After noticing a surge of incorrect high user fees, the Internal Revenue Service (IRS) Employee Plans Voluntary Compliance function (VC) has released a reminder on ways plan sponsors can evade an overpayment of fees, such as determining the correct voluntary correction program (VCP) submission user fee, and specific qualification for reduced fees.
In order to find the right VCP user fee, the VC mentions the number of participants will usually determine user fees for 401(a) and 403(b) plans. These sponsors may review Rev. Proc 2017-4, Appendix A. 08 to find the correct fee number; or also visit the Voluntary Correction Program (VCP) Fees webpage. Additionally, the VC stresses plan sponsors to—when viewing the user fee table—utilize the fee number that correlates with the number of participants.
For 401(a), 401(k) and 403(b) plan sponsors, the VC suggests keeping an eye out on eligibility for reduced fees. According to the VC, circumstances in which these specific sponsors may qualify for a lower fee include:
- "If you maintain a 401(a) or 401(k) IRS pre-approved defined contribution plan and didn’t amend it by April 30, 2016, for the Pension Protection Act, you’re eligible for a 50% reduced fee if you correct the failure and mail your VCP submission to the IRS by April 30, 2017.
- If your submission is limited to participant loans that didn’t comply with Internal Revenue Code Section 72(p), lower fees may apply. See Rev. Proc. 2017-4, Appendix A.08.
- If your submission is limited to a failure to make minimum required distributions, lower fees may apply. See Rev. Proc. 2017-4, Appendix A.08."
To completely avoid an overpayment of user fees, the VC reminds plan sponsors and representatives of the following:
- "The current Employee Plans Compliance Resolution System (EPCRS) Revenue Procedure 2016-51 no longer lists Voluntary Correction Program (VCP) user fees.
- Plan sponsors need to refer to Rev. Proc. 2017-4, Appendix A.08 to determine the appropriate VCP user fees for submissions made in 2017.
- As of February 1, 2016, we lowered the user fees for many types of 401(a) and 403(b) plan VCP submissions.
- Only use the 2016 version of Form 8951 (Rev. September 2016), Compliance Fee for Application for Voluntary Correction Program (VCP), to determine specific user fee amounts; don’t use the pre-2016 versions of this form as they contain inaccurate information."
More information about avoiding overpaying user fees from the VC can be found here.