IRS Makes Major Change in Retirement Plan VCP Fees and Other Fees

The IRS has issued Internal Revenue Bulletin (IRB) 2018-1, which is this year’s annual update describing procedures and user fees for obtaining agency guidance, including opinion and determination letters, private letter rulings, etc. It also updates fees for submissions under IRS correction programs.

One significant change for 2018 involves submissions for retirement plan failure corrections under the IRS Voluntary Correction Program (VCP), which is a subset of its Employee Plans Compliance Resolution System (EPCRS) program. While some user fees have gone down, others submissions could see dramatically higher fees.

Eliminated under this guidance are streamlined correction submission fees for certain common retirement plan failures, such as certain loan failures and failing to timely distribute required minimum distributions. Fees for these submissions will now fall under the general plan asset-based fee schedule, as follows.

  • $1,500 for plan assets of $500,000 or less
  • $3,000 for plan assets of over $500,000 to $10,000,000
  • $3,500 for plan assets of over $10,000,000

One significant change, for example, is that certain loan failure corrections could be submitted with a streamlined submission fee as low as $300. Now this falls under the much higher asset-based fee schedule.

The changes provided by IRB 2018-1 are effective immediately—January 2, 2018. This effective timeline is a notable departure from past IRS practice. In the past, the IRS generally granted at least a modest lead-time before taking effect.