The Internal Revenue Service (IRS) has updated its page explaining what retirement plan sponsors should do once they receive a compliance statement.
When a plan sponsor and the IRS agree with the proposed correction of plan failures disclosed in a Voluntary Correction Program (VCP) submission, the IRS issues a compliance statement listing the failures and the applicant’s proposed corrections. The compliance statement is conditioned on the plan sponsor correcting the failures before the end of the correction period, which in most cases, is 150 days after the date the compliance statement is signed by the VCP manager.
The IRS says if a plan sponsor is near the 150-day expiration date or knows it can’t meet the deadline, the plan sponsor can send the VCP specialist, whose contact information is on the closing letter issued with the compliance statement, a letter to request an extension of the correction period and explain why an extension is needed. If the plan sponsor doesn’t fully correct according to the compliance statement by the end of the correction period or approved extension date, the compliance statement is not valid. The plan sponsor must submit a new VCP submission with a new fee, and include the previously issued compliance statement and an explanation as to why the correction was not completed.
Generally, once the compliance statement is issued, it can’t be modified. A plan sponsor would need to submit a new VCP submission for major modifications. However, if the modification is minor—for example, the compliance statement listed 200 affected participants, but the failure affected 225 participants after recalculation—a plan sponsor may request a minor modification.
Because the compliance statement resolves plan failures, the IRS says plan sponsors should keep this statement, evidence of corrections, and any follow up letters including extension letters, minor modification letters and revised compliance statements.