For 2018, the Internal Revenue Service (IRS) has significantly lowered the fees that most tax-qualified retirement plan sponsors must pay to correct errors under the Employee Plans Compliance Resolution System’s Voluntary Correction Program (VCP). The VCP’s new, lowered user fees are provided in Revenue Procedure 2018-4, and are based on plan assets and capped at $3,500. Previously, the fees were based on the number of plan participants and capped at $15,000. In addition, the fee covers all eligible errors and a single submission may cover multiple errors, but the reduced fees for streamlined filings (e.g., to correct minor errors such as loan or minimum distribution failures) no longer are available.
Small plans with 50 or fewer participants will experience an increase in costs, as previously the VCP user fees were $500 for 20 or fewer participants and $750 for 21 to 50 participants.
The fees effective for VCP applications mailed to the IRS on or after January 2, 2018, are:
|Plan Assets||Fees for 2018|
|$0 to $500,000||$1,500|
|Over $500,000 to $10,000,000||$3,000|
The most recently filed Form 5500-series return (Annual Return/Report of Employee Benefit Plan) is used to determine a plan’s net assets. Special rules apply to plan sponsors that are not required to file Form 5500, as well as for very small plans (e.g., SEPs, SARSEPs, SIMPLE IRAs). The new fee schedule does not apply to group VCP submissions, nor to “orphan” plans or 457(b) tax-deferred plans.
Reporting fees on Form 8951
The IRS is currently revising Form 8951, User Fee for Application for Voluntary Correction Program (VCP). Until a revised form is available, the IRS advises plan sponsors to:
• Continue using the current Form 8951 (rev. September 2016), ignoring the information on the form that suggests VCP fees are determined based upon the number of plan participants.
• Not check boxes on Lines 8(a) through 8(c) because they no longer apply.
• Attach a check for the fee amount specified in Rev. Proc. 2018-4, Appendix A.09.
For information about the new VCP fees and for assistance with assessing whether to proceed with VCP or other, possibly more appropriate correction programs, please contact your Milliman consultant.