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IRS Reduces Voluntary Correction Program Compliance Fees

February 11, 2016

The IRS has announced new fees for Voluntary Correction Program (VCP) submissions under the Employee Plans Compliance Resolution System (EPCRS) effective February 1, 2016.

To encourage employers who sponsor 401(a) qualified retirement plans and 403(b) plans to correct plan failures through VCP, the IRS reduced the general VCP fees for most new submissions made on or after February 1, 2016. Plan corrections can generally be made for documentary, operational or demographic failures or mistakes. In order to take advantage of the favorable treatment afforded to employers who identify and correct all such problems, corrections and any filings (if applicable) must be made before being notified of an audit.

New General VCP fees based on number of participants

Participants Fee as of February 1, 2016
20 or fewer $500
21-50 $750
51-100 $1,500
101-1000 $5,000
1,001-10,000 $10,000
Over 10,000 $15,000

The IRS is revising the required submission document (Form 8951, the Compliance Fee for Application). Until the new version is published, plan sponsors should:

  • Continue to use the current form
  • Ignore the general fee amounts on line 7
  • Attach a check for the fee amount

The IRS will not apply reduced fees or issue refunds for VCP submissions made prior to February 1, 2016 even if the submissions were withdrawn and then resubmitted under the reduced fee schedule.

We are available to help you review your plan documents and plan operation to ensure your compliance. Establishing internal controls and best practices are an effective means to minimize your risk of disqualifying your retirement plans and being subject to severe adverse tax consequences.

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