The Internal Revenue Service (IRS) has published Revenue Procedure 2018-52, which modifies and supersedes Revenue Procedures 2016-51 and 2016-42, the most recent prior consolidated statements of the various correction programs available to plan sponsors under the Employee Plans Compliance Resolution System (EPCRS).
As readers may know, the Employee Plans Compliance Resolution System permits plan sponsors to correct plan administration failures and thereby continue to provide their employees with retirement benefits on a tax-favored basis. The core components of EPCRS are the Self Correction Program (SCP), the Voluntary Correction Program (VCP), and the Audit Closing Agreement Program (Audit CAP).
According to IRS, this update to the 2016-51 publication is “a limited update and is published primarily to set forth new VCP [Voluntary Correction Program] submission procedures, including the required use of the www.pay.gov website.”
Sections 2.02 and 2.03 of the new 2018-52 publication discuss the new VCP submission procedures in detail. Also of note, the new revenue procedure states that IRS and the Department of the Treasury “are currently developing guidance on other issues relating to EPCRS.” More detail about this is given in the general discussion in section 2.04.
Detail from Revenue Procedure 2018-02
According to IRS, in general, beginning April 1, 2019, plan sponsors must use the www.pay.gov website when filing a VCP submission and paying applicable user fees. To ease the transition to the new submission procedures, from January 1, 2019, through March 31, 2019, sponsors may file VCP submissions with the IRS either by using www.pay.gov in accordance with sections 10 and 11 of the new revenue procedure, or by filing paper VCP submissions in accordance with the procedures in sections 10 and 11 of the previous Revenue Procedure 2016-51. However, the IRS will not accept paper VCP submissions postmarked on or after April 1, 2019.
The detailed revenue procedure, stretching over 120 pages, lays out the step-by-step process plan sponsors must follow. Broadly speaking, an electronic VCP submission filed using the www.pay.gov website must include many of the same documents as a VCP submission filed on paper pursuant to Revenue Procedure 2016-51. Given the new digital forum, there are key procedural differences.
First, for example, an applicant must use the www.pay.gov website to create a pay.gov account. This pay.gov account will be used when filing a VCP submission and paying applicable user fees. Second, after a pay.gov account has been established, the applicant must complete Form 8950, “Application for Voluntary Correction Program (VCP) Submission Under the Employee Plans Compliance Resolution System,” using the www.pay.gov website.
There are various other procedural requirements, including that, beginning April 1, 2019, applicants are not permitted to submit a paper version of Form 8950.
Apart from setting new digital procedures for the submission/processing of user fees, IRS notes that documents relating to the VCP submission, including the description of failures, Form 14568 (Model VCP Compliance Statement), Schedules 1 through 9 of Form 14568, and any other applicable items (as set forth in section 11.04) for a VCP submission, generally must be converted into a single PDF. This document must then uploaded onto the www.pay.gov website.
There is a 15 MB size limitation for uploading a PDF document onto the www.pay.gov website; thus special instructions are provided for PDF files that exceed that limitation.
Future changes and enhancements
In the Revenue Procedure, IRS says it is expected that the agency and the Treasury Department will continue to update the EPCRS revenue procedures, in whole or in part, from time to time, “including further improvements to EPCRS based on comments received.”
“Accordingly, the IRS and Treasury Department continue to invite further comments on how to improve EPCRS,” the revenue procedure states.
Of note here, the Treasury Department and the IRS requested comments in Revenue Procedure 2015-27 “on potential changes to EPCRS relating to the recoupment of overpayments.” The Treasury Department and the IRS received and are reviewing responsive comments, and are in the process of developing further changes to modify the EPCRS rules on the correction of overpayments.
In addition, the Treasury Department and the IRS have received comments relating to expanding the Self Correction Program and are in the process of reviewing the comments received. According to the new revenue procedure, the Treasury Department and the IRS are considering changes to the program based on those comments.
The full text of Revenue Procedure 2018-52 is available for download here.