The IRS has announced simplified user fees for submissions made to correct 401(k), 403(b), and other qualified retirement plan errors under its Voluntary Compliance Program (VCP). VCP is the IRS program under its Employee Plans Compliance Resolution System that allows tax-favored retirement plans not currently under examination to correct certain failures that would otherwise result in the loss of tax-qualified status. Previously, user fees for a VCP submission ranged from $500 to $15,000, based on the total number of participants in the plan, and plan sponsors were offered a handful of alternative or reduced fees for certain types of standardized corrections, including plan loan deficiencies and failure to make required minimum distributions. This “simplification” significantly changes the way user fees are determined and eliminated alternative and reduced fees that were previously available.
The new fee structure is based solely on net plan assets, as follows:
- $1,500 for plans with assets of $500,000 or less;
- $3,000 for plans with assets over $500,000 to $10,000,000; and
- $3,500 for plans with assets of over $10,000,000.
The result of capping user fees at $3,500 under the new fee structure is to provide a significant reduction for the largest plans, as the prior applicable user fee was $15,000. Plans with fewer than 100 participants will generally pay more under the new structure.
The new fees take effect for any submissions mailed on or after January 2, 2018. Note that the IRS indicated that it will not issue refunds for submissions mailed before January 2, 2018 that are withdrawn and resubmitted.
In addition to the VCP change, the user fee for filing a Form 5310 (a determination letter application for a terminating plan) has increased from $2,300 to $3,000.
If you have any questions regarding how this change would affect your retirement plans or need assistance, please contact Connie Lee at firstname.lastname@example.org or 844.4WINDES (844.494.6337).