Don’t Overpay VCP Submission User Fees, IRS Reminds

The IRS has issued a reminder concerning how to pay the correct user fees for voluntary correction program (VCP) submissions. It took the action because its Employee Plans Voluntary Compliance function has received an increased number of VCP submissions with incorrect user fees, many of which were overpayments.

To avoid overpaying user fees, the IRS reminds those making VCP submissions of the following:

• Revenue Procedure 2016-51, which sets forth the current Employee Plans Compliance Resolution System (EPCRS), no longer lists VCP user fees.

• Plan sponsors need to refer to Rev. Proc. 2017-4, Appendix A.08, to determine the appropriate VCP user fees for submissions made in 2017.

• As of Feb. 1, 2016, the IRS lowered the user fees for many types of 401(a) and 403(b) plan VCP submissions.

• Only use the 2016 version of Form 8951 (Rev. September 2016), Compliance Fee for Application for Voluntary Correction Program (VCP), to determine specific user fee amounts; don’t use the pre-2016 versions of this form as they contain inaccurate information.

To determine the correct VCP submission user fee, one may:

• Refer to the annual Employee Plans revenue procedure for user fee amounts. See Rev. Proc. 2017-4, Appendix A.08, which contains all the user fee amounts and other information for VCP submissions in 2017; or

• Visit the Program Voluntary Correction (VCP) Fees webpage. While less comprehensive, it lists current user fees.

The number of participants in a plan generally determines the user fees for 401(a) and 403(b) plans. See Rev. Proc. 2017-4, Appendix A.08, for how to determine this number. When looking at the user fee table, be sure you use the fee appropriate for the number of plan participants.
For 401(a) (including 401(k)) and 403(b) plan sponsors, do not overlook these common situations in which you may be eligible for a reduced fee:

• If you maintain a 401(a) or 401(k) IRS pre-approved defined contribution plan and didn’t amend it by April 30, 2016, for the Pension Protection Act, you’re eligible for a 50% reduced fee if you correct the failure and mail your VCP submission to the IRS by April 30, 2017.

• If your submission is limited to participant loans that didn’t comply with Internal Revenue Code Section 72(p), lower fees may apply. See Rev. Proc. 2017-4, Appendix A.08.

• If your submission is limited to a failure to make minimum required distributions, lower fees may apply. See Rev. Proc. 2017-4, Appendix A.08.