Background. The IRS allows plan sponsors to correct a wide range of operational and documentary errors with their qualified retirement plans through the Voluntary Correction Program (VCP). As long as the plan is not under IRS audit, the plan sponsor can voluntarily correct errors under VCP by filing the appropriate forms with the IRS and paying the necessary filing fee.
New Fee Schedule. Beginning in 2018, the IRS has significantly reduced the VCP filing fee for most plans. Previously, the VCP fee was based on the number of plan participants and was as high as $15,000 for plans with 10,000 or more participants. The new VCP fees are based on the assets of the plan instead of its participants and are capped at $3,500.
Following is the specific VCP fee schedule:
Plan Assets VCP Fee
$500,000 or less $1,500
$500,001 to $10,000,000 $3,000
$10,000,001 or more $3,500
Note that certain types of errors were previously eligible for reduced VCP fees. For example, a VCP covering only a small number of loan failures for non-key employees was eligible for a reduced fee of as little as $300. Most of these special fees have now been eliminated so that the fee schedule above will apply to most VCPs.
Next Steps. With the lower VCP fees, now is the perfect time for plan sponsors to audit the operation of their qualified retirement plans and take corrective actions. Plan errors that are not voluntarily corrected can be subject to significantly increased penalties if the IRS identifies the error during an audit.
Contact Information. For more information from Mazursky Constantine, please contact Don Mazursky (404.888.8840), David Putnal (404.888.8836), Toby Walls (404.888.8870), Teri King (404.888.8847) or Angela Roberts (404.888.8822).