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. The IRS has modified its VCP procedures under the Employee Plans Compliance Resolution System (EPCRS) with the release of Revenue Procedure 2018-52. It requires that submissions and VCP fee payments be made electronically on the pay.gov website starting April 1, 2019.
Submitting and Paying Online
Corrections through the new pay.gov procedure may be applied for beginning January 1, 2019.
- Transition period: From 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 1st: All VCP submissions made on or after this date must be made through pay.gov.
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 also contains several other noteworthy updates to the IRS’ EPCRS.
- The reference to the IRS Letter Forwarding Program as an option for locating participants and beneficiaries is removed. (Though, that service under the program was technically discontinued years ago.)
- If the IRS deems a VCP submission deficient or determines that issuing a compliance statement approving the correction is inappropriate, it can refuse to issue a compliance statement and may close the correction case, possibly without issuing a refund for the VCP fee. The previous IRS approach was to work with plans that made incomplete submissions in order to gather the required information so that the submission could be approved.
- 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.
More to Come
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 active as it is used for other payment purposes as well, but as of this writing, the retirement plan correction information was not yet available. Watch ascensus.com Industry & Regulatory News as additional guidance becomes available.