EPCRS Fee Increases
Rev. 08/14/03, E-mail Alert 2003-15

As we reported in an earlier E-mail Alert, IRS Rev. Proc. 2003-44 consolidates all voluntary correction programs under the Employee Plans Compliance Resolution System (EPCRS). As of October 1, 2003, the fees that are currently being charged to correct certain operational failures will be replaced with a new fee schedule (the VCP program) with some fees being higher and some lower. Corrections may still be filed under the old program until the deadline. In some cases, it will be less expensive to hurry up and file under the old program.

The Voluntary Correction of Operational Failures Standardized (VCS)

The VCS program is available for the correction of up to two operational failures. The program could only be used for operational failures and corrections identified in Appendix A or Appendix B of Revenue Procedure 2002-47. The fee for the program is $350. After October 1, 2003, VCS will be consolidated into the VCP program and subject to the VCP fees based on the number of participants in the plan.

Some of the items (sometimes known to practitioners as the seven sisters) that are eligible for correction under VCS until October 1, 2003 are:

1. Failure to provide top-heavy minimum.
   
2. Failure to satisfy the ADP test set forth in 401(k)(3) or the ACP test set forth on 401(m)(2).
   
3. Failure to distribute elective deferrals.
   
4. Exclusion of an eligible employee from all contributions or accruals under the plan for one or more plan years.
   
5. Failure to timely pay the minimum distribution required under 401(a)(9).
   
6. Failure to obtain the participant’s and/or the spouse’s consent for a distribution subject to the Joint and Survivor rules.
   
7. Failure to satisfy the 415 limits in a defined contribution plan.

In addition to paying the fee, the appropriate correction that needs to be made is spelled-out in detail in Appendix A and Appendix B of Revenue Procedure 2002-47. Click here for Revenue Procedure 2002-47.