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Voluntary Correction Program (VCP)

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Revised VCP Fees – Simple Isn’t Always Better

January 18, 2018

Authors

benefitsbclp

Revised VCP Fees – Simple Isn’t Always Better

January 18, 2018

by: benefitsbclp

The Internal Revenue Service (“IRS”) has described its recent changes to its Voluntary Correction Program (“VCP”) user fees as “simplification.”  This simplification is achieved by significantly changing the way user fees are determined and by eliminating alternative and reduced fees that were previously available.   At first blush, this simplification appears to result in a general reduction in user fees, however, in certain circumstances, the changes will actually result in significantly higher fees.   If you are the person responsible for issuing or requesting checks for your plan’s VCP application(s), it is important to note the differences from the past fee structure so that you will know what your plan is in for (good or bad) the next time a VCP application is necessary.

In case you are not familiar with the VCP, the IRS created the program under its Employee Plans Compliance Resolution System, to allow tax-favored retirement plans not

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Changes to User Fees for Voluntary Correction Program (VCP) Submissions

January 8, 2016

Authors

Katharine Finley and benefitsbclp

Changes to User Fees for Voluntary Correction Program (VCP) Submissions

January 8, 2016

by: Katharine Finley and benefitsbclp

On January 4, 2016, the Internal Revenue Service published its annual update of user fees Rev. Proc. 2016-8 for various letter ruling and determination letter requests. The 2016 update now includes user fees and guidance for Voluntary Correction Program (VCP) submissions under the Employee Plans Compliance Resolution System. In many cases the user fee for VCP submissions is reduced under Revenue Procedure 2016-8. The revised fee schedule for employee plan user fees (including VCP submissions) is effective February 1, 2016.

Below are the current user fees for regular VCP submissions for qualified plans and 403(b) plans as set forth in Section 12.02 of Revenue Procedure 2013-12.*

Participants Revenue Procedure 2013-12 Fee 20 or fewer participants $750 21 to 50 participants $1,000 51 to 100 participants $2,500 101 to 500 participants $5,000 501 to 1,000 participants $8,000 1,001 to 5,000 participants $15,000 5,001 to 10,000 participants $20,000

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Correcting 401(k) Plan Loans Under EPCRS

July 2, 2013

Authors

Denise Erwin and Chris Rylands

Correcting 401(k) Plan Loans Under EPCRS

July 2, 2013

by: Denise Erwin and Chris Rylands

Participant loans from 401(k) plans must satisfy certain rules under section 72(p) of the Internal Revenue Code (the “Code”) to prevent the loan from being treated as a taxable distribution (sometimes called a “deemed distribution”).  The amount of the loan generally cannot exceed 50% of the participant’s vested account balance up to a maximum of $50,000 (with reductions for certain previous outstanding loans), the participant must be required to make level amortized payments at least quarterly, and the loan term may not exceed five years from the date the loan is funded unless the participant uses the loan to purchase his or her primary residence (in which case a longer period from the date of funding is allowed).

It is not uncommon for plan sponsors to discover that one or more of these rules have not been followed in administering the plan.  Failures to follow the terms of

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IRS Updates Retirement Plan Correction Program

January 14, 2013

Authors

benefitsbclp

IRS Updates Retirement Plan Correction Program

January 14, 2013

by: benefitsbclp

After a long wait, an updated Revenue Procedure for the Employee Plans Compliance Resolution System (EPCRS) was released in the form of Rev. Proc. 2013-12.  The new Revenue Procedure makes some important changes to the EPCRS.

As many plan sponsors know, the EPCRS includes the self-correction program (SCP), which requires prescribed corrections but does not require submission to the IRS; the voluntary correction program (VCP), which requires both prescribed corrections and submission to and approval by the IRS; and correction of problems discovered on audit (Audit CAP).

The purpose of the updated Revenue Procedure is to improve some features of the EPCRS and clarify others, based in large part on comments from the employee benefits community.  The IRS expects to make more changes of this type in the future, also based on comments from the employee benefits community.  Generally speaking, the IRS was responsive to many of the

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Limitation of Letter Forwarding Program May Affect VCP Submissions and Plan Terminations

September 14, 2012

Authors

Hal Morgan and Denise Erwin

Limitation of Letter Forwarding Program May Affect VCP Submissions and Plan Terminations

September 14, 2012

by: Hal Morgan and Denise Erwin

In Revenue Procedure 2012-35, the Internal Revenue Service limited the use of its letter forwarding program to “humane purposes,” such as emergency situations, and specifically indicated that it will not be available to locate missing participants who may be entitled to a retirement benefit.  The new limitation applies to letter forwarding requests postmarked on and after August 31, 2012.

One of the practical implications of that was discussed by IRS officials in a recent phone forum.  The correction of certain operational failures under the Voluntary Correction Program (“VCP”) may affect former participants by, for example, requiring corrective allocations or distributions.  In those cases, the VCP submission must indicate the method that will be used to locate and notify those individuals of the failure and the correction.  Many submissions designate the IRS letter forwarding program as one or more methods that will be used for that purpose.  As a result,

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If It Isn’t Written Down, It Didn’t Happen

November 8, 2011

Authors

benefitsbclp

If It Isn’t Written Down, It Didn’t Happen

November 8, 2011

by: benefitsbclp

 

We’ve all heard the old adage, advising us to record our thoughts and actions, lest they become lost to obscurity. In EP Quality Assurance Bulletin 2012-1, released November 2, the IRS reminds us of the importance of documentation with regard to the qualified plans in our lives. The Bulletin, entitled “Verification of Prior Plan Documents in the Absence of a Determination Letter,” provides IRS determination letter specialists with updated guidance on verification that retirement plans have been timely amended for prior legislation.

If you are filing your plan during the second remedial amendment cycle and you already have a d-letter covering the first cycle, you need to include all good-faith and interim amendments adopted after your first cycle submission.  In addition, you should include any discretionary amendments adopted since the issue date of the d-letter. However, if you are filing for a plan that does not

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