Retirement Plan VCP Corrections to Be Submitted Electronically Now
by Robert Shipp, QKA
Employers whose retirement plans have compliance issues in need of correction through the IRS’ Voluntary Correction Program (VCP) will now have a few new and different hoops to jump through to get the IRS’ stamp of approval. In an effort to modernize and streamline procedures, the IRS has modified its VCP procedures under the Employee Plans Compliance Resolution System (EPCRS) with the release of Revenue Procedure 2018-52, which states that the IRS will transition to electronic filing of VCP submissions and fee payments.
Submitting and Paying Online
Corrections through the new pay.gov procedure may be applied for beginning January 1, 2019.
Transition period: January 1, 2019, through March 31, 2019; the IRS will accept either electronic submissions through pay.gov or traditional paper submissions. Paper submissions that are postmarked on or after April 1, 2019, will not be accepted.
Starting April 1, 2019: All VCP submissions made on or after this date must be made through the pay.gov website.
These payment rules also apply to plans assessed sanctions through the IRS’ Audit Closing Agreement Program (Audit CAP). Plans that correct failures using the Self-Correction Program (SCP) are not required to submit to the IRS or pay a fee.
A 15MB file size restriction is imposed on pay.gov submissions. Submissions typically fall in the 5MB to 10MB range, but information for a submission that is above the 15MB threshold must be faxed to the IRS. Thus, a submission that is above the size restriction may need to be broken into two parts—one 15MB file sent to pay.gov and the rest of the information above 15MB faxed to the IRS.
Other EPCRS Changes
Although the major change lies in how VCP corrections are submitted, Revenue Procedure 2018-52 contains several other noteworthy updates to the EPCRS.
The reference to the IRS letter forwarding program as an option for locating participants and beneficiaries is removed (the service was technically discontinued years ago).
If the IRS deems a VCP submission deficient or determines that issuing a compliance statement approving the sponsor-proposed correction is inappropriate, it can refuse to issue a compliance statement and may close the correction case in an unresolved state, possibly without issuing a refund for the VCP fee. The previous IRS approach was to work with plans that made incomplete submissions to gather the required information in an effort to approve the submission or negotiate a more acceptable correction.
A new Penalty of Perjury statement that includes a plan sponsor signature must be included with submissions. This information previously was included on Form 8950, Application for Voluntary Correction Program (VCP) under the Employee Plans Compliance Resolution System (EPCRS).
Form 5265, which is an acknowledgement letter for Form 8950 submissions, will no longer be filed with the submission.
Corrective amendments detailed in the revenue procedure now also apply to pre-approved 403(b) plans
Outstanding Questions Remain
Several outstanding questions remain as 2019 approaches. Details at pay.gov are scarce at this time. For example, the revenue procedure does not state what plans should do if the submission is rejected—whether a second submission and fee would be required.
It is clear, however, that effective April 1, 2019, the VCP will become almost exclusively digital. The pay.gov website is currently active, as it is used for other payment purposes, but as of this writing, the retirement plan correction information was not yet available.
Watch ascensus.com News as additional guidance becomes available.
