Don’t Leave the IRS Hanging on Voluntary Corrections

If retirement plan sponsors fail to complete all steps in the voluntary compliance process, they must reapply for the IRS program and pay a fee.

The Employee Plans Compliance Unit (EPCU) of the Internal Revenue Service (IRS) conducted a Voluntary Compliance Follow-Up project to determine if plan sponsors completed the corrections they agreed to in their Voluntary Correction Program (VCP) compliance statements.

The agency found 29% of plan sponsors were in violation of the compliance statements or had some other noncompliant issue. The majority of these issues stemmed from failing to make the proposed correction within 150 days from the date the statement was issued.

When plan sponsors apply to use the IRS’ Voluntary Compliance Program (VCP) and the agency accepts the submission, plan sponsors receive an IRS compliance statement that outlines the plan failures identified, proposed corrections including revisions to administrative procedures, and time allowed to complete the actions. If a plan sponsor doesn’t complete the corrective actions within 150 days of the compliance statement’s date, the compliance statement is invalid. The sponsor will have to file another VCP submission, along with a compliance fee, and identify that they didn’t complete the corrections within 150 days from the date the compliance statement was issued.

Plan sponsors that need additional time to complete the proposed corrections in the compliance statement may request an extension in writing before the 150-day correction period expires.

More information is here.