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IRS Announces Umbrella Closing Agreements for Pre-Approved Plan Providers

The IRS on May 15 announced that it is inviting financial institutions and other service providers to submit proposals for umbrella closing agreements to correct failures to restate plans by the applicable deadline.

Plan sponsors may continue to make voluntary correction program (VCP) submissions to correct such failures. The IRS is offering another way for financial institutions and other service providers to do so on a larger scale by addressing them as a group.

The umbrella closing agreement parameters are as follows:

  • Minimum of 20 plans covered by closing agreement.
  • $10,000 fee for the first 20 plans, plus $250 for each additional plan. Maximum amount: $50,000 (similar to the Group Submission fee arrangement under VCP) Note: Don’t include the fee with your request. When the IRS first announced this program on April 1, 2016, the base fee was $10,000. The IRS reduced that fee to $5,000 to offer a 50% reduction for the first year after the April 30, 2016 deadline. Now that the April 30, 2017 deadline has passed, the 50% reduction no longer applies.
  • The closing agreement should include plans maintained by eligible participating employers for whom the service provider can certify that they have a record of their:
    • Consent to participate — affirmative agreement to participate in the closing agreement program.
    • Prior document compliance — adoption of pre-approved defined contribution plans for the Economic Growth Tax Relief Reconciliation Act of 2001 (EGTRRA) by the required deadline stated in Notice 2004-84; or, if late, IRS compliance statements to correct for the late adoption of EGTRRA documents
    • Correction of the document issue — execution of the PPA restatement using the service provider’s pre-approved document
  • Financial institutions or other service providers that apply and are approved will have until the later of 120 days from the closing agreement execution date to:
    • provide a final list of employers covered by the closing agreement; and
    • pay additional fees (if applicable).

Letters outlining proposals for umbrella closing agreements should be sent to:

Internal Revenue Service
TE/GE:EP:VC Group 7554
Request for Voluntary Closing Agreement
9350 Flair Drive, 3rd Floor
El Monte, CA 91731