IRS Webpage: Avoid Overpaying User Fees for Your Voluntary Correction Program Submission (Mar. 15, 2017)
The IRS has noticed an increase in plan sponsors paying user fees that are higher than the amount required for their submissions under the Voluntary Correction Program (VCP). In response, the IRS website has been changed to remind plan sponsors that, beginning in 2016, VCP user fees are no longer included in the revenue procedure for the Employee Plans Compliance Resolution System (EPCRS) (see our Checkpoint article). Instead, they are published annually in a separate revenue procedure that lists user fees for various requests, including VCP submissions (see our Checkpoint article). The webpage notes that fees for many types of VCP submissions were reduced in February 2016, so plan sponsors should use only the 2016 version of Form 8951 (Rev. September 2016) (Compliance Fee for Application for Voluntary Correction Program (VCP)) for submitting VCP user fee payments. Older versions of Form 8951 reflect user fees before the reductions.
The IRS suggests the following steps for determining the correct VCP user fee in 2017:
Determine the amount from the table based on the number of plan participants. (The number of plan participants generally is determined from the most recently filed Form 5500-series return.)
Determine whether the type of submission is eligible for a reduced user fee. For example, reduced fees may be available for submissions limited to participant loan or required minimum distribution failures, or certain nonamender failures.
EBIA Comment: This IRS webpage highlights the importance of using up-to-date forms when making submissions and payments to the IRS. Earlier versions of Form 8951 included the general user fee schedule on the form, which may explain, in part, why the IRS is receiving so many overpayments. Also, plan sponsors may not be checking to see if a submission is eligible for a reduced fee. The instructions for Form 8951 indicate that if the full applicable user fee is not included with the submission, the submission may be returned without any action, but the instructions do not address overpayments. The Internal Revenue Manual, however, affirms that overpaid user fees are refunded. For more information, see EBIA’s 401(k) Plans manual at Section XXXV.E.8 (“Voluntary Correction Program (VCP) With IRS Approval: VCP User Fees”).
Contributing Editors: EBIA Staff.