IRS highlights changes to VCP Compliance Fees, including reduced fees for most 401(a) and 403(b) plans

In 2016, plan sponsors will refer to an annual revenue procedure to determine the appropriate fee when making a Voluntary Correction Program (VCP) submission to the IRS. This change results from the IRS classifying VCP fees as user fees subject to Code Sec. 7528 in 2015. In addition, the IRS has made changes to the general fees for submissions for Code Secs. 401(a) and 403(b) retirement plans.

The IRS has reduced the general VCP fees for most new submissions made on or after February 1, 2016 in order to encourage employers who sponsor 401(a) qualified retirement plans and 403(b) plans to correct plan failures through VCP. However, the general fee amount for plans with 101 to 500 participants remains unchanged. The general fee table in Rev. Proc. 2013-12, section 12.02(1) will no longer apply, according to the IRS. VCP fees for other types of plans remain unchanged from the amounts in Rev. Proc. 2013-12, section 12 (as modified by Rev. Proc. 2015-27).

Thus, beginning February 1, 2016, plan sponsors should use Rev. Proc. 2016-8, section 6.08 (and subsequent annual updates), to determine the appropriate fee for most VCP submissions, and continue to use Rev. Proc. 2013-12, as modified by Rev. Proc. 2015-27, for additional guidance on VCP fees and eligibility for reduced fees for certain submissions.

The IRS notes that it is revising Form 8951 (Compliance Fee for Application for Voluntary Correction Program (VCP)). The IRS advises that, in the meantime, plan sponsors should:

• Continue to use the Form 8951 (9-2015 version) until the new version is published.
• Ignore the general fee amounts on line 7.
• Attach a check for the fee amount specified in Rev. Proc. 2016-8, Section 6.08 (or Rev. Proc. 2013-12, section 12, if applicable and as modified by Rev. Proc. 2015-27).

The IRS will not apply the reduced fees for VCP submissions made prior to February 1, 2016, or issue refunds for pre-February 1, 2016 VCP submissions that are withdrawn and then resubmitted under the reduced fee schedule.

Source: IRS Employee Plans News, Issue Number 2016-1.

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