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IRS Updates Employee Plans Compliance Resolution System
June 5, 2003, E-mail Alert 2003-10
IRS Updates EPCRS May 5, 2006
On June 5, 2003, in what has become an annual ritual, the IRS updated and modified the Employee Plans Compliance Resolution System (EPCRS) in Rev. Proc. 2003-44. The changes are generally effective as of October 1, 2003, however employers may use them immediately. The following tables provide highlights of the EPCRS changes.
HIGHLIGHTS OF THE EPRCRS CHANGES FROM REV. PROC. 2003-44 |
| All voluntary correction procedures consolidated into Voluntary Correction Program (VCP). §2.01 |
| The anonymous and group submission procedures expanded to all submissions under VCP. §10.11, §10.12 |
| Expanding EPCRS to SIMPLA IRA Plans. §4.01 |
| Adding correction methods and reporting instruction for SEPRs and SIMPLE IRAs. §6.10 |
| Guidance for EGTRRA nonamenders. §4.10 |
| Simplifying the group submission procedure by eliminating the Power of Attorney requirement. §10.12(3)(b) |
| A correction procedure for failure to obtain spousal consent on a distribution subject to the QJSA rules. §6.04 |
| Special rule for failing to report to report a loan failure by issuing a 1099R for year of correction. § 6.07 |
| Special exceptions to full correction |
When imprecise or unavailable data clarified. §6.02(5)(a)
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DeMinimus of $50.00 if the cost to process is more than $50.00 §6.02(5)(b)
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Recovery of small overpayments of $100.00 or less is not required but notification that not eligible for favorable tax treatment is. §6.02(5)(c)
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Locating lost participants requires use of IRS or Social Security Letter Forwarding Services. §6.02(5)(d)
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| Sample Formats for VCP submission. Appendix D |
| A new single time payment for most VCP submission with a fee structure based on the number of participants in the qualified plan or 403(b) to be paid at the time of the VCP submission. §11.04, §11.05 |
NUMBER of PARTICIPANTS |
VCP FEE |
SOME ADDITONAL POINTS ABOUT VCP FEES |
| 20 or fewer |
$750.00 |
The Fee Table (§12.02) requires the fee to accompany the VCP submission. IRS may apply additional fees when the compliance statement is due. §12.02(2)
Egregious failures (§4.08) may be subject to a negotiated percentage fee not to exceed 40%. §12.06
SEP or SIMPLE IRA fee is $500.00 §12.05
Number of participants based on most recent 5500 count on line 7f. §12.07
The applicable VCP table fee is reduced by 50% for plans that did not amend during the remedial amendment period (RAP) provided the nonamender submits under the VCP within one year of the plan's RAP deadline. §12.03
Group submissions based on number of plans. 20 plans is $10,000.00, additional plans are @ $250 each up to maximum of $50,000. §12.04
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| 21 to 50 |
$1,000.00 |
| 51 to 100 |
$2,500.00 |
| 101 to 500 |
$5,000.00 |
| 501 to 1,000 |
$8,000.00 |
| 1,001 to 5,000 |
$15,000.00 |
| 5,001 to 10,000 |
$20,000.00 |
| Over 10,000 |
$25,000.00 |
| CLICK HERE FOR LINKS TO EPCRS |
The table below presents an overview of the correction programs within EPCRS. §1.03
EPCRS includes three basic elements |
Self-correction Program (SCP) |
| A Plan Sponsor that has established compliance practices and procedures may, at any time without paying any fee or sanction, correct insignificant Operational Failures under a Qualified Plan or a 403(b) Plan, or a SEP or a SIMPLE IRA Plan, provided the SEP or SIMPLE IRA Plan is established and maintained on a document approved by the Service. In addition, in the case of a Qualified Plan that is the subject of a favorable determination letter from the Service or in the case of a 403(b) Plan, the Plan Sponsor generally may correct even significant Operational Failures without payment of any fee of sanction. |
Voluntary Correction Program with Service Approval (VCP) |
A Plan Sponsor, at any time before audit, may pay a limited fee and receive the Service's approval for correction of a Qualified Plan, 403(b) Plan, SEP or SIMPLE IRA Plan. Under VCP, there are special procedures for anonymous submissions and group submissions.
McKay Hochman Comment: All the prior voluntary programs such as VCO, VCS, VCT, VCSEP, are now handled under the VCP program. |
Correction on Audit Program (Audit CAP) |
| If a failure (other than a failure corrected through SCP or VCP) is identified on audit, the Plan Sponsor may correct the failure and pay a sanction. The sanction imposed will bear a reasonable relationship to the nature, extent, and severity of the failure, taking into account the extent to which correction occurred before audit. |
To learn more, call 973-492-1880 or e-mail info@mhco.com.
© 2012, McKay Hochman Co., Inc. All rights reserved.
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