Are You Aware of the DOL & IRS Programs to Fix Errors in Your Employee Retirement Plan?
Employee benefit plans are under great scrutiny by the DOL. If your plan is not complying with plan provisions or just has errors in its operations there are steps you can take to fix these problems. Generally, if your plan is not currently being audited by the IRS you can apply under the voluntary correction program (“VCP”) with the IRS to correct the errors which if not corrected could result in penalty or even worse, loss of the plan’s tax favored status. The VCP helps bring your plan back into compliance with federal tax law, protects your tax deductions, insures that all participants’ retirement savings continue to accumulate tax-free, avoid paying larger penalties if uncovered by the IRS on audit along with other advantages.
The VCP provides descriptions of the various categories of plan “failures” and their methods of correction. The plan must follow IRS procedures when applying under the VCP:
- Identify the error Follow the process for correcting the violation
- Calculate and restore any losses with interest and distribute to plan participants
- File an application with IRS showing evidence of the corrective action taken
- Receive compliance statement from IRS
The VCP is one of three programs offered by the IRS for correcting failures under the Employee Plans Compliance Resolution System (EPCRS). The other two EPCRS programs are the Self-Correction Program which can be used to correct certain operational failures and the Audit Closing Agreement Program when a failure is discovered on audit by the IRS. The plan is entitled to preserve the tax benefits associated with the plan by complying with the terms of the Closing Agreement Program. Also, fiduciary violations such as delinquent participant contributions may be correctable under the Department of Labor’s Voluntary Fiduciary Correction Program (VFCP).
We can help you identify and file for relief for plan document failures, operational problems or fiduciary violations that fall under the EPCRS or VFCP. This will prevent any unwanted surprises down the road when you may no longer be eligible for voluntary correction.