On January 2 of this year, the IRS published Revenue Procedure 2018-4 (Procedure), which outlined new fees for Voluntary Compliance Program (VCP) submissions to correct plan errors.
Prior to the new Procedure, fees were based on participant count, with a scale ranging from $750 for plans with less than 20 participants, to $25,000 for plans covering over 10,000 employees. In addition, there have been reduced fees for correcting common errors relating to participant loans, missed plan amendments and required minimum distributions.
Without explanation, the new Procedure changes the basis of the fees from participant count to asset size, effectively creating a flat three-tiered schedule, as follows:
| Assets | User Fee |
| $500,000 or less | $1,500 |
| $500,001-10,000,000 | $3,000 |
| Over $10,000,000 | $3,500 |
Besides this radical change in the user fee basis, the Procedure also eliminated the discounts for the common errors mentioned above. The new fees are retroactive to the beginning of the year and allowed no time for public comment or for submissions in process to qualify under the old fees.
The effect of the new fee structure is to provide a dramatic reduction for large plans, while increasing the cost of compliance for most small plans. This may serve as a disincentive to some plan sponsors to voluntarily correct plan issues that are not eligible for self-correction. With the elimination of the determination letter program, the IRS will likely shift more resources to plan examinations, so employers are cautioned against ignoring plan compliance issues. The cost of correcting an issue through an audit still greatly outweighs the user fees detailed above.
Please contact us with any questions about your plan’s compliance.
For questions or more information, please contact Richard Green at rgreen@windes.com or 844.4WINDES.
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