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The Voluntary Correction Program: Everything You Need to Know

February 22, 2022

A Voluntary Correction Program (VCP) submission is a way for an employer or plan representative to voluntarily disclose issues with the retirement plan. These usually come in the form of an IRS compliance statement. The final compliance statement is mailed by the IRS to the sponsor and, if applicable, the plan representative.

Correcting the failures

The compliance statement requires the plan sponsor to fix or adjust the failures before the end of the correction period. The correction period in most cases is 150 days after the date the compliance statement is signed by the IRS (there is a longer correction period for group submissions). You must correct plan errors by following the compliance statement and listed proposed corrections. In addition, you must act as outlined to locate former employees and beneficiaries and revise any administrative procedures.

Requesting an extension

If you’re near the 150-day expiration date or know that you can’t meet the deadline, you can send the IRS a letter to request an extension of the correction period by explaining why you need an extension. Contact information is on the closing letter issued with the compliance statement. IRS specialists may, at their discretion, extend the correction period if you send the request before the 150-day correction period expires. If the IRS extends the correction period, the IRS will mail a letter to the sponsor and plan representative, confirming the extended due date. Keep this letter with the original compliance statement.

Failing to meet the correction period

If the plan sponsor doesn’t fully correct according to the compliance statement by the end of the correction period or approved extension date, the compliance statement is not valid. To correct plan failures, the plan sponsor must submit a new Voluntary Correction Program submission according to Revenue Procedure 2013-12, section 11. This submission involves a new fee and must include the previously issued compliance statement and an explanation why correction was not completed.

Modifying VCP submissions

Generally, once the compliance statement is issued, it can’t be modified. If a correction is needed, you’d need to submit a new Voluntary Correction Program submission. However, if the modification is minor and you mail your request to make a minor modification, the IRS will consider it. For example, your compliance statement listed 200 affected participants, however, after recalculating the failure affected 225 participants.

To request a minor modification:

If accepted, the IRS mails a letter to you and your plan representative reflecting the minor modification and a revised compliance statement. Keep those documents with your original compliance statement.

Keep the compliance statement and correction records

Because the compliance statement resolves plan failures, you should keep this statement, evidence of corrections, and any follow up letters, such as an extension letter, minor modification letter, and revised compliance statement.

I need more help

If this blog post does not answer your question or if you would like assistance in addressing your VCP submission or compliance statement, do not hesitate to contact LRS.

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