The IRS maintains a voluntary correction program for retirement plan sponsors, called the Employee Plans Compliance Resolution Program, or EPCRS. Plan errors that have occurred within 2 years generally may be eligible for self-correction, whereas older plan errors that are “significant” must be corrected with IRS approval through the Voluntary Compliance Program, or VCP. EPCRS is a very popular way for plan sponsors to resolve plan problems on their own schedule, and without suffering the monetary penalties that likely would apply in the event of a plan audit.
On September 28, 2018, the IRS announced that, effective April 1, 2019, VCP submissions, including payment of “user fees,” must be made electronically through the www.pay.gov website, per the instructions set forth in Revenue Procedure 2018-52. Plan sponsors, or their authorized representatives, may voluntarily use the electronic submission method starting January 1, 2019, but it will be mandatory starting April 1, 2019 and the IRS will reject hard copy VCP submissions postmarked on or after that date.
Revenue Procedure 2018-52 makes extensive revisions to Sections 2, 10 and 11 of Revenue Procedure 2016-51 (and otherwise generally supersedes it) to describe the new electronic user fee payment and VCP submission methods. Under the new methods, a plan sponsor must either itself submit the VCP application electronically, or authorize a representative to do so via Form 2848, Power of Attorney. Only third parties designated via Form 2848, such as attorneys, CPAs, or enrolled agents, can sign and file the VCP application on the plan sponsor’s behalf. (A plan sponsor may use Form 8821 to designate other representatives (such as unenrolled return preparers) to inspect or receive confidential information from IRS about the submission.)
Under the new procedures, the VCP submission process will be as follows (note that links to IRS forms are not provided as they may be changing as a result of the new Revenue Procedure):
- Create an account at www.pay.gov, if one does not already exist. If using an authorized representative (AR), confirm that the AR has a www.pay.gov account.
- Using www.pay.gov, complete Form 8950, Application for Voluntary Correction Program (VCP). If using an AR, the AR will complete the form.
- Assemble, into a single PDF file not exceeding 15 MB, the following:
- Plan Sponsor’s signed Penalty of Perjury Statement. (This used to be part of IRS Form 8950 but now will be a separate statement.
- Form 2848, Power of Attorney, or Form 8821, Tax Information Authorization. If using an AR, you must check line 5a for “Other acts authorized” on Form 2848 and include as a description “signing and filing of the Form 8950 and accompanying documents as part of a VCP submission.”
- Form 14568, Model VCP Compliance Statement, and any/all applicable Schedules to same (Forms 14568-A through 14568-I), and required enclosures. Alternatively, a cover letter and separate written narrative could be used.
- Sample earnings calculations and earnings computations.
- Relevant plan document language or full plan document when applicable (e.g., non-amender failures).
- Copy of opinion, advisory, or determination letter, if applicable, pertaining to the plan document.
- Any other required information, such as statement required for 403(b) plans re: cooperation of all investment providers.
4. Upload the PDF file at www.pay.gov. If information supporting the submission exceeds the size limit, follow special fax instructions set forth in Section 11.03(7) of the Revenue Procedure.
5. Use www.pay.gov to pay the user fee, as set forth in Appendix A of Revenue Procedure 2018-4 (and successor Revenue Procedures issued at the beginning of each year). The user fees are now based on plan assets rather than the number of plan participants.
6. Keep the “Payment Confirmation – Application for Voluntary Correction Program” that is generated on successful filing through pay.gov; the Tracking ID on this receipt serves as the IRS control number for your submission and is official acknowledgement of the submission; if no confirmation is generated call (877) 829-5500 for assistance.
If you discover additional operational errors after submitting your VCP materials, but before the submission has been assigned to an IRS representative, you are directed to call the VCP Status Inquiry Line at (626) 927-2011 (not toll-free) for further information. Although it is currently customary for the IRS to contact the filer once a submission is assigned to an IRS representative, this may not be the case in the future; in the Revenue Procedure the IRS reserves the right to process submissions and issue compliance statements without any prior contact with the filer. If the IRS gets the jump on you in this manner, you will likely have to pay a new user fee and address the later-discovered errors under a new VCP submission.
Even before the recent increase in VCP user fees, EPCRS was a consistently strong revenue source for the IRS and the new digital streamlining of the program will likely increase its use by plan sponsors over time.