IRS Retirement Plan Corrections Are Going Paperless

IRS Voluntary Corrections Program will accept only online submissions beginning April 1, 2019

Stephen Miller, CEBS By Stephen Miller, CEBS October 4, 2018
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IRS Retirement Plan Corrections Are Going Paperless

Next year, the top program for filing retirement plan corrections with the IRS is going exclusively digital.

Starting Jan. 1, 2019, the IRS Voluntary Correction Program (VCP) will begin accepting employers' applications to correct retirement plan errors and filing-fee payments through the Pay.gov website. Plan sponsors can continue to file paper VCP submissions during a transition period through March 31, 2019, after which all VCP submissions must be made via the website.

The IRS announced the changes Sept. 28 in Revenue Procedure 2018-52, which supersedes Revenue Procedure 2016-51.

VCP is an IRS program that allows plan sponsors to correct, with IRS approval, failures involving a qualified plan—such as 401(k) or 403(b) defined contribution plans and defined benefit pension plans—and to pay related filing fees based on the size of plan assets.

"The IRS currently doesn't allow electronic filings for plan corrections. A plan sponsor may pay the user fee using an electronic fund transfer but not pay.gov," said Scott Hittner, a Greenwood Village, Colo.-based partner and chief actuary at October Three Consulting, a retirement plan advisory firm. "The new electronic-submission requirements will modernize VCP filings, similar to the recent transition from a paper-based to an electronic Form 5500 filing system."

To use the system, plan sponsors must create a Pay.gov account, then complete and sign the main VCP filing form (Form 8950 through the website.

Revenue Procedure 2018-52 also incorporates changes to VCP user fees made since Revenue Procedure 2016-51 was issued and provides other minor updates to the Employee Plans Compliance Resolution System (EPCRS). The VCP is one of three EPCRS programs for correcting retirement plan errors; the other two are the Self-Correction Program and the Audit Closing Agreement Program.

Under the new guidance, "a plan sponsor may designate an authorized representative to file a VCP submission with the IRS using the www.pay.gov website," wrote B. David Joffe, a partner in the Nashville office of law firm Bradley. "There are specific instructions in the new procedure on how to designate an authorized representative using the Form 2848, Power of Attorney and Declaration of Representation."

When a VCP submission is successfully filed, the system will generate a "Payment Confirmation — Application for Voluntary Correction Program" with a tracking identification number. The IRS will no longer send written acknowledgments for VCP filings.

Filing-Size Limit

Sponsors must upload all supporting documents, including Form 2848 (if relying on a designated representative), in a single PDF file.

If the PDF file exceeds 15 MB, the sponsor must remove some documents (or parts of documents) to fit within the limit and fax the removed documents to the IRS.

"While we are very pleased that the IRS is embracing the electronic age, we are concerned that the limit on .PDF size, coupled with the need to fax any additional documents, will complicate the process," posted attorneys at the Ferenczy Benefits Law Center in Atlanta. "That said, we should note that the IRS now has faxes going directly to computer files, so even that part of the process should be electronic."

They added, "Nevertheless, our insecurities about what may happen to user fees in 2019, as well as our concerns about being the first guinea pigs for the electronic submission procedure, make us want to submit as many of our pending submissions before year end (and certainly before March 31, 2019) as possible. We recommend you do the same."

[SHRM members-only toolkit: Designing and Administering Defined Contribution Retirement Plans]

Employers' Liability

Employers, as plan sponsors, bear the burden of ensuring that the administration of their retirement plans meets all IRS and Department of Labor administration, notification and reporting requirements.

"Having their plan providers telling them that their plan is in fine shape is really a false sense of security when the 401(k) plan sponsor is always going to be on the hook for liability when any issues are discovered," cautioned Ary Rosenbaum of the Rosenbaum Law Firm in Garden City, N.Y. "Plan sponsors can't afford just to take someone's word that the plan is OK," he added. Instead, they should ask their plan administrators to provide "an actual presentation and evidence" of plan compliance.

Related SHRM Article:

IRS Sets New Fees for Correcting Retirement Plan Errors, SHRM Online, January 2018

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