in the plan for the year of the failure if the failure had
not occurred, then that amount is reallocated to the other employees in accordance with the plan’s
allocation formula). Note that while this correction method will permit more favorable tax treat-
ment of elective deferrals for the employee than the Appendix A correction method, this correction
method could be less favorable to the employee in certain cases, for example, if the employee is
subsequently reemployed and becomes vested. (See Examples 18 and 19.)
(c) Return of Overpayment Correction Method. A failure to satisfy § 415(c) that includes a distri-
bution of a § 415(c) excess attributable to nonelective contributions and matching contributions
may be corrected using the return of Overpayment correction method set forth in section 6.06(4)
of this revenue procedure.
(2) Correction of Overpayment Failures that are not Attributable to a § 415(c) Excess. An Over-
payment that is not attributable to a § 415(c) excess may be corrected in accordance with the
return of Overpayment correction method in section 2.04(1)(c).

August 2, 2021 252 Bulletin No. 2021–31
(3) Examples.
Example 18:
Employer G maintains a § 401(k) plan. The plan provides for nonelective employer contributions, elective deferrals, and
after-tax employee contributions. The plan provides that the nonelective contributions vest under a 5-year cliff vesting
schedule. The plan provides that when an employee terminates employment, the employee’s nonvested account balance
is forfeited five years after a distribution of the employee’s vested account balance and that forfeitures are used to reduce
employer contributions. For the 1998 limitation year, the annual additions made on behalf of two nonhighly compensated
employees in the plan, Employees T and U, exceeded the limit in § 415(c). For the 1998 limitation year, Employee T had
§ 415 compensation of $60,000, and, accordingly, a § 415(c)(1)(B) limit of $15,000. Employee T made elective deferrals
and after-tax employee contributions. For the 1998 limitation year, Employee U had § 415 compensation of $40,000, and,
accordingly, a § 415(c)(1)(B) limit of $10,000. Employee U made elective deferrals. Also, on January 1, 1999, Employee
U, who had three years of service with Employer G, terminated his employment and received his entire vested account
balance (which consisted of his elective deferrals). The annual additions for Employees T and U consisted of:
T U
Nonelective Contributions $ 7,500 $ 4,500
Elective Deferrals $10,000 $ 5,800
After-tax Contributions $ 500 $ 0
Total Contributions $18,000 $10,300
§ 415(c) Limit $15,000 $10,000
§ 415(c) Excess $ 3,000 $ 300
Correction:
Employer G uses the Appendix A correction method to correct the § 415(c) excess with respect to Employee T (that is,
$3,000). Thus, a distribution of plan assets (and corresponding reduction of the account balance) consisting of $500 (ad-
justed for Earnings) of after-tax employee contributions and $2,500 (adjusted for Earnings) of elective deferrals is made
to Employee T. Employer G uses the forfeiture correction method to correct the § 415(c) excess with respect to Employee
U. Thus, the § 415(c) excess is deemed to consist solely of the nonelective contributions. Accordingly, Employee U’s non-
vested account balance is reduced by $300 (adjusted for Earnings) which is placed in an unallocated account, as described
in section 6.06(2) of this revenue procedure, to be used to reduce employer contributions in succeeding year(s). After
correction, it is determined that the ADP and ACP tests for 1998 were satisfied.
Example 19:
Employer H maintains a § 401(k) plan. The plan provides for nonelective employer contributions, matching contributions,
and elective deferrals. The plan provides for matching contributions that are equal to 100% of an employee’s elective
deferrals that do not exceed 8% of the employee’s plan compensation for the plan year. For the 1998 limitation year, Em-
ployee V had § 415 compensation of $50,000, and, accordingly, a § 415(c)(1)(B) limit of $12,500. During that limitation
year, the annual additions for Employee V totaled $15,000, consisting of $5,000 in elective deferrals, a $4,000 matching
contribution (8% of $50,000), and a $6,000 nonelective employer contribution. Thus, the annual additions for Employee
V exceeded the § 415(c) limit by $2,500.
Correction:
Employer H uses the Appendix A correction method to correct the § 415(c) excess with respect to Employee V (that is,
$2,500). Accordingly, $1,000 of the unmatched elective deferrals (adjusted for Earnings) are distributed to Employee V.
The remaining $1,500 excess is apportioned equally between the elective deferrals and the associated matching employer
contributions, so Employee V’s account balance is further reduced by distributing to Employee V $750 (adjusted for
Earnings) of the elective deferrals and forfeiting $750 (adjusted for Earnings) of the associated employer matching contri-
butions. The forfeited matching contributions are placed in an unallocated account, as described in section 6.06(2) of this
revenue procedure, to be used to reduce employer contributions in succeeding year(s). After correction, it is determined
that the ADP and ACP tests for 1998 were satisfied.
.05 Section 415(b) Failures and Correction of Overpayments (Defined Benefit Plans). (1) In Gen-
eral. An Overpayment in a defined benefit plan may be corrected using the return of Overpayment
or adjustment of future payment correction methods set forth in section 2.05(2), or, provided
certain requirements are satisfied, the funding exception correction method set forth in section
2.05(3), or the contribution credit correction method set forth in section 2.05(4). However, the
funding exception correction method set forth in section 2.05(3) and the contribution credit cor-
rection method set forth in section 2.05(4) may not be applied with respect to Overpayments asso-
ciated with a failure to satisfy a statutory limit (including §§ 401(a)(17), 415(b), and 436) or with

Bulletin No. 2021–31 253 August 2, 2021
Overpayments made to a disqualified person (as defined in § 4975(e)(2)) or an owner-employee
(as defined in § 401(c)). In addition, to be eligible to use the contribution credit correction method,
the plan may not have a funding deficiency or an unpaid minimum required contribution as of the
end of the last plan year before the plan year for which the Plan Sponsor takes into account the
corrected benefit payment amount for funding purposes (taking into account contributions made
after the end of the plan year that are credited to that plan year). As provided in section 6.06(3)
(e) of this revenue procedure, any other appropriate correction method may be used to correct an
Overpayment.
(2) Return of Overpayment and Adjustment of Future Payments Correction Methods. (a) Return
of Overpayment Correction Method. (i) In General. Under the return of Overpayment correc-
tion method, the Plan Sponsor must take reasonable steps to have the Overpayment (adjusted for
appropriate interest) returned to the plan by the Overpayment recipient and must reduce future
benefit payments (if any) to the Overpayment recipient to equal the correct amount payable under
the terms of the plan (or an amount that satisfies a limitation provided in the Code or regulations).
The Plan Sponsor may permit the Overpayment recipient to repay the Overpayment through the
payment of a single sum or through an installment agreement, as described in section 2.05(2)(a)
(ii). If the amount returned to the plan by the Overpayment recipient is less than the Overpayment
adjusted for Earnings at the plan’s earnings rate, the Plan Sponsor or another person (other than
any spouse or beneficiary of the Overpayment recipient) must contribute the difference to the plan.
In addition, if the Overpayment was previously treated as eligible for favorable tax treatment,
in accordance with section 6.06(3) of this revenue procedure, the Plan Sponsor must notify the
Overpayment recipient in writing that the Overpayment was not eligible for favorable tax treat-
ment accorded to distributions from qualified plans (and, specifically, was not eligible for tax-free
rollover). (See Examples 23, 24, and 25.)
(ii) Rules Relating to Recoupment Through an Installment Agreement. Under the return of Over-
payment correction method, the Plan Sponsor may permit an Overpayment recipient to repay the
Overpayment through an installment agreement. However, this option is not available in cases in
which the Overpayment recipient is a disqualified person (as defined in § 4975(e)(2)) or an own-
er-employee (as defined in § 401(c)).
(b) Adjustment of Future Payments Correction Method. (i) In General. In the case of plan benefits
that are being distributed in the form of periodic payments, Overpayments may be corrected using
the adjustment of future payments correction method set forth in this section 2.05(2)(b). Under the
adjustment of future payments correction method, payments made to the Overpayment recipient
on or after the date of correction are reduced so that they do not exceed the correct benefit payment
under the terms of the plan (or satisfy a limitation provided in the Code or regulations). An addi-
tional reduction is made to recoup the Overpayment (over a period not longer than the remaining
payment period) so that the actuarial present value of the additional reduction, determined as of
the date of correction, is equal to the Overpayment plus interest at the interest rate used by the
plan as of the date of correction to determine actuarial equivalence. (See Examples 20 and 22.)
(ii) Joint and Survivor Annuity Payments. If a participant is receiving payments in the form of
a joint and survivor annuity, with the employee’s spouse receiving a life annuity upon the em-
ployee’s death equal to a percentage (for example, 75 percent) of the amount being paid to the
employee, the reduction of future annuity payments to reflect the correct amount payable to the
participant under the terms of the plan (or to satisfy a limitation provided in the Code or regula-
tions) reduces the amount of benefits payable during the lives of both the employee and spouse.
However, any reduction to recoup Overpayments made to the employee’s future annuity payments
does not reduce the amount of the spouse’s survivor benefit (regardless of whether the Overpay-
ments have been recouped fully due to the reductions during the employee’s lifetime). Thus, the
spouse’s survivor benefit will be based on the specified percentage (for example, 75 percent) of the
maximum permitted amount payable under the terms of the plan (or to satisfy a limitation provid-
ed in the Code or Regulations), instead of the reduced periodic amount payable to the employee.
(See Example 21.)

August 2, 2021 254 Bulletin No. 2021–31
(iii) Overpayment Not Treated as an Excess Amount. An Overpayment corrected under the ad-
justment of future payments correction method is not treated as an Excess Amount as defined in
section 5.01(3) of this revenue procedure.
(iv) Plan Sponsor Not Required to Contribute to the Plan. To the extent the amount returned by an
Overpayment recipient through the adjustment of future payments correction method is less than
the Overpayment (for example, due to the death of the Overpayment recipient), the Plan Sponsor
is not required to contribute any additional amount to the plan.
(c) Overpayment Recipients May Be Given Choice of Recoupment Correction Methods. If seek-
ing recoupment of an Overpayment under the return of Overpayment or adjustment of future
payments correction methods under section 2.05(2), a Plan Sponsor may provide Overpayment
recipients a choice of repaying an Overpayment by: (A) a single sum repayment, (B) entering an
installment agreement, or (C) an adjustment made to future benefit payments.
(3) Funding Exception Correction Method. Corrective payments are not required in the case of a
plan subject to § 436, provided that the plan’s certified or presumed AFTAP that is applicable to
the plan at the date of correction is equal to at least 100 percent (or, in the case of a multiemployer
plan, the plan’s most recent annual funding certification indicates that the plan is not in critical,
critical and declining, or endangered status, as defined in § 432, determined at the date of correc-
tion). For this purpose, the rules for determining the AFTAP and presumed AFTAP under § 436
and for determining the status of a multiemployer plan under § 432 must be followed. Future
benefit payments to an Overpayment recipient must be reduced to the correct benefit payment
amount. For purposes of EPCRS, no further payments from any party are required, no further
reductions to future benefit payments to an Overpayment recipient, or any spouse or beneficiary
of an Overpayment recipient, are permitted, and no further corrective payments from an Over-
payment recipient, or any spouse or beneficiary of an Overpayment recipient, are permitted. (See
Examples 25 and 28.)
(4) Contribution Credit Correction Method. (a) In General. (i) Subject to the additional rules set
forth in section 2.05(4)(a)(ii) and (b), under the contribution credit correction method, the amount
of Overpayments required to be repaid to the plan is the amount of the Overpayments reduced (but
not below zero) by: (A) the cumulative increase in the plan’s minimum funding requirements at-
tributable to the Overpayments (including the increase attributable to the overstatement of liabili-
ties, whether funded through cash contributions or through the use of a funding standard carryover
balance, prefunding balance, or funding standard account credit balance), beginning with (1) the
plan year for which the Overpayments are taken into account for funding purposes, and through
(2) the end of the plan year preceding the plan year for which the corrected benefit payment
amount is taken into account for funding purposes; and (B) certain additional contributions in
excess of minimum funding requirements paid to the plan after the first of the Overpayments was
made (see section 2.05(4)(a)(ii)). The amount of the Overpayments and the cumulative additional
contributions (taking into account the increase in minimum funding and excess contributions) are
determined without adjustment for interest. (See Examples 26 and 27.) This reduction is referred
to as the “contribution credit.”
(ii) Contributions may not be counted toward the contribution credit if they are designated for other
plan purposes. Accordingly, the following contributions to the plan in excess of minimum funding
requirements may not be counted toward the contribution credit: (A) contributions added to the
plan’s prefunding balance (except that, if an election was made by the date of correction to reduce
the prefunding balance by all or a portion of those contributions, then the amount by which the
prefunding balance was reduced may be counted toward the contribution credit); (B) contribu-
tions made to avoid or remove restrictions under § 436; (C) contributions made to CSEC plans
and withdrawal liability payments and other contributions made to multiemployer plans (all of
which are automatically added to the credit balance); and (D) contributions made to correct other
Qualification Failures.

Bulletin No. 2021–31 255 August 2, 2021
(iii) For purposes of EPCRS, if the amount of the Overpayments is reduced to zero after the
contribution credit is applied, no further corrective payments from any party are required, no
further reductions to future benefit payments to an Overpayment recipient, or any spouse or ben-
eficiary of an Overpayment recipient, are permitted, and no further corrective payments from an
Overpayment recipient, or any spouse or beneficiary of an Overpayment recipient, are permitted.
However, if a net amount of Overpayments remains (“net Overpayment”) after application of the
contribution credit, subject to section 2.05(4)(a)(iv) and the additional rules set forth in section
2.05(4)(b), the Plan Sponsor or another party must take one of the following actions to secure re-
payment to the plan of the net Overpayment: (A) the Plan Sponsor or another party makes a single
sum contribution to the plan in the amount of the net Overpayment; or (B) the Plan Sponsor takes
reasonable steps to recoup the net Overpayment from the Overpayment recipient by (1) securing
a single sum payment from the Overpayment recipient, (2) entering into an installment agreement
with the Overpayment recipient, or (3) adjusting future benefit payments due to the Overpayment
recipient in accordance with section 2.05(2)(b). If the Plan Sponsor pursues recoupment under this
section 2.05(4)(a), Overpayment recipients must be permitted to choose which of these correction
options will apply after receiving the written notification described in section 2.05(4)(b)(iv).
(iv) To the extent the amount returned by an Overpayment recipient through either a single sum
payment or an installment agreement is less than the net Overpayment, the Plan Sponsor or an-
other person must contribute any additional amount owed to the plan. However, to the extent the
amount returned by the Overpayment recipient through the adjustment of future payments is less
than the net Overpayment (for example, due to the death of the Overpayment recipient), the Plan
Sponsor is not required to contribute an additional amount to the plan.
(b) Additional Rules. The following additional rules apply if a net Overpayment remains after the
application of the contribution credit as described in section 2.05(4)(a).
(i) Limitations Relating to Recoupment Through Adjustment of Future Payments. The following
limitations apply if a Plan Sponsor pursues recoupment of a net Overpayment from an Overpay-
ment recipient and the Overpayment recipient chooses to have future periodic benefit payments
adjusted for the net Overpayment: (A) the maximum adjustment to a future periodic benefit pay-
ment must be limited to 10 percent of the Overpayment recipient’s corrected periodic payment
amount; (B) interest may not accrue prior to the date that corrected periodic payments begin; and
(C) appropriate interest must accrue on the amount of the net Overpayment beginning on the date
the corrected periodic payments begin.
(ii) Rules Relating to Recoupment From an Overpayment Recipient Through an Installment Agree-
ment. The following rules apply if a Plan Sponsor pursues recoupment of a net Overpayment from
an Overpayment recipient and the Overpayment recipient chooses to repay the net Overpayment
through an installment agreement: (A) interest may not accrue prior to the date that installment
payments begin; (B) appropriate interest must accrue on the amount of the net Overpayment be-
ginning on the date the installment payments begin; and (C) the installment period over which the
net Overpayment will be repaid to the plan must be at least five years.
(iii) Joint and Survivor Annuity Payments. The requirements set forth in section 2.05(2)(B)(ii), re-
lating to joint and survivor annuity payments, apply to the contribution credit correction method.
(iv) Written Notification Required. Under the contribution credit correction method, a Plan Spon-
sor that requests recoupment of a net Overpayment from an Overpayment recipient must provide
a written notification to the Overpayment recipient with information about the net Overpayment
and the repayment options available to the Overpayment recipient. This information must include
the following:
(A) a description of the error;
(B) the amount of the Overpayment;

August 2, 2021 256 Bulletin No. 2021–31
(C) the amount of the Overpayment recipient’s benefit after reduction to reflect the correct amount
payable under the terms of the plan, or to satisfy a limitation provided in the Code or regula-
tions;
(D) the estimated amount of reduced future benefit payments that the Overpayment recipient will
receive if the Overpayment recipient chooses to have future benefit payments adjusted; and
(E) the estimated repayment amounts if the Overpayment recipient chooses to repay the Overpay-
ment through a single sum repayment or an installment agreement.
Information about the repayment options must indicate that if the Overpayment recipient does
not choose a repayment option within a reasonable time (which may not be less than 30 days),
the default repayment option will be the adjustment of future payments correction method if the
Overpayment recipient is entitled to future payments under the terms of the plan, or a single sum
repayment, if the Overpayment recipient is not entitled to future payments under the terms of the
plan (for example, if the Overpayment recipient’s entire benefit was distributed as a single sum
payment). The information required by this section 2.05(4)(b)(iv) must be provided in addition to
the written notification required under section 6.06(3)(b)(ii) of this revenue procedure (but may be
set forth in the same notification to the Overpayment recipient).
(c) Examples.
Example 20:
Employer F maintains a defined benefit plan funded solely through employer contributions. The plan provides that the
benefits of employees are limited to the maximum amount permitted under § 415(b), disregarding cost-of-living adjust-
ments under § 415(d) after benefit payments have commenced. At the beginning of the 2006 plan year, Employee S retired
and started receiving an annual straight life annuity of $185,000 from the plan. Due to an administrative error, the annual
amount received by Employee S for 2006 included an Overpayment of $10,000 (because the § 415(b)(1)(A) limit for 2006
was $175,000). This error was discovered at the beginning of 2007.
Correction:
Employer F uses the adjustment of future payments correction method to correct the failure to satisfy the limit in § 415(b).
Future annuity benefit payments to Employee S are reduced so that they do not exceed the § 415(b) maximum limit, and, in
addition, Employee S’s future benefit payments from the plan are actuarially reduced to recoup the Overpayment. Accord-
ingly, Employee S’s future benefit payments from the plan are reduced to $175,000 and further reduced by $1,000 annually
for life, beginning in 2007. The annual benefit amount is reduced by $1,000 annually for life because, for Employee S,
the actuarial present value of a benefit of $1,000 annually for life commencing in 2007 is equal to the sum of $10,000 and
interest at the rate used by the plan to determine actuarial equivalence beginning with the date of the first Overpayment and
ending with the date the reduced annuity payment begins. Thus, Employee S’s remaining benefit payments are reduced so
that Employee S receives $174,000 for 2007, and for each year thereafter.
Example 21:
The facts are the same as in Example 20, except that Employee S is receiving the benefit in the form of a fully-subsidized
100% joint and survivor benefit, so that Employee S’s spouse will receive 100% of Employee S’s benefit after Employee
S’s death. As provided under Example 20, under the terms of the plan, the annual benefit payable to Employee S should
have been $175,000 for Employee S’s lifetime, and $175,000 to Employee S’s spouse after Employee S’s death.
Correction:
The adjustment to recoup the Overpayment is applied only for Employee S’s lifetime, as described in section 2.05(2)(b)
(ii), so the actuarial adjustment is $1,000 annually as determined in Example 20. Therefore, the future annual payments
to Employee S will be $174,000 for Employee S’s lifetime, and the annual payments to Employee S’s spouse will be
$175,000 for the remainder of the spouse’s lifetime after Employee S’s death.
Example 22:
The facts are the same as in Example 20.

Bulletin No. 2021–31 257 August 2, 2021
Correction:
Employer F uses the adjustment of future payments correction method to correct the § 415(b) failure, by recouping the
entire excess payment made in 2006 from Employee S’s remaining benefit payments for 2007. Thus, Employee S’s annual
annuity benefit for 2007 is reduced to $164,400 to reflect the excess benefit amounts (increased by interest) that were paid
from the plan to Employee S during the 2006 plan year. Beginning in 2008, Employee S begins to receive annual benefit
payments of $175,000.
Example 23:
The facts are the same as in Example 20, except that the benefit was paid to Employee S in the form of a single-sum dis-
tribution in 2006, which exceeded the maximum § 415(b) limit by $110,000.
Correction:
Employer F uses the return of Overpayment correction method to correct the § 415(b) failure. Thus, Employer F notifies
Employee S of the $110,000 Overpayment and that the Overpayment was not eligible for favorable tax treatment accorded
to distributions from qualified plans (and, specifically, was not eligible for tax-free rollover). The notice also informs Em-
ployee S that the Overpayment (with interest at the rate used by the plan to calculate the single-sum payment) is owed to
the plan. Employer F takes reasonable steps to have the Overpayment (with interest at the rate used by the plan to calculate
the single-sum payment) paid to the plan. Employee S pays the $110,000 (plus the requested interest) to the plan. It is
determined that the plan’s rate of return for the relevant period was 2 percentage points more than the rate used by the plan
to calculate the single-sum payment. Accordingly, Employer F contributes the difference to the plan.
Example 24:
The facts are the same as in Example 23.
Correction:
Employer F uses the return of Overpayment correction method to correct the § 415(b) failure. Thus, Employer F notifies
Employee S of the $110,000 Overpayment and that the Overpayment was not eligible for favorable tax treatment accorded
to distributions from qualified plans (and, specifically, was not eligible for tax-free rollover). The notice also informs Em-
ployee S that the Overpayment (with interest at the rate used by the plan to calculate the single-sum payment) is owed to
the plan. Employer F takes reasonable steps to have the Overpayment (with interest at the rate used by the plan to calculate
the single-sum payment) paid to the plan. As a result of Employer F’s recovery efforts, some, but not all, of the Overpay-
ment (with interest) is recovered from Employee S. It is determined that the amount returned by Employee S to the plan
is less than the Overpayment adjusted for Earnings at the plan’s rate of return. Accordingly, Employer F contributes the
difference to the plan.
Example 25:
Plan H is a single-employer plan with a calendar-year plan year. In August, 2021, the Plan Sponsor discovers that the lump
sum paid to Participant U in December, 2019 was overstated by $10,000, although the benefit was less than the maximum
benefit permitted under § 415(b). Plan H’s last certified AFTAP for the 2020 plan year is equal to 100%; however, the Plan
Sponsor has not yet certified the AFTAP for 2021.
Correction:
The Plan Sponsor notifies Participant U that $10,000 of the lump sum payment is not eligible for favorable tax treatment
because the benefit exceeded the amount that should have been provided under plan terms. The Plan Sponsor uses the
funding exception correction method to correct the Overpayments. Because the presumed AFTAP as required under § 436
as of August, 2021 is equal to 100%, no corrective payment is required to be made to Plan H as a result of the Overpay-
ment.
Example 26:
The facts are the same as in Example 25, except that the certified AFTAP for 2020 was 90%. The Plan Sponsor determines
that the $10,000 Overpayment increased the minimum funding requirement by $1,700 per year, starting with the 2020
plan year when the Overpayment was first reflected in the funding calculations. The error was discovered after the 2021
valuation was completed, so the Overpayment was also reflected in the 2021 minimum required contribution. The Plan
Sponsor contributed an additional $1,000 over the minimum required contribution for the 2020 plan year which was not
added to the prefunding balance.

August 2, 2021 258 Bulletin No. 2021–31
Correction:
The Plan Sponsor corrects the Overpayment under the contribution credit correction method. Under this correction meth-
od, the cumulative contribution credit is $4,400 (that is, $1,700 for plan year 2020, $1,700 for plan year 2021, and the
additional $1,000 contribution for the 2020 plan year). The difference of $5,600 ($10,000 - $4,400) must be repaid by
the Plan Sponsor, Participant U, or another party. Under this correction method, no adjustment for interest is made when
calculating the amount of the Overpayment or the cumulative contribution credit for periods before the date of correction.
Example 27:
The facts are the same as in Example 26 except that Participant U retired December 1, 2019, with a life annuity and the
Plan Sponsor discovered in August, 2021 that the monthly benefits paid to Participant U were overstated by $200 per
month. The Plan Sponsor reduces the life annuity to the correct amount beginning with the benefit paid for September,
2021. The Plan Sponsor reflected the incorrect payment in the calculation of the minimum required contribution for the
2020 and 2021 plan years and determined that the Overpayment resulted in an increase in the minimum required contribu-
tion of $4,900 per year. Participant U received the $200 monthly Overpayment for 21 months, for a cumulative Overpay-
ment of $4,200 (with no adjustment for interest prior to the date of correction).
Correction:
The Plan Sponsor corrects the Overpayment using the contribution credit correction method. The accumulated contribu-
tion credit is $10,800 (resulting from an increase in the minimum required contribution of $4,900 per year for two years,
plus the additional $1,000 contribution for the 2020 plan year, again with no adjustment for interest). Under the contri-
bution credit correction method, since the accumulated contribution credit is larger than the cumulative Overpayment, no
corrective payments are required to be made to Plan H as a result of the Overpayment.
Example 28:
Plan G is a multiemployer plan with a calendar-year plan year. In March, 2021, the enrolled actuary certifies that Plan G
is not in critical, critical and declining, or endangered status in accordance with the rules of § 432. In June, 2021, the Plan
Administrator discovers that for 12 months, Participant T had been receiving a benefit of $1,000 per month (which is under
the limit in § 415(b)) instead of the $900 per month benefit provided under the terms of the plan.
Correction:
The Plan Sponsor reduces Participant T’s benefit to the corrected amount of $900 per month effective July 1, 2021. The
Plan Sponsor uses the funding exception correction method to correct the Overpayments. Under this correction method,
because the most recent certification by Plan G’s actuary states that Plan G is not in critical, critical and declining, or en-
dangered status, no corrective payment is required for Plan G as a result of the Overpayment.
.06 § 401(a)(17) Failures. (1) Reduction of Account Balance Correction Method. The allocation of
contributions or forfeitures under a defined contribution plan for a plan year on the basis of compen-
sation in excess of the limit under § 401(a)(17) for the plan year may be corrected using the reduction
of account balance correction method set forth in section 6.06(2) of this revenue procedure.
(2) Example.
Example 29:
Employer J maintains a money purchase pension plan. Under the plan, an eligible employee is entitled to an employer
contribution of 8% of the employee’s compensation up to the § 401(a)(17) limit ($220,000 for 2006). During the 2006 plan
year, an eligible employee, Employee W, inadvertently was credited with a contribution based on compensation above the
§ 401(a)(17) limit. Employee W’s compensation for 2006 was $250,000. Employee W received a contribution of $20,000
for 2006 (8% of $250,000), rather than the contribution of $17,600 (8% of $220,000) provided by the plan for that year,
resulting in an improper allocation of $2,400.
Correction:
The § 401(a)(17) failure is corrected using the reduction of account balance method by reducing Employee W’s account
balance by $2,400 (adjusted for Earnings) and crediting that amount to an unallocated account, as described in section
6.06(2) of this revenue procedure, to be used to reduce employer contributions in succeeding year(s).
.07 Correction by Amendment. (1) Section 401(a)(17) Failures. (a) Contribution Correction
Method. In addition to the reduction of account balance correction method under section 6.06(2)
of this revenue procedure, a Plan Sponsor may correct a § 401(a)(17) failure for a plan year under

Bulletin No. 2021–31 259 August 2, 2021
a defined contribution plan by using the contribution correction method set forth in this paragraph.
The Plan Sponsor contributes an additional amount on behalf of each of the other employees (ex-
cluding each employee for whom there was a § 401(a)(17) failure) who received an allocation for
the year of the failure, and amends the plan (as necessary) to provide for the additional allocation.
The amount contributed for an employee is equal to the employee’s plan compensation for the
year of the failure multiplied by a fraction, the numerator of which is the improperly allocated
amount made on behalf of the employee with the largest improperly allocated amount, and the de-
nominator of which is the limit under § 401(a)(17) applicable to the year of the failure. The result-
ing additional amount for each of the other employees is adjusted for Earnings. (See Example 30.)
(b) Example.
Example 30:
The facts are the same as in Example 29.
Correction:
Employer J corrects the failure under VCP using the contribution correction method by (1) amending the plan to increase
the contribution percentage for all eligible employees (other than Employee W) for the 2003 plan year and (2) contribut-
ing an additional amount (adjusted for Earnings) for those employees for that plan year. To determine the increase in the
plan’s contribution percentage (and the additional amount contributed on behalf of each eligible employee), the improperly
allocated amount ($2,400) is divided by the § 401(a)(17) limit for 2006 ($220,000). Accordingly, the plan is amended to
increase the contribution percentage by 1.09 percentage points ($2,400/$220,000) from 8% to 9.09%. In addition, each
eligible employee for the 2006 plan year (other than Employee W) receives an additional contribution of 1.09% multiplied
by that employee’s plan compensation for 2006. This additional contribution is adjusted for Earnings.
(2) Hardship Distribution Failures. (a) Plan Amendment Correction Method. The Operational
Failure of making hardship distributions to employees under a plan that does not provide for hard-
ship distributions may be corrected using the plan amendment correction method set forth in this
paragraph. The plan is amended retroactively to provide for the hardship distributions that were
made available. This paragraph does not apply unless (i) the amendment satisfies § 401(a), and
(ii) the plan as amended would have satisfied the qualification requirements of § 401(a) (including
the requirements applicable to hardship distributions under § 401(k), if applicable) had the amend-
ment been adopted when hardship distributions were first made available. (See Example 31.)
(b) Example.
Example 31:
Employer K, a for-profit corporation, maintains a § 401(k) plan. Although plan provisions in 2005 did not provide for
hardship distributions, beginning in 2005 hardship distributions of amounts allowed to be distributed under § 401(k) were
made currently and effectively available to all employees (within the meaning of §1.401(a)(4)-4). The standard used to
determine hardship satisfied the deemed hardship distribution standards in §1.401(k)-1(d). Hardship distributions were
made to a number of employees during the 2005 and 2006 plan years, creating an Operational Failure. The failure was
discovered in 2007.
Correction:
Employer K corrects the failure under VCP by adopting a plan amendment in 2007, effective January 1, 2005, to provide a
hardship distribution option that satisfies the rules applicable to hardship distributions in §1.401(k)-1(d). The amendment
provides that the hardship distribution option is available to all employees. Thus, the amendment satisfies § 401(a), and
the plan as amended in 2007 would have satisfied § 401(a) (including §1.401(a)(4)-4 and the requirements applicable to
hardship distributions under § 401(k)) if the amendment had been adopted in 2005.
(3) Plan Loan Failures. Plan Amendment Correction Method. The Operational Failure of (i) per-
mitting plan loans to employees under a plan that does not provide for plan loans, or (ii) permit-
ting a participant to obtain a number of loans that exceeds the number of loans permitted under
the terms of the plan, may be corrected using the plan amendment correction method set forth in
this paragraph. The plan is amended retroactively to provide for the plan loans that were made
available. This paragraph does not apply unless (i) the amendment satisfies § 401(a), (ii) the plan

August 2, 2021 260 Bulletin No. 2021–31
as amended would have satisfied the qualification requirements of § 401(a) (and the requirements
applicable to plan loans under § 72(p)) had the amendment been adopted when plan loans were
first made available, and (iii) plan loans (including plan loans in excess of the number permitted
under the terms of the plan) were available to either all participants, or solely to one or more par-
ticipants who were nonhighly compensated employees.
(4) Early Inclusion of Otherwise Eligible Employee Failure. (a) Plan Amendment Correction
Method. The Operational Failure of including an otherwise eligible employee in the plan who
either (i) has not completed the plan’s minimum age or service requirements, or (ii) has com-
pleted the plan’s minimum age or service requirements but became a participant in the plan on a
date earlier than the applicable plan entry date, may be corrected by using the plan amendment
correction method set forth in this paragraph. The plan is amended retroactively to change the
eligibility or entry date provisions to provide for the inclusion of the ineligible employee to reflect
the plan’s actual operations. The amendment may change the eligibility or entry date provisions
with respect to only those ineligible employees that were wrongly included, and only to those
ineligible employees, provided (i) the amendment satisfies § 401(a) at the time it is adopted, (ii)
the amendment would have satisfied § 401(a) had the amendment been adopted at the earlier time
when it is effective, and (iii) the employees affected by the amendment are predominantly non-
highly compensated employees. For a defined benefit plan, a contribution may have to be made to
the plan for a correction that is accomplished through a plan amendment if the plan is subject to
the requirements of § 436(c) at the time of the amendment, as described in section 6.02(4)(e)(ii).
(b) Example.
Example 32:
Employer L maintains a § 401(k) plan applicable to all of its employees who have at least six months of service. The plan
is a calendar year plan. The plan provides that Employer L will make matching contributions based upon an employee’s
salary reduction contributions. In 2007, it is discovered that all four employees who were hired by Employer L in 2006
were permitted to make salary reduction contributions to the plan effective with the first weekly paycheck after they were
employed. Three of the four employees are nonhighly compensated. Employer L matched these employees’ salary reduc-
tion contributions in accordance with the plan’s matching contribution formula. Employer L calculates the ADP and ACP
tests for 2006 (taking into account the salary reduction and matching contributions that were made for these employees)
and determines that the tests were satisfied.
Correction:
Employer L corrects the failure under SCP by adopting a plan amendment, effective for employees hired on or after Janu-
ary 1, 2006, to provide that there is no service eligibility requirement under the plan.
SECTION 3. EARNINGS ADJUSTMENT METHODS AND EXAMPLES
.01 Earnings Adjustment Methods. (1) In general. (a) Under section 6.02(4)(a) of this revenue
procedure, whenever the appropriate correction method for an Operational Failure in a defined
contribution plan includes a corrective contribution or allocation that increases one or more em-
ployees’ account balances (now or in the future), the contribution or allocation is adjusted for
Earnings and forfeitures. This section 3 provides Earnings adjustment methods (but not forfeiture
adjustment methods) that may be used by a Plan Sponsor to adjust a corrective contribution or
allocation for Earnings in a defined contribution plan. Consequently, these Earnings adjustment
methods may be used to determine the Earnings adjustments for corrective contributions or al-
locations made under the correction methods in section 2 and under the correction methods in
Appendix A. If an Earnings adjustment method in this section 3 is used to adjust a corrective
contribution or allocation, that adjustment is treated as satisfying the Earnings adjustment re-
quirement of section 6.02(4)(a) of this revenue procedure. Other Earnings adjustment methods,

Bulletin No. 2021–31 261 August 2, 2021
different from those illustrated in this section 3, may also be appropriate for adjusting corrective
contributions or allocations to reflect Earnings.
(b) Under the Earnings adjustment methods of this section 3, a corrective contribution or alloca-
tion that increases an employee’s account balance is adjusted to reflect an “earnings amount” that
is based on the Earnings rate(s) (determined under section 3.01(3)) for the period of the failure
(determined under section 3.01(2)). The Earnings amount is allocated in accordance with section
3.01(4).
(c) The rule in section 6.02(5)(a) of this revenue procedure permitting reasonable estimates in
certain circumstances applies for purposes of this section 3. For this purpose, a determination of
Earnings made in accordance with the rules of administrative convenience set forth in this section
3 is treated as a precise determination of Earnings. Thus, if the probable difference between an
approximate determination of Earnings and a determination of Earnings under this section 3 is
insignificant and the administrative cost of a precise determination would significantly exceed the
probable difference, reasonable estimates may be used in calculating the appropriate Earnings.
(d) This section 3 does not apply to corrective distributions or corrective reductions in account
balances. Thus, for example, while this section 3 applies in increasing the account balance of an
improperly excluded employee to correct the exclusion of the employee under the reallocation
correction method described in section 2.02(2)(a)(iii)(B), this section 3 does not apply in reducing
the account balances of other employees under the reallocation correction method. (See section
2.02(2)(a)(iii)(C) for rules that apply to the Earnings adjustments for such reductions.) In addition,
this section 3 does not apply in determining Earnings adjustments under the one-to-one correction
method described in section 2.01(1)(b)(iii).
(2) Period of the Failure. (a) General Rule. For purposes of this section 3, the “period of the fail-
ure” is the period from the date that the failure began through the date of correction. For example,
in the case of an improper forfeiture of an employee’s account balance, the beginning of the period
of the failure is the date as of which the account balance was improperly reduced. See section
6.02(4)(f) of this revenue procedure.
(b) Rules for Beginning Date for Exclusion of Eligible Employees from Plan. (i) General Rule.
In the case of an exclusion of an eligible employee from a plan contribution, the beginning of the
period of the failure is the date on which contributions of the same type (for example, elective de-
ferrals, matching contributions, or discretionary nonelective employer contributions) were made
for other employees for the year of the failure. In the case of an exclusion of an eligible employee
from an allocation of a forfeiture, the beginning of the period of the failure is the date on which
forfeitures were allocated to other employees for the year of the failure.
(ii) Exclusion from a § 401(k) or (m) Plan. For administrative convenience, for purposes of cal-
culating the Earnings rate for corrective contributions for a plan year (or the portion of the plan
year) during which an employee was improperly excluded from making periodic elective deferrals
or after-tax employee contributions, or from receiving periodic matching contributions, the Plan
Sponsor may treat the date on which the contributions would have been made as the midpoint
of the plan year (or the midpoint of the portion of the plan year) for which the failure occurred.
Alternatively, in this case, the Plan Sponsor may treat the date on which the contributions would
have been made as the first date of the plan year (or the portion of the plan year) during which
an employee was excluded, provided that the Earnings rate used is one half of the Earnings rate
applicable under section 3.01(3) for the plan year (or the portion of the plan year) for which the
failure occurred.
(3) Earnings Rate. (a) General Rule. For purposes of this section 3, the Earnings rate generally is
based on the investment results that would have applied to the corrective contribution or allocation
if the failure had not occurred.

August 2, 2021 262 Bulletin No. 2021–31
(b) Multiple Investment Funds. If a plan permits employees to direct the investment of account
balances into more than one investment fund, the Earnings rate is based on the rate applicable to
the employee’s investment choices for the period of the failure. For administrative convenience, if
most of the employees for whom the corrective contribution or allocation is made are nonhighly
compensated employees, the rate of return of the fund with the highest rate of return under the
plan for the period of the failure may be used to determine the Earnings rate for all corrective
contributions or allocations. If the employee had not made any applicable investment choices, the
Earnings rate may be based on the rate of return under the plan as a whole (that is, the average of
the rates earned by all of the funds in the valuation periods during the period of the failure weight-
ed by the portion of the plan assets invested in the various funds during the period of the failure).
(c) Other Simplifying Assumptions. For administrative convenience, the Earnings rate applicable
to the corrective contribution or allocation for a valuation period with respect to any investment
fund may be assumed to be the actual Earnings rate for the plan’s investments in that fund during
that valuation period. For example, the Earnings rate may be determined without regard to any
special investment provisions that vary according to the size of the fund. Further, the Earnings
rate applicable to the corrective contribution or allocation for a portion of a valuation period may
be a pro rata portion of the Earnings rate for the entire valuation period, unless the application of
this rule would result in either a significant understatement or overstatement of the actual Earnings
during that portion of the valuation period.
(4) Allocation Methods. (a) In General. For purposes of this section 3, the Earnings amount gen-
erally may be allocated in accordance with any of the methods set forth in this paragraph (4). The
methods under paragraph (4)(c), (d), and (e) are intended to be particularly helpful where correc-
tive contributions are made at dates between the plan’s valuation dates.
(b) Plan Allocation Method. Under the plan allocation method, the Earnings amount is allocated
to account balances under the plan in accordance with the plan’s method for allocating Earnings
as if the failure had not occurred. (See Example 33.)
(c) Specific Employee Allocation Method. Under the specific employee allocation method, the
entire Earnings amount is allocated solely to the account balance of the employee on whose be-
half the corrective contribution or allocation is made (regardless of whether the plan’s allocation
method would have allocated the Earnings solely to that employee). In determining the allocation
of plan Earnings for the valuation period during which the corrective contribution or allocation is
made, the corrective contribution or allocation (including the Earnings amount) is treated in the
same manner as any other contribution under the plan on behalf of the employee during that val-
uation period. Alternatively, where the plan’s allocation method does not allocate plan Earnings
for a valuation period to a contribution made during that valuation period, plan Earnings for the
valuation period during which the corrective contribution or allocation is made may be allocated
as if that employee’s account balance had been increased as of the last day of the prior valuation
period by the corrective contribution or allocation, including only that portion of the Earnings
amount attributable to Earnings through the last day of the prior valuation period. The employee’s
account balance is then further increased as of the last day of the valuation period during which the
corrective contribution or allocation is made by that portion of the Earnings amount attributable to
Earnings after the last day of the prior valuation period. (See Example 34.)
(d) Bifurcated Allocation Method. Under the bifurcated allocation method, the entire Earnings amount
for the valuation periods ending before the date the corrective contribution or allocation is made is
allocated solely to the account balance of the employee on whose behalf the corrective contribution
or allocation is made. The Earnings amount for the valuation period during which the corrective con-
tribution or allocation is made is allocated in accordance with the plan’s method for allocating other
Earnings for that valuation period in accordance with section 3.01(4)(b). (See Example 35.)
(e) Current Period Allocation Method. Under the current period allocation method, the portion of the
Earnings amount attributable to the valuation period during which the period of the failure begins
(“first partial valuation period”) is allocated in the same manner as Earnings for the valuation period

Bulletin No. 2021–31 263 August 2, 2021
during which the corrective contribution or allocation is made in accordance with section 3.01(4)
(b). The Earnings for the subsequent full valuation periods ending before the beginning of the val-
uation period during which the corrective contribution or allocation is made are allocated solely to
the employee for whom the required contribution should have been made. The Earnings amount for
the valuation period during which the corrective contribution or allocation is made (“second partial
valuation period”) is allocated in accordance with the plan’s method for allocating other Earnings for
that valuation period in accordance with section 3.01(4)(b). (See Example 36.)
.02 Examples.
Example 33:
Employer L maintains a profit-sharing plan that provides only for nonelective contributions. The plan has a single invest-
ment fund. Under the plan, assets are valued annually (the last day of the plan year) and Earnings for the year are allocated
in proportion to account balances as of the last day of the prior year, after reduction for distributions during the current
year but without regard to contributions received during the current year (the “prior year account balance”). Plan contri-
butions for 1997 were made on March 31, 1998. On April 20, 2000, Employer L determines that an operational failure
occurred for 1997 because Employee X was improperly excluded from the plan. Employer L decides to correct the failure
by using the Appendix A correction method for the exclusion of an eligible employee from nonelective contributions in
a profit-sharing plan. Under this method, Employer L determines that this failure is corrected by making a contribution
on behalf of Employee X of $5,000 (adjusted for Earnings). The Earnings rate under the plan for 1998 was +20%. The
Earnings rate under the plan for 1999 was +10%. On May 15, 2000, when Employer L determines that a contribution to
correct for the failure will be made on June 1, 2000, a reasonable estimate of the Earnings rate under the plan from January
1, 2000 to June 1, 2000 is +12%.
Earnings Adjustment on the Corrective Contribution:
The $5,000 corrective contribution on behalf of Employee X is adjusted to reflect an earnings amount based on the Earn-
ings rates for the period of the failure (March 31, 1998 through June 1, 2000) and the earnings amount is allocated using
the plan allocation method. Employer L determines that a pro rata simplifying assumption may be used to determine the
Earnings rate for the period from March 31, 1998 to December 31, 1998, because that rate does not significantly understate
or overstate the actual investment return for that period. Accordingly, Employer L determines that the Earnings rate for that
period is 15% (9/12 of the plan’s 20% Earnings rate for the year). Thus, applicable Earnings rates under the plan during
the period of the failure are:
Time Periods Earnings Rate
3/31/98 - 12/31/98 (First Partial Valuation Period) +15%
1/1/99 - 12/31/99 +10%
1/1/00 - 6/1/00 (Second Partial Valuation Period) +12%
If the $5,000 corrective contribution had been contributed for Employee X on March 31, 1998, (1) Earnings for 1998
would have been increased by the amount of the Earnings on the additional $5,000 contribution from March 31, 1998
through December 31, 1998 and would have been allocated as 1998 Earnings in proportion to the prior year (December
31, 1997) account balances, (2) Employee X’s account balance as of December 31, 1998 would have been increased by the
additional $5,000 contribution, (3) Earnings for 1999 would have been increased by the 1999 Earnings on the additional
$5,000 contribution (including 1998 Earnings thereon) allocated in proportion to the prior year (December 31, 1998) ac-
count balances along with other 1999 Earnings, and (4) Earnings for 2000 would have been increased by the Earnings on
the additional $5,000 (including 1998 and 1999 Earnings thereon) from January 1 to June 1, 2000 and would be allocated
in proportion to the prior year (December 31, 1999) account balances along with other 2000 Earnings. Accordingly, the
$5,000 corrective contribution is adjusted to reflect an Earnings amount of $2,084 ($5,000[(1.15)(1.10)(1.12)-1]) and the
earnings amount is allocated to the account balances under the plan allocation method as follows:
(a) Each account balance that shared in the allocation of Earnings for 1998 is increased, as of December 31, 1998, by its
appropriate share of the Earnings amount for 1998, $750 ($5,000(.15)).
(b) Employee X’s account balance is increased, as of December 31, 1998, by $5,000.
(c) The resulting December 31, 1998 account balances will share in the 1999 Earnings, including the $575 for 1999
Earnings included in the corrective contribution ($5,750(.10)), to determine the account balances as of December 31,
1999. However, each account balance other than Employee X’s account balance has already shared in the 1999 Earnings,
excluding the $575. Accordingly, Employee X’s account balance as of December 31, 1999 will include $500 of the 1999
portion of the earnings amount based on the $5,000 corrective contribution allocated to Employee X’s account balance as
of December 31, 1998 ($5,000(.10)). Then each account balance that originally shared in the allocation of Earnings for
1999 (that is, excluding the $5,500 additions to Employee X’s account balance) is increased by its appropriate share of the
remaining 1999 portion of the earnings amount, $75.

August 2, 2021 264 Bulletin No. 2021–31
(d) The resulting December 31, 1999 account balances (including the $5,500 additions to Employee X’s account balance)
will share in the 2000 portion of the earnings amount based on the estimated January 1, 2000 to June 1, 2000 Earnings
included in the corrective contribution equal to $759 ($6,325(.12)). (See Table 1.)
TABLE 1
CALCULATION AND ALLOCATION OF THE
CORRECTIVE AMOUNT ADJUSTED FOR EARNINGS
Earnings RateAmountAllocated to
Corrective Contribution$5,000Employee X
First Partial Valuation Period Earnings15%$750
1
All 12/31/1997 Account Balances
4
1999 Earnings10%$575
2
Employee X ($500)/ All 12/31/1998 Account
Balances ($75)
4
Second Partial Valuation Period Earnings12%$759
3
All 12/31/1999 Account Balances (including
Employee X’s $5,500)
4
Total Amount Contributed$7,084
1
$5,000 x 15%
2
$5,750($5,000 +$750) x 10%
3
$6,325($5,000 +$750 + $575) x 12%
4
After reduction for distributions during the year for which Earnings are being determined but without regard to contribu-
tions received during the year for which Earnings are being determined.
Example 34:
The facts are the same as in Example 33.
Earnings Adjustment on the Corrective Contribution:
The earnings amount on the corrective contribution is the same as in Example 33, but the earnings amount is allocated
using the specific employee allocation method. Thus, the entire earnings amount for all periods through June 1, 2000 (that
is, $750 for March 31, 1998 to December 31, 1998, $575 for 1999, and $759 for January 1, 2000 to June 1, 2000) is allo-
cated to Employee X. Accordingly, Employer L makes a contribution on June 1, 2000 to the plan of $7,084 ($5,000(1.15)
(1.10)(1.12)). Employee X’s account balance as of December 31, 2000 is increased by $7,084. Alternatively, Employee
X’s account balance as of December 31, 1999 is increased by $6,325 ($5,000(1.15)(1.10)), which shares in the allocation
of Earnings for 2000, and Employee X’s account balance as of December 31, 2000 is increased by the remaining $759.
(See Table 2.)
TABLE 2
CALCULATION AND ALLOCATION OF THE
CORRECTIVE AMOUNT ADJUSTED FOR EARNINGS
Earnings RateAmountAllocated to:
Corrective Contribution$5,000Employee X
First Partial Valuation Period Earnings15%$750
1
Employee X
1999 Earnings10%$575
2
Employee X
Second Partial Valuation Period Earnings12%$759
3
Employee X
Total Amount Contributed$7,084
1
$5,000 x 15%
2
$5,750($5,000 +$750) x 10%
3
$6,325($5,000 +$750 + $575) x 12%

Bulletin No. 2021–31 265 August 2, 2021
Example 35:
The facts are the same as in Example 33.
Earnings Adjustment on the Corrective Contribution:
The earnings amount on the corrective contribution is the same as in Example 33, but the earnings amount is allocated
using the bifurcated allocation method. Thus, the Earnings for the first partial valuation period (March 31, 1998 to Decem-
ber 31, 1998) and the Earnings for 1999 are allocated to Employee X. Accordingly, Employer L makes a contribution on
June 1, 2000 to the plan of $7,084 ($5,000(1.15)(1.10)(1.12)). Employee X’s account balance as of December 31, 1999
is increased by $6,325 ($5,000(1.15)(1.10)); and the December 31, 1999 account balances of employees (including Em-
ployee X’s increased account balance) will share in estimated January 1, 2000 to June 1, 2000 Earnings on the corrective
contribution equal to $759 ($6,325(.12)). (See, Table 3.)
TABLE 3
CALCULATION AND ALLOCATION OF THE
CORRECTIVE AMOUNT ADJUSTED FOR EARNINGS
Earnings RateAmountAllocated to:
Corrective Contribution$5,000Employee X
First Partial Valuation Period Earnings15%$750
1
Employee X
1999 Earnings10%$575
2
Employee X
Second Partial Valuation Period Earnings12%$759
3
12/31/99 Account Balances
(including Employee X’s $6,325)
4
Total Amount Contributed$7,084
1
$5,000 x 15%
2
$5,750($5,000 + $750) x 10%
3
$6,325($5,000 +$750 +$575) x 12%
4
After reduction for distributions during the 2000 year but without regard to contributions received during the 2000 year.
Example 36:
The facts are the same as in Example 33.
Earnings Adjustment on the Corrective Contribution:
The earnings amount on the corrective contribution is the same as in Example 33, but the earnings amount is allocated
using the current period allocation method. Thus, the Earnings for the first partial valuation period (March 31, 1998 to
December 31, 1998) are allocated as 2000 Earnings. Accordingly, Employer L makes a contribution on June 1, 2000 to the
plan of $7,084 ($5,000 (1.15)(1.10)(1.12)). Employee X’s account balance as of December 31, 1999 is increased by the
sum of $5,500 ($5,000(1.10)) and the remaining 1999 Earnings on the corrective contribution equal to $75 ($5,000(.15)
(.10)). Further, both (1) the estimated March 31, 1998 to December 31, 1998 Earnings on the corrective contribution equal
to $750 ($5,000(.15)) and (2) the estimated January 1, 2000 to June 1, 2000 Earnings on the corrective contribution equal
to $759 ($6,325(.12)) are treated in the same manner as 2000 Earnings by allocating these amounts to the December 31,
2000 account balances of employees in proportion to account balances as of December 31, 1999 (including Employee X’s
increased account balance). (See, Table 4.) Thus, Employee X is allocated the Earnings for the full valuation period during
the period of the failure.

August 2, 2021 266 Bulletin No. 2021–31
TABLE 4
CALCULATION AND ALLOCATION OF THE
CORRECTIVE AMOUNT ADJUSTED FOR EARNINGS
Earnings RateAmountAllocated to:
Corrective Contribution$5,000Employee X
First Partial Valuation Period Earnings15%$750
1
12/31/99 Account Balances (including
Employee X’s $5,575)
4
1999 Earnings10%$575
2
Employee X
Second Partial Valuation Period Earnings12%$759
3
12/31/99 Account Balances (including
Employee X’s $5,575)
4
Total Amount Contributed$7,084
1
$5,000 x 15%
2
$5,750 ($5,000 +$750) x 10%
3
$6,325 ($5,000 +$750 +$575) x 12%
4
After reduction for distributions during the year for which Earnings are being determined but without regard to contribu-
tions received during the year for which Earnings are being determined.

Bulletin No. 2021–31 267 August 2, 2021
Part IV
Announcement of
Disciplinary Sanctions
From the Office of
Professional Responsibility
Announcement 2021-12
The Office of Professional Respon-
sibility (OPR) announces recent disci-
plinary sanctions involving attorneys, cer-
tified public accountants, enrolled agents,
enrolled actuaries, enrolled retirement
plan agents, appraisers, and unenrolled/
unlicensed return preparers (individuals
who are not enrolled to practice and are
not licensed as attorneys or certified pub-
lic accountants). Licensed or enrolled
practitioners are subject to the regulations
governing practice before the Internal
Revenue Service (IRS), which are set out
in Title 31, Code of Federal Regulations,
Subtitle A, Part 10, and which are released
as Treasury Department Circular No.
230. The regulations prescribe the duties
and restrictions relating to such practice
and prescribe the disciplinary sanctions
for violating the regulations. Unenrolled/
unlicensed return preparers are subject to
Revenue Procedure 81-38 and supersed-
ing guidance in Revenue Procedure 2014-
42, which govern a preparer’s eligibility
to represent taxpayers before the IRS in
examinations of tax returns the preparer
both prepared for the taxpayer and signed
as the preparer. Additionally, unenrolled/
unlicensed return preparers who volun-
tarily participate in the Annual Filing Sea-
son Program under Revenue Procedure
2014-42 agree to be subject to the duties
and restrictions in Circular 230, including
the restrictions on incompetent or disrep-
utable conduct.
The disciplinary sanctions to be im-
posed for violation of the applicable stan-
dards are:
Disbarred from practice before the
IRS—An individual who is disbarred
is not eligible to practice before the IRS
as defined at 31 C.F.R. § 10.2(a)(4) for a
minimum period of five (5) years.
Suspended from practice before the
IRS—An individual who is suspended is
not eligible to practice before the IRS as
defined at 31 C.F.R. § 10.2(a)(4) during
the term of the suspension.
Censured in practice before the
IRS—Censure is a public reprimand. Un-
like disbarment or suspension, censure
does not affect an individual’s eligibility
to practice before the IRS, but OPR may
subject the individual’s future practice
rights to conditions designed to promote
high standards of conduct.
Monetary penalty—A monetary pen-
alty may be imposed on an individual who
engages in conduct subject to sanction,
or on an employer, firm, or entity if the
individual was acting on its behalf and it
knew, or reasonably should have known,
of the individual’s conduct.
Disqualification of appraiser—An
appraiser who is disqualified is barred
from presenting evidence or testimony in
any administrative proceeding before the
Department of the Treasury or the IRS.
Ineligible for limited practice—An
unenrolled/unlicensed return preparer
who fails to comply with the requirements
in Revenue Procedure 81-38 or to comply
with Circular 230 as required by Revenue
Procedure 2014-42 may be determined in-
eligible to engage in limited practice as a
representative of any taxpayer.
Under the regulations, individuals sub-
ject to Circular 230 may not assist, or ac-
cept assistance from, individuals who are
suspended or disbarred with respect to
matters constituting practice (i.e., repre-
sentation) before the IRS, and they may
not aid or abet suspended or disbarred in-
dividuals to practice before the IRS.
Disciplinary sanctions are described in
these terms:
Disbarred by decision, Suspended by
decision, Censured by decision, Mone-
tary penalty imposed by decision, and
Disqualified after hearing—An adminis-
trative law judge (ALJ) issued a decision
imposing one of these sanctions after the
ALJ either (1) granted the government’s
summary judgment motion or (2) con-
ducted an evidentiary hearing upon OPR’s
complaint alleging violation of the regu-
lations. After 30 days from the issuance
of the decision, in the absence of an ap-
peal, the ALJ’s decision becomes the final
agency decision.
Disbarred by default decision, Sus-
pended by default decision, Censured
by default decision, Monetary penalty
imposed by default decision, and Dis-
qualified by default decision—An ALJ,
after finding that no answer to OPR’s
complaint was filed, granted OPR’s mo-
tion for a default judgment and issued a
decision imposing one of these sanctions.
Disbarment by decision on appeal,
Suspended by decision on appeal, Cen-
sured by decision on appeal, Monetary
penalty imposed by decision on appeal,
and Disqualified by decision on ap-
peal—The decision of the ALJ was ap-
pealed to the agency appeal authority, act-
ing as the delegate of the Secretary of the
Treasury, and the appeal authority issued a
decision imposing one of these sanctions.
Disbarred by consent, Suspended by
consent, Censured by consent, Mone-
tary penalty imposed by consent, and
Disqualified by consent—In lieu of a
disciplinary proceeding being instituted or
continued, an individual offered a consent
to one of these sanctions and OPR accept-
ed the offer. Typically, an offer of consent
will provide for: suspension for an indef-
inite term; conditions that the individual
must observe during the suspension; and
the individual’s opportunity, after a stat-
ed number of months, to file with OPR a
petition for reinstatement affirming com-
pliance with the terms of the consent and
affirming current fitness and eligibility
to practice (i.e., an active professional li-
cense or active enrollment status, with no
intervening violations of the regulations).
Suspended indefinitely by decision in
expedited proceeding, Suspended indef-
initely by default decision in expedited
proceeding, Suspended by consent in
expedited proceeding—OPR instituted
an expedited proceeding for suspension
(based on certain limited grounds, in-
cluding loss of a professional license for
cause, and criminal convictions).
Determined ineligible for limited
practice—There has been a final deter-
mination that an unenrolled/unlicensed
return preparer is not eligible for limited
representation of any taxpayer because the

August 2, 2021 268 Bulletin No. 2021–31
preparer violated standards of conduct or
failed to comply with any of the require-
ments to act as a representative.
A practitioner who has been disbarred
or suspended under 31 C.F.R. § 10.60, or
suspended under § 10.82, or a disqualified
appraiser may petition for reinstatement
before the IRS after the expiration of 5
years following such disbarment, suspen-
sion, or disqualification (or immediately
following the expiration of the suspension
or disqualification period if shorter than 5
years). Reinstatement will not be granted
unless the IRS is satisfied that the peti-
tioner is not likely to engage thereafter in
conduct contrary to Circular 230, and that
granting such reinstatement would not be
contrary to the public interest.
Reinstatement decisions are published
at the individual’s request, and described
in these terms:
Reinstated to practice before the
IRS—The individual’s petition for re-
instatement has been granted. The
agent, and eligible to practice before the
IRS, or in the case of an appraiser, the in-
dividual is no longer disqualified.
Reinstated to engage in limited
practice before the IRS—The individ-
ual’s petition for reinstatement has been
granted. The individual is an unenrolled/
unlicensed return preparer and eligible to
engage in limited practice before the IRS,
subject to requirements the IRS has pre-
scribed for limited practice by tax return
preparers.
OPR has authority to disclose the
grounds for disciplinary sanctions in these
situations: (1) an ALJ or the Secretary’s
delegate on appeal has issued a final de-
cision; (2) the individual has settled a dis-
ciplinary case by signing OPR’s “consent
to sanction” agreement admitting to one
or more violations of the regulations and
consenting to the disclosure of the admit-
ted violations (for example, failure to file
Federal income tax returns, lack of due
diligence, conflict of interest, etc.); (3)
OPR has issued a decision in an expedited
proceeding for indefinite suspension; or
(4) OPR has made a final determination
(including any decision on appeal) that an
unenrolled/unlicensed return preparer is
ineligible to represent any taxpayer before
the IRS.
Announcements of disciplinary sanc-
tions appear in the Internal Revenue Bul-
letin at the earliest practicable date. The
sanctions announced below are alphabet-
ized first by state and second by the last
names of the sanctioned individuals.
City & State
NameProfessional
Designation
Disciplinary SanctionEffective Date(s)
Oregon
MedfordAnkerberg, Curtis E.C PASuspended by Default DecisionIndefinite from
May 17, 2021
Texas
BurlesonHelge, Terry L.AttorneySuspended by default decision in
expedited proceeding under
31 C.F.R. § 10.82(b)
Indefinite from
April 23, 2021
Fort WorthWilshire, Jr., Raymond B.Enrolled AgentReinstated to practice
before the IRS, effective
June 25, 2021
West Virginia
Alum CreekMcCallister-Kuhn, Joetta C.C PAConsent suspension for
violations of sections 10.51(a)(2)
and 10.51(a)(3)
Indefinite from
June 11, 2021

Bulletin No. 2021–31 i August 2, 2021
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior rul-
ing is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previous-
ly published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cas-
es in litigation, or the outcome of a Ser-
vice study.
Abbreviations
The following abbreviations in current use
and formerly used will appear in material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

August 2, 2021 ii Bulletin No. 2021–31
Numerical Finding List
1
Bulletin 2021–31
Announcements:
2021-12, 2021-31 I.R.B. 267
Notices:
2021-39, 2021-27 I.R.B. 3
2021-40, 2021-28 I.R.B. 15
2021-41, 2021-29 I.R.B. 17
2021-42, 2021-29 I.R.B. 19
2021-38, 2021-30 I.R.B. 155
2021-44, 2021-31 I.R.B. 166
2021-45, 2021-31 I.R.B. 170
Proposed Regulations:
REG-107705-21, 2021-30 I.R.B. 162
Revenue Procedures:
2021-28, 2021-27 I.R.B. 5
2021-29, 2021-27 I.R.B. 12
2021-24, 2021-29 I.R.B. 19
2021-14, 2021-30 I.R.B. 158
2021-30, 2021-31 I.R.B. 172
Revenue Rulings:
2021-12, 2021-27 I.R.B. 1
2021-13, 2021-30 I.R.B. 152
2021-14, 2021-31 I.R.B. 164
Treasury Decisions:
9951, 2021-30 I.R.B. 25
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2021–27 through 2021–52 is in Internal Revenue Bulletin
2021–52, dated December 27, 2021.

Bulletin No. 2021–31 iii August 2, 2021
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2021–31
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2021–27 through 2021–52 is in Internal Revenue Bulletin
2021–52, dated December 27, 2021.

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