In an effort to encourage larger employers to voluntarily correct errors in their plan, the IRS has revised the fees charged to employers for using the IRS Voluntary Correction Program (“VCP”). VCP is a program the IRS offers to allow an employer who sponsors a retirement plan to correct a variety of operational and document errors, as long as the plan is not under audit by the IRS.
Previously based on the number of participants and containing fees up to $15,000, the IRS has changed how the fee is determined to be based on the amount of plan assets, and fees are capped at $3,500. The new fee schedule is:
|Plan Assets||VCP Filing Fee|
|$500,000 or less||$1,500|
|$500,001 to $10,000,000||$3,000|
While correcting under VCP in the past may have been costly, the new fees may make it more affordable for larger employers. For smaller employers, these fees may be an increase from the past fee schedule. Regardless of the change in the determination of fees, if errors are not corrected voluntarily and are discovered upon audit by the IRS, the penalties incurred can be significantly higher than those under VCP.
If you have any questions regarding the correction program and how to identify errors that may need to be corrected, please contact your Nyhart consultant.