IRS Updates Model VCP Compliance Statements to Reflect Fee Changes

The IRS has updated three of its model compliance statement forms, conforming them to recent changes in the fees for some submissions under the Voluntary Correction Program (VCP) portion of the Employee Plans Compliance Resolution System (EPCRS). As background, plan sponsors who submit corrections for IRS approval under VCP are encouraged, but not required, to use the Form 14568 series to describe their qualification failures and proposed corrections. Some of those forms, including some that were revised in September 2017 (see our Checkpoint article), requested information relevant to reduced VCP fees that, prior to 2018, applied to failures to satisfy the minimum distribution requirements of Code § 401(a)(9), certain plan loan failures, and nonamender failures. In 2018 the IRS replaced the reduced fee structures with a plan-asset-based fee structure for correcting all errors (with a separate flat fee for group submissions) (see our Checkpoint article). Elimination of the reduced fees made certain information requests unnecessary, leading to the following changes:

• Form 14568-B. The form no longer asks whether the nonamender failure is the sole failure, and whether the amendments were signed within three months after the end of the relevant remedial amendment period.
• Form 14568-E. The revised form no longer asks for a “detailed explanation” as to how any reduced fee was determined. [EBIA Comment: Prior to 2018, the fee for plan loans could be reduced to an amount determined by the number of loan failures, if plan loan failures were the only failures and those failures did not affect more than 25% of the plan sponsor’s participants in any of the years affected by the failure.]
• Form 14568-H. The revised form drops the request for a “detailed explanation” as to how the user fee was determined, as well as the instruction to include the total number of plan participants with required minimum distribution failures.

EBIA Comment: Plan sponsors submitting VCP requests after the 2018 VCP user fee schedule went into effect, but before the new forms were released, might have guessed that these portions of the 2017 forms were unnecessary, but the IRS has now confirmed their obsolescence. The revised forms are available in a fillable format on the IRS’s Retirement Plans Forms and Publications webpage and through links on another webpage providing instructions and additional forms for VCP submissions. The revised forms must be used without modifying their format or content. For more information, see EBIA’s 401(k) Plans manual at Section XXXV.E (“Voluntary Correction Program (VCP) With IRS Approval”).

Contributing Editors: EBIA Staff.