7.2.2  Employee Plans Compliance Resolution System (EPCRS)

Manual Transmittal

September 29, 2014

Purpose

(1) This transmits revised IRM 7.2.2, TE/GE Closing Agreements, Employee Plans Compliance Resolution System (EPCRS).

Background

IRM 7.2.2 provides case processing procedures for Employee Plans specialists working Voluntary Correction Program (VCP) submission cases that intend to meet the requirements of the Employee Plans Compliance Resolution System (EPCRS).

IRM 7.2.2 also provides general information for Employee Plans specialists on the Employee Plans compliance programs that fall under the umbrella of EPCRS. These programs offer plan sponsors alternatives to revoking a retirement plan’s qualified status.

Material Changes

(1) This IRM substantially revises and expands VCP case processing procedures.

  • This includes procedures reflecting changes in where and how VCP submissions are initially processed and screened.

  • Other sections were added that describe how Specialists and their Group Managers are to process, review and close VCP cases. Other new sections contain procedures relating to VCP compliance fee issues, including refunds, waivers and the solicitation of missing fees.

  • New sections were added to deal with specific matters, including Anonymous VCP submissions, Group Submissions, extensions to the VCP correction period, requests for special tax relief, and how to process voluntary requests involving deferred compensation plans under Code section 457(b).

  • The old provisions in IRM 7.2.2.3 through 7.2.2.10 no longer exist. IRM 7.2.2.11 through 7.2.2.30 are brand new sections. References to the latest applicable revenue procedures have also been made through out the document.

(2) Removed material not relevant to VCP case processing, such as submission of a determination letter application, correction on Audit Closing Agreement Program (Audit CAP), operational failures under the Self Correction Program (SCP), excise tax procedures for Audit CAP, outdated special procedures, and closing agreements outside the scope of EPCRS.

(3) Deleted all previous Exhibits and replaced them with two new exhibits. One Exhibit contains links to the internet and IRS intranet with regard to referenced websites and the latest versions of specific items referred to in this IRM. The 2nd Exhibit is an interactive guide to these VCP Case Processing Procedures.

Effect on Other Documents

This supersedes IRM 7.2.2, TE/GE Closing Agreements, Employee Plans Compliance Resolution System (EPCRS) dated March 1, 2002.

Audience

Tax Exempt and Government Entities (TE/GE) Employee Plans Personnel

Effective Date

(09-29-2014)

Robert Choi
Director, Employee Plans
Tax Exempt and Government Entities

7.2.2.1  (09-29-2014)
Overview

  1. This section provides the procedures for processing plans addressed under the Employee Plans Compliance Resolution System (EPCRS) correction program that are submitted to the IRS under VCP. It also contains some basic information about EPCRS. This material is for the use of Tax Law Specialists, Tax Compliance Officers and Internal Revenue Agents in Employee Plans (EP).

    Note:

    For purposes of this IRM, "specialist " means Tax Law Specialists, Tax Compliance Officers and Internal Revenue Agents.

  2. The source of guidance for the EPCRS is found in Rev. Proc. 2013–12, IRB 2013-4. EPCRS is a system of correction programs that encourages sponsors of retirement plans ("plan sponsors" ) to voluntarily correct failures to comply with applicable requirements of the Internal Revenue Code (IRC). These programs allow certain tax qualified retirement plans to maintain their qualified status as permitted by the IRC.

  3. The three components comprising EPCRS include:

    • Self Correction Program (SCP)

    • Voluntary Correction Program (VCP)

    • Audit Closing Agreement Program (Audit CAP)

7.2.2.1.1  (09-29-2014)
Effect of EPCRS Reliance

  1. If the eligibility requirements of a correction program are satisfied and the plan sponsor or employer corrects a failure in accordance with the EPCRS principles, the IRS will not pursue revoking the tax-favored status of the plan with the resulting income inclusion for affected participants, or liability for income tax withholding due to the failure.

  2. Types of plans covered by EPCRS include:

    • Qualified plan that complies with IRC 401(a) or 403(a)

    • Tax deferred annuities/custodial accounts that complies with IRC 403(b)

    • Simplified Employee Pension (SEP) - A plan intended to satisfy IRC 408(k).

    • Salary Reduction Simplified Employee Pension (SARSEP)- A salary reduction SEP described in IRC 408(k)(6).

    • SIMPLE plan - A plan intended to satisfy IRC 408(p).

      Note:

      Outside of EPCRS, in limited situations and at the discretion of the IRS, an eligible plan of deferred compensation that complies with IRC 457(b).

  3. Taxpayers may rely on EPCRS for relief.

7.2.2.2  (09-29-2014)
Types of Failures

  1. Failures eligible for EPCRS correction are defined in sections 5 and 6.07 of Rev. Proc. 2013–12IRB 2013–4.

  2. In the case of a plan intended to satisfy IRC 401(a) or IRC 403(a), there are four types of Qualification Failures:

    1. Plan Document Failure — means a plan provision (or absence of a plan provision) that, on its face violates the requirements of IRC 401(a) or IRC 403(a).

    2. Operational Failure — means a failure that arises solely from the failure to follow plan provisions.

    3. Demographic Failure — means a failure to satisfy the requirements of IRC 401(a)(4), IRC 401(a)(26) or IRC 410(b).

    4. Employer Eligibility Failure — means the adoption of a cash or deferred arrangement by an employer that fails to meet the employer eligibility requirements to establish a IRC 401(k) plan. This includes tax exempt employers who were prohibited from adopting a IRC 401(k) plan between 1987 and 1986, and governmental employers who adopted an IRC 401(k) plan after May 6, 1986.

  3. If a failure occurred in 2009 and later years, there are four types of IRC 403(b) failures that can be fixed under EPCRS:

    1. Plan Document Failure---means a plan provision (or the absence of a plan provision) that, on its face, violates the requirements of IRC 403(b). This includes the failure to adopt a written plan by December 31, 2009 that complied with the final IRC 403(b) Treasury regulations and the failure to amend the plan for any other new requirement that was not adopted within the plan's applicable remedial amendment period.

    2. Operational Failure---means a failure that arises solely from the failure to follow plan provisions. This includes failing to follow plan terms with regard to availability of elective deferral contributions as discussed in IRC 403(b)(12)(A)(ii) and IRC 401(m) as applied to IRC 403(b) plans. See IRC 403(b)(12)(A)(i).

    3. Demographic Failure — means a failure to satisfy the requirements of IRC 401(a)(4), IRC 401(a)(26) or IRC 410(b) as applied to IRC 403(b) plans. See IRC 403(b)(12)(A)(i).

    4. Employer Eligibility Failure — means the adoption of an IRC 403(b) plan by an employer that is not a tax-exempt organization described in IRC 501(c)(3) or a public educational organization described in IRC 170(b)(1)(A)(ii).

  4. If a failure occurred in 2008 (or before), issues that qualify as IRC 403(b) failures are limited to what is defined in Rev. Proc. 2008-50 CB 464, section 5.02. There are three types of IRC 403(b) failures that can be addressed:

    1. Operational Failure — means a failure to satisfy the requirements of IRC 403(b) as follows:

        (i) A failure to satisfy the requirement relating to the availability of salary reduction contributions. See IRC 403(b)(12)(A)(ii).
        (ii) A failure to satisfy the requirements of IRC 401(m) as applied to 403.
        (iii) A failure to limit participant compensation as required by IRC 401(a)(17) as applied to 403(b) plans. See IRC 403(b)(12)(A)(i).(b) plans. See IRC 403(b)(12)(i).
        (iv) A failure to satisfy the distribution restrictions of IRC 403(b)(7) or IRC 403(b)(11).
        (v) A failure to satisfy the incidental death benefit rules of IRC 403(b)(10).
        (vi) A failure to pay minimum required distributions required by IRC 403(b)(10).
        (vii) A failure to give employees the right to elect a direct rollover per IRC 403(b)(10), including the failure to give meaningful notice of such right.
        (viii) A failure of the annuity contract or custodian agreement to provide participants with a right to elect a direct rollover required by IRC 403(b)(10) and IRC 401(a)(31).
        (ix) A failure to satisfy the limit on elective deferrals required by IRC 403(b)(1)(E).
        (x) A failure of the annuity contract or custodial agreement to provide the limit on elective deferrals as required by IRC 403(b)(1)(E) and IRC 401(a)(30).
        (xi) A failure involving contributions or allocations of Excess Amounts.
        (xii) Any other failure to satisfy the applicable requirements of IRC 403(b) that results in the loss of IRC 403(b) status for the plan, custodial account or annuity contract associated with the plan that is not a Demographic Failure or an Employer Eligibility Failure, or a failure related to contributions on behalf of individuals who are not employees of the employer.
    2. Demographic Failure — means a failure to satisfy the requirements of IRC 401(a)(4), IRC 401(a)(26) or IRC 410(b) as applied to IRC 403(b). See IRC 403(b)(12)(A)(i).

    3. Employer Eligibility Failure — means any of the following:

        (i) The adoption of an IRC 403(b) plan by an employer that is not a tax-exempt organization described in IRC 501(c)(3) or a public educational organization described in IRC 170(b)(1)(A)(ii).
        (ii) A failure to satisfy the non-transferability requirement of IRC 401(g).
        (iii) A failure to initially establish or maintain a custodial account as required by IRC 403(b)(7).
        (iv) A failure to purchase (initially or subsequently) either an annuity contract from an insurance company (unless grandfathered by Rev. Rul. 82–102 or a custodial account from a regulated investment company utilizing a bank or approved non-bank trustee/custodian.
  5. A failure to satisfy IRC 408(k) SEP requirements or a failure to satisfy IRC 408(k)(6) SARSEP requirements.

  6. A failure to satisfy IRC 408(p) SIMPLE IRA plan requirements.

  7. A failure to satisfy IRC 72(p) participant loans requirements.

    Note:

    Rev. Proc. 2013-12 section 4.09 allows for voluntary submissions in the case of an eligible plan of deferred compensation, and at the discretion of the IRS, a failure to satisfy IRC 457(b).

7.2.2.2.1  (09-29-2014)
EPCRS Programs

  1. The Self Correction Program (SCP) enables a sponsor of a qualified plan or an employer that offers a 403(b) plan or SEP or SIMPLE IRA Plan to self-correct Operational Failures it discovers in its plan. A sponsor of a qualified plan that has a favorable letter or an employer that offers a 403(b) plan, may self-correct any Operational Failure, even if significant, generally, within two years from the year in which the failure occurs as long as the eligibility requirements of SCP are satisfied. A SEP or SIMPLE IRA plan is not eligible for self-correction of significant failures. Insignificant failures may be corrected after the two year correction period, even if the plan or plan sponsor is under audit. See Rev. Proc. 2013-12IRB 2013-4, sections 4, 8, and 9 for provisions relating specifically to SCP.

  2. The Voluntary Correction Program (VCP) enables a sponsor of a qualified plan or an employer that offers a 403(b) plan or SEP or SIMPLE IRA plan to voluntarily disclose to the IRS failures it has discovered in its plan, to propose a method of correcting the failures (including proposed modifications to administrative procedures, if any) and to pay a fixed compliance fee. The IRS issues a compliance statement with respect to the plan. The compliance statement contains the information identified and provided by the plan sponsor, including the applicable failures, the correction methods and changes to administrative procedures approved by the IRS. See Rev. Proc. 2013-12IRB 2013-4, sections 4, 10, 11, and 12 for provisions relating specifically to VCP.

    1. VCP general submission procedures for qualified plans apply to all Plan Document Failures, Operational Failures, Demographic Failures and Employer Eligibility Failures. They also apply to submissions involving 403(b), SEP, SARSEP, and SIMPLE IRA plans.

    2. VCP has special procedures for Group submissions and Anonymous Submissions

    3. A plan sponsor may make a submission involving a IRC 457(b) plan, on a provisional basis, outside of EPCRS, through standards that are similar to EPCRS. The IRS has the complete discretion to determine whether such requests will be accepted for processing. Section 4.09 of Rev. Proc. 2013–12 discusses the availability of correction for IRC 457(b) plans.

  3. The Audit Closing Agreement Program (Audit CAP) is a program established in Employee Plans (EP) Examination Area offices that is available to a qualified plan, 403(b) plan, SEP or SIMPLE IRA plan that is Under Examination as defined in section 5 of Rev. Proc. 2013-12. Under Audit CAP, the plan sponsor pays a monetary sanction that is a negotiated percentage of the maximum payment amount. The maximum payment amount approximates the amount of tax the IRS could collect as a result of the disqualification of the plan. See Rev. Proc. 2013-12IRB 2013-4, sections 4, 13, and 14 for provisions relating specifically to Audit CAP.

7.2.2.3  (09-29-2014)
VCP Receipt Processing

  1. Effective as of January 1, 2013, the Service Center in Covington, KY began front end processing of VCP submissions. Beginning January 1, 2013, VCP submissions that were mailed to the old Washington DC address were temporarily forwarded to the Service Center by select EP Voluntary Compliance (VC) employees in the Washington DC POD.

  2. The Service Center in Covington, KY will:

    1. Process any submitted compliance fee and record receipt of the fee in the HQEP (Headquarters Employee Plans) system of TE/GE Rulings and Agreements Control (TRAC).

    2. Update a partial record of the VCP submission in the Employee Plans Compliance Resolution System Research and Inventory Management (ERIM).

    3. Send the VCP cases to the Cincinnati Office for limited screening.

    4. Process additional compliance fees.

    5. See IRM 3.45.1.14, EP Voluntary Correction Program (VCP), for VCP processing procedures being followed by the Service Center.

  3. Rev. Proc. 2013–12 IRB 2013–4 mandated a change to the mailing address that applicants use to submit VCP submissions to the IRS and this has caused some confusion. The process is:

    1. Effective April 1, 2013, applicants must mail all VCP submissions to the IRS Service Center located in Covington, KY.

    2. Between April 1, 2013, and June 30, 2013 any VCP submission mailed to the Washington DC in error was forwarded to the Service Center by select VC employees in the Washington DC POD.

    3. Beginning on July 1, 2013, VCP submissions mailed to the Washington DC POD would no longer be forwarded to the Service Center. Instead, VCP submissions mailed to the old mailing address in Washington DC would be returned to the Applicant by select VC employees in the Washington DC POD.

7.2.2.3.1  (09-29-2014)
Limited Screening of VCP Cases by Cincinnati

  1. Beginning January 2013, select Cincinnati EP Determination personnel will generally perform limited administrative screening on VCP submissions.

  2. The Screener is responsible for taking the following actions:

    1. Updating the record on TRAC-ERIM. See paragraph (3) of this subsection for instructions on which fields to complete.

    2. Checking the Integrated Data Retrieval System (IDRS) and the list of withdrawn determination letter applications for exam activity.

      Note:

      EP Determinations Group 7526 conducts these checks on every VCP case they receive from the Covington Campus regardless of whether the case is screened or not.

    3. Reviewing the VCP submission for completeness.

    4. Completing Form 5464, Case Chronology Record reporting their time and describing their work on the case.

    5. Notifying the plan sponsor and/or the plan sponsor's representative if the submission is not complete and requesting the missing information.

    6. Returning VCP cases classified as being “Under Examination” or non-Orphan Plan submissions that do not include a compliance fee check to the Applicant. See paragraph (4) of this subsection for instructions on the proper closing code.

    7. Forwarding a complete submission to their manager.

  3. When updating the record on TRAC-ERIM, include the following fields:

    1. EIN (Employer Identification Number)

    2. NAICS (North American Industry Classification System) or Business Code

    3. Plan Sponsor

    4. State and zip code of Plan Sponsor

    5. Plan Name

    6. POA (Power of Attorney) firm name

    7. POA contact name and telephone number

    8. Plan type

    9. Value of plan assets

    10. Number of plan participants

    11. Check the appropriate box if the case is an anonymous VCP submission or if there is an egregious failure

    12. Check the appropriate box if the case has an international issue or if the submission is limited solely to late interim amendment failures or if the submission is limited to late nonamender failures

    13. If the submission contains any Appendix C or F Schedule, check the box for each submitted schedule. If no schedules were submitted, check the “None” box.

  4. Update the closing code information in TRAC-ERIM for returning VCP cases classified as being “Under Examination” or non-Orphan Plan submissions without a compliance fee, as follows (described in paragraph (1)f. of this subsection):

    IF: THEN insert the following information into TRAC-ERIM:
    The plan or plan sponsor is under Examination,
    1. Status Code is 22

    2. Correction Code is U

    3. Failure Code is 97C

    4. Years Affected: 0000

    5. Closing Letter is V-05(b) (assigned to official Letter 5341)

    The plan is a non-Orphan Plan submission without a compliance fee,
    1. Status Code is 34

    2. Correction Code is U

    3. Failure Code is 99C

    4. Years Affected: 0000

    5. Closing Letter is V-04 (assigned to official Letter 5339)

  5. The Manager of EP Determinations Group 7526 will assign screened cases to the VC Groups on a weekly basis based upon each group’s unassigned inventory.

  6. On occasion, VCP submissions will not be administratively screened nor will the case information be fully updated on TRAC-ERIM prior to assignment to a VC Group. The VC Group will update the case information on TRAC-ERIM.

7.2.2.4  (09-29-2014)
Technical Screening of VCP Submission Cases

  1. Due to limited resources there is no formal requirement for the technical screening of VCP submissions at this time.

  2. The Manager of EP Voluntary Compliance (VC) encourages VC Groups to perform a limited scope screening of their assigned inventory.

  3. Before assigning a case, Group Managers should perform the following steps:

    Note:

    The Group Manager may assign the technical screening of cases and necessary TRAC-ERIM updates to a Group Coordinator or senior Specialist within the group.

    1. Promptly identify VCP submissions subject to expedited treatment. See paragraph (4) of this subsection for the VCP submissions that are subject to expedited treatment.

    2. Verify and/or determine the VCP case grade in accordance with IRM 7.11.2, ,Employee Plans Determinations Letter Program, EP Case Assignment Guide.

    3. Update TRAC-ERIM to ensure that the case record is complete. See paragraph (5) of this subsection for the list of fields.

    4. Assign the appropriate category and Work Code to the case to designate the level of review that will be needed to process the submission. See paragraph (6) of this subsection for the information.

    5. Mark the appropriate category on the EPCRS Inventory Control Worksheet.

    6. Update TRAC-ERIM to reflect the correct EPCRS Work program code if incorrect.

    7. Once the submission has been graded and categorized, the Group Manager (or individual responsible) will assign the submission to a Specialist in his/her group for further processing.

  4. Types of VCP submissions that may be subject to expedited treatment include:

    1. A Terminating Plan. This includes Orphan Plan cases and VCP cases that have a related Form 5310 determination letter application.

    2. Governmental Plan

    3. Plans with participant loan issues involving a failure to comply with IRC 72(p). These are often submissions using Schedule 5 associated with Appendix F (Rev. Proc. 2008-50) or Appendix C (Rev. Proc. 2013-12)

  5. Ensure the following TRAC-ERIM fields are completed.

    1. EIN. If a Social Security Number (SSN) was submitted in lieu of an EIN, do not complete this field until the assigned Specialist obtains an EIN from the VCP applicant.

    2. Status Code.

    3. Case Assignment. Needs to reflect assignment to VC Group/Specialist and the date assigned.

    4. Plan Sponsor.

    5. Plan name.

    6. POA firm name.

    7. Plan type.

    8. Plan assets.

    9. Number of plan participants.

    10. Name and telephone number of POA.

    11. State and zip code of plan sponsor.

    12. NAICS business code.

    13. Check the appropriate box if the case is an anonymous VCP submission or if there is an egregious failure.

    14. Check the appropriate box if the case has an international issue or if the submission is limited solely to late interim amendment failures or if the submission is limited to late nonamender failures.

    15. If the submission contains any Appendix C or F Schedule, check the box for each submitted schedule. If no schedules were submitted, check the “None” box.

  6. Designate the level of review needed to process the submission based on the following:

    Category/TRAC-ERIM Work Code Characteristics Examples
    1 – VCP Quick Closure/26Q
    1. Submissions involve simple failures and/or correction methods.

    2. There are no missing, incomplete, inaccurate, or modified items in the VCP Case file.

    3. Case is ready to close without POA or TP (Taxpayer) contact.

    4. No need to coordinate with a Group Coordinator.

    1. Nonamender only cases. Often associated with Schedules 1 and 2.

    2. Employee Eligibility Failures. Often associated with Schedule 6.

    3. Loan failures involving IRC 72(p). Often associated with Schedule 5.

    2 – VCP, No Coordinator Review/26N
    1. Imperfect submissions.

    2. Corrections for operational failures conform to safe harbor A/B methods in Rev. Proc. 2008-50 or Rev. Proc. 2013-12.

    3. Review by Group Coordinator is not necessary.

    1. Nonamender documentation is not complete or Schedules are not completed properly.

    2. Correction method or sample calculations for safe harbor method are incomplete.

    3. Missing, modified or incomplete enclosures.

    3 – VCP-Required Coordinator Review/26J, 26K and 26L
    1. Complex failures

    2. Corrections outside of the Appendix A/B safe harbors in Rev. Proc. 2008-50IRB 464 or Rev. Proc. 2013-12IRB 2013-4.

    3. Retroactive plan amendments used to fix operational failures

    4. Unique Issues.

    5. 2nd level of review with Group Coordinator or Group Manager is required.

    1. Retroactive amendments used to fix operational failures.

    2. Demographic failures.

    3. Group submissions (26L)

    4. Anonymous submissions (26K)

    5. Excise tax relief requested.

    6. All or some of the issues appear to be ineligible for VCP.

    7. Corrections outside of Appendix A/B safe harbor

    3 – VCP-Required Coordinator Review (Continued)/ 29 and 26v
    1. Any submission that will need a closing agreement.

    1. Submissions involving 457(b) plans (29).

    2. Special closing agreement requests that are outside of EPCRS (26v).

7.2.2.5  (09-29-2014)
VCP Case Assignment Procedures for Group Managers

  1. VC Group Managers (and any EP Determinations Group Manager who has employees allowed to process certain types of VCP cases) are expected to assign cases to a Specialist as soon as possible depending on the level of inventory currently held by the Specialist.

  2. If a Group Manager does not technically screen their VCP cases before assignment, the Group Manager is expected to update TRAC-ERIM to ensure that the case record is complete in accordance with IRM 7.2.2.4, Technical Screening of VCP Submission Cases

  3. Group Managers must verify whether the case is marked for expedited processing:

    1. If the VCP case involves a terminating plan, or a governmental plan or the failures pertain to participant loans that do not comply with IRC 72(p), check and see if the VCP case file was marked for expedited processing.

    2. If the case file was not marked for expedited processing [but should have], check the applicable box on the inventory screening sheet, or make a notation on the EPCRS Inventory Control Worksheet.

  4. For VCP cases only reporting nonamender failures, the Group Manager will:

    1. Check TRAC-ERIM to determine if there is a “1” entry in the “Related DL File” field on the EPCRS Inventory Control Worksheet. If there is then the VCP case file should be returned to the Manager of EP Determinations Group 7526 as discussed below in (v).

    2. If Appendix C or F Schedules were submitted, check the applicable boxes on TRAC-ERIM for Schedules 1 and/or 2.

    3. Check the appropriate TRAC-ERIM box if the submission was limited solely to late interim amendment failures (Schedule 1 failures) or solely to late nonamender failures (Schedule 2 failures). Do NOT check any boxes if the submission contains both Schedule 1 and Schedule 2 type failures.

    4. Review the cover letter for the submission, if provided, to determine if a related DL filing was included with the submission.

    5. Check EDS to see if a related DL application was submitted concurrently with the VCP. If yes, the VCP case file should be returned to the Manager of EP Determinations Group 7526 so that it may be worked by an EP Determinations Specialist who works both the VCP and the related DL application.

  5. The Group Manager will check the case file and record any Cincinnati or VC technical screening hours in the appropriate TRAC-ERIM fields for "Screening Hrs" if not already entered.

  6. At the time of case assignment, each TRAC-ERIM record must be updated to status 03 by the Group Manager using the Specialist’s VC SEID. For EP Determination Letter Specialists who are assigned to work VCP cases their unique VC SEID # must be used when they are assigned VCP cases. The date assigned is the date the Group Manager mailed or handed out the VCP case to the applicable Specialist.

  7. Assigned VCP cases mailed to a Specialist must be accompanied by a completed Form 3210, Document Transmittal. When mailing cases, follow the requirements for shipping Personally Identifiable Information (PII) discussed in Document 13056, Employee Toolkit: Shipping Procedures for Personally Identifiable Information (PII).

7.2.2.6  (09-29-2014)
Actions Upon Receipt of Newly Assigned VCP Cases

  1. Form 3210: If applicable, the Specialist must compare received cases to the Form 3210, Document Transmittal. The Specialist needs to sign the Acknowledgement Copy and mail/fax/email it back to the VC Group Manager.The Group Manager should be contacted if there are any discrepancies.

  2. WebETS: Newly assigned VCP cases must be recorded on WebETS within seven days of receipt. Managers will instruct their Specialists as to what case category to use.

    1. "Operational time" captures more information and allows VCP cases to be readily distinguishable on WebETS as it will show the plan number.

    2. A Specialist's manager may prefer that their employees use the "Voluntary Compliance" category; and

    3. The "Other operational time" category should never be used for VCP cases on WebETS. Use "EP Determ Case" as the case type

  3. WebETS activity and project codes for VCP cases can be found in the Document 6476, Information Systems Code. The Project Code is generally 0999 unless the VCP submission involves an international issue or plan. Discuss with Group Manager before using the international project code. The common Activity Codes for submissions to VC are as follows:

    Activity Code Description
    110 Activity code for time charged to Determination Letter application– With a related VCP case
    113 Activity code to use for VCP submissions that do not require a closing agreement
    114 (Valid thru 9/30/14) Activity code to use for any voluntary submission that is resolved via a Director's closing agreement
    118 (Effective as of 10/1/14) Time applied to voluntary closing agreement requests involving 457(b) plans made under the EPCRS revenue procedure and any closing agreement that arises from a VCP submission.
    119 (Effective as of 10/1/14) Time applied to voluntary requests for Delegation Order 8-3 closing agreements arising from issues/corrections that are outside of the EPCRS revenue procedure.
  4. Generally, record time already charged by another Specialist, as "Transfer Time" when establishing the case on WebETS.

    Note:

    Cincinnati screeners' hours must not be recorded as "Transfer Time" on WebETS. Time recorded on WebETS by VC employees is limited to actual time charged by them to process the VCP submission.

  5. Specialists are to create a Form 5464, Case Chronology Record (CCR) for each assigned case in order to document case activity and time charged.

  6. Inspect the VCP submission to verify that the case was properly graded before contacting the VCP Applicant or their plan representative. The case grading criteria can be found in IRM 7.11.2, Employee Plans Determinations Letter Program, EP Case Assignment Guide .

    Note:

    Contact your Group Manager to discuss the case grade if you believe the case grade is incorrect. The discussion on the case grade with your Group Manager and what was the agreed upon case grade should be documented on the CCR.

  7. If the case grade is not correct, the Group Manager may decide to transfer the VCP case to another Specialist.

  8. Review the VCP submission to determine if the case requires expedited treatment. Indications that the case requires expedited treatment may be found within the case file itself or possibly on the Case Inventory Screening Worksheet.

  9. Determine the work priority of the newly received cases. Cases should be worked in the following order of priority:

    1. Cases subject to expedited treatment

    2. Cases with sensitive issues

    3. All other cases (oldest to newest)

7.2.2.6.1  (09-29-2014)
Required Use of Form 5464 And WebETS

  1. VC employees should take the following actions when recording their time on WebETS:

    1. Use Form 5464, Case Chronology Record to document all actions taken, persons contacted, time charged and planned follow-up dates when working an assigned VCP case. An interactive PDF version of the CCR has been designed for VCP submissions and is located on the VC SharePoint site.

    2. Update the CCR each time a contact or activity has occurred. To ensure good case management, all Specialists should adhere to all follow-up dates.

    3. Document and explain periods of inactivity or gaps in time that exceed 30 days, by making entries to the CCR. This includes gaps due to leave, training, or any other reason.

    4. List each VCP assigned on WebETS. This includes cases that are assigned but have no time charged.

    5. Ensure time charged on the CCR corresponds to the time the Specialist has entered onto WebETS for the specific case.

    6. Record their time in WebETS as time is charged.

7.2.2.7  (09-29-2014)
VCP Submissions - Initial Review

  1. Specialists are responsible for verifying whether the VCP submissions assigned to them are complete and accurate. This requirement applies even though a VCP submission may have been administratively screened by Cincinnati and/or technically screened by a VC Group Manager.

  2. All VCP submissions sent to the IRS on or after April 1, 2013 must conform to Rev. Proc. 2013-12 requirements. From January 1, 2013 through
    March 31, 2013 plan sponsors had the option to make submissions in accordance with Rev. Proc. 2008–50, IRB 464 or Rev. Proc. 2013–12IRB 2013–4 provisions.

  3. Rev. Proc. 2008-50 provisions, including Appendix C/D/F documents and applicable Schedules cannot be part of a Rev. Proc. 2013-12 submission. Rev. Proc. 2013-12 documents, including Appendix C and applicable Appendix C Schedule documents cannot be part of a Rev. Proc. 2008-50 submission.

  4. Review the cover letter(s) and narrative attachments. Note any unusual representations, conflicting items, etc.

  5. Discuss with the Group Manager or Group Coordinator if anything in the VCP case file suggests that the Plan or plan sponsor is “Under Examination” as defined in the applicable EPCRS revenue procedure or any other issues that the Specialist feels should be raised.

  6. Verify that the correct VCP fee has been paid:

    1. Review HQEP printout(s) to determine what amount has been paid. Review Rev. Proc. 2013-12 (or Rev. Proc. 2008-50, if applicable) Section 12 to determine the correct compliance fee.

    2. Review Form 8951, Compliance Fee for Application for Voluntary Correction Program (VCP), for a submission made in accordance with Rev. Proc. 2013-12 provisions.

    3. Determine the general compliance fee using the number of reported plan participants, if the plan is a 401(a) plan or 403(b) plan.

    4. Determine if one of the fee discounts is applicable and verify that the submission qualifies for the reduced compliance fee.

    5. If the Specialist discovers some potential fee issues, document the issue in the Form 5464, Case Chronology Record or workpaper. Refer to IRM 7.2.2.10, Procedures for Compliance Fee Issues and IRM 7.2.2.10.1, Instructions on Soliciting Compliance Fees Owed, for instructions on soliciting additional compliance fees or IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP Compliance Fees, for instructions with regard to the processing of VCP Refunds of paid compliance fees. See IRM 7.2.2.10.3, Compliance Fee Waiver Requests Involving Terminating Orphan Plans, for procedures that deal with requested fee waivers involving terminated orphan plans.

    6. If the VCP applicant does not submit any owed compliance fees, the case is closed as a no action case.

  7. Confirm that the compliance fee has not been paid with plan assets:

    1. Review the cover letter or narrative in the VCP case file to determine if there is an indication that the compliance fee was paid by the plan.

    2. Review the HQEP printout to see if the plan is the payor of the compliance fee.

    3. If the VCP submission was made in accordance with the provisions of Rev. Proc. 2013-12, review the copy of the compliance fee check to determine if the plan is the payor. If the copy of the check is missing, secure a copy of the compliance fee check from the VCP Applicant.

    4. If there are indications that the plan paid the compliance fee, discuss the matter with the Group Manager or Group Coordinator. If the fee was paid by the plan, ensure that the plan is immediately reimbursed by the plan sponsor (or some other party) with interest for any amount of VCP compliance fees paid. The VCP submission cannot be processed any further until the plan has been reimbursed.

  8. Review Forms 2848, Power of Attorney and Declaration of Representative and 8821, Tax Information Authorization to verify that they are correctly completed before contacting or sending out any correspondence to the specified individuals. For additional procedures refer to IRM 7.2.2.12, Power of Attorney Form 2848 and Form 8821.

  9. Review the case file to determine if the plan or plan sponsor was “Under Examination” as defined by the applicable EPCRS revenue procedure. Specifically:

    1. If the VCP submission was made in accordance with Rev. Proc. 2008-50 provisions, review the required examination statement in the case file to determine if any activity is disclosed. If this statement is missing, secure it.

      Note:

      The examination statement is incorporated into Appendix D and Appendix F.

    2. Check for any IDRS printouts that may be present in the case file to determine if there is any indication of IRS examination activity.

    3. Indications of exam activity will show up on IDRS printouts if some sort of record exists. Status code 12 indicates that EP Exam has contacted the plan or plan sponsor. Check with your Group Manager or a VC Program Coordinator or EP Exam agent if you need assistance in understanding the IDRS printouts.

    4. Review any cover letters or attachments to determine if any IRS examination activity is mentioned.

    5. If the VCP submission was made in accordance with Rev. Proc. 2013-12 provisions, review Form 8950, Application for Voluntary Correction Program (VCP) Submission under the Employee Plans Compliance Resolution System (EPCRS), Line 10. A "Yes" response means that the plan is ineligible for VCP. If there is no entry it may be a possible indication of exam activity. Secure a replacement page with this question answered.

    6. If the VCP submission was made in accordance with Rev. Proc. 2013-12, review Form 8950 Line 12. If there is no entry it may be a possible indication of abusive tax avoidance transactions (ATAT) or exam activity. Secure a replacement page with this question answered. If applicable, review (or secure and review) submitted attachments from the Applicant.

    7. If there is evidence that the plan or plan sponsor may be "Under Examination" , bring the matter to your Group Manager’s attention immediately.

    8. Determine whether the examination began before or after the postmark date of the VCP submission.

    9. If it is determined that the plan or plan sponsor was "Under Examination" at the time the VCP submission was made, the VCP case will be closed as ineligible and a full refund of the paid compliance fee will be made to the payor. Use Sample Closing Letter V-05b (assigned to official Letter 5341)

    10. If the plan or plan sponsor is "Under Examination" , enter the following closing codes in TRAC-ERIM:

      Type of Information Closing Code
      Status Code is 22
      Failure Code is 97
      Correction Code is U
      Years affected are 0000
  10. Review the case file to see if the required ATAT statement has been enclosed:

    1. For a VCP submission made in accordance with Rev. Proc. 2008-50, the ATAT statement is included in Appendix D and F. A plan sponsor is only permitted to check one ATAT box. If both boxes are checked, secure a revised Appendix D or F page, as applicable.

    2. For a VCP submission made in accordance with Rev. Proc. 2013-12, the ATAT statement is part of the VCP Application Form. See Form 8950 , item 8.

    IF THEN Rev. Proc. 2013-12 Submission Rev. Proc. 2008-50 Submission
    Form 8950, Line 8 is blank, it may indicate ATAT activity. Secure a replacement page that answers this question. X  
    The ATAT statement is missing. Secure a written statement signed by the Applicant or their representative.   X
    The VCP Applicant indicated the plan or plan sponsor was involved in some sort of ATAT,
    Review the ATAT explanation (this is required).
    If it is missing, secure the missing explanation
    X X
    The case file indicates an ATAT, Contact the Group Manager as it may be necessary to coordinate with the EP Exam ATAT Coordinator. See Rev. Proc. 2008-50IRB 464 or Rev. Proc. 2013-12IRB 2013-4, section 4.13. X X
  11. For submissions made in accordance with Rev. Proc. 2013-12 provisions, check whether a signed Form 8950 and completed Form 8951 are part of the case file. If either Form is missing, secure the Form. Verify that the Form 8950:

    1. Has an original signature

    2. Has been signed by a authorized person. See Form 8950 instructions, "Who Must Sign" , for additional information

  12. Inspect the VCP case file to determine if all required plan documents, plan amendments and sample computations have been submitted. Refer to Rev. Proc. 2013-12 or Rev. Proc. 2008-50 Section 11. This includes the following:

    1. Specific enclosure items listed on Appendix C or F Schedules

    2. Detailed sample computations

    3. Corrective plan amendments

    4. Prior plan document in effect at the time of the specified qualification failure. For operational failures, taxpayers are permitted to submit relevant portions of the prior plan document

      Note:

      This requirement generally does not apply if the failures in any VCP submission are limited to late good faith/interim amendment failures adopted before the end of the remedial amendment cycle that first included them

    5. If the POA or TP indicates that the prior plan document does not exist or is missing or cannot be found, see IRM 7.2.2.29, Missing Prior Plan Document (Relevant Sections), for additional procedures.

  13. The Form 8950, Application for Voluntary Correction Program (VCP) Submission under the Employee Plans Compliance Resolution System (EPCRS), Procedural Requirements Checklist is also a useful tool to determine if any required items are missing from the VCP case file.

  14. For Rev. Proc. 2013-12 submissions, inspect Form 8950 to determine if all applicable lines were answered and whether all required attachments/explanations were submitted. Incomplete or missing items must be secured.

  15. If the VCP submission contains a request for special tax relief offered by Rev. Proc. 2008-50 or Rev. Proc. 2013-12 section 6.09, review the file for a written explanation in support of such request. If missing, secure the explanation. See IRM 7.2.2.11, Special Tax Relief Requests, for procedures on how to evaluate such requests.

  16. If the VCP is an Anonymous Submission, verify that there is a penalty of perjury statement signed by the individual who made the VCP submission. See IRM 7.2.2.20, Anonymous VCP Submissions, for anonymous submission procedures.

  17. Request missing or incomplete items using Letter VCP-6a (assigned to official Letter 5344) if the VCP submission is made in accordance with Rev. Proc. 2008-50 provisions or Letter VCP-6b (assigned to official Letter 5345) if made in accordance with Rev. Proc. 2013-12 provisions.

  18. Document that the initial review procedures discussed in this IRM have been completed on Form 5464, Case Chronology Record or in your workpapers.

7.2.2.8  (09-29-2014)
VCP Submissions-Technical Review Procedures

  1. Review the documents in the VCP submission for technical compliance and accuracy. Documents in the VCP submission may include:

    1. Form 8950 for Rev. Proc. 2013–12 submissions

    2. Form 8951 for Rev. Proc. 2013–12 submissions

    3. Form 2848

    4. Form 8821

    5. Pre-formatted Appendix C, D, or F documents, including applicable Schedules for Rev. Proc. 2008–50 submissions

    6. Pre-formatted Appendix C documents, including applicable Schedules for Rev. Proc. 2013–12 submissions. These documents have been released as official forms.

    7. Form 14568, Appendix C Part 1 Model VCP Submission Compliance Statement for Appendix C

    8. Form 14568-A, Appendix C Part II Schedule 1- Interim and Certain Discretionary Nonamender Failures

    9. Form 14568-B, Appendix C Part II Nonamender Failures (other than those to which Schedule 1 applies) and Failure to Adopt a 403(b) Plan Timely

    10. Form 14568-C, Appendix C Part II Schedule 3 SEPS and SARSEPs

    11. Form 14568–D, Appendix C Part II Schedule 4 Simple IRAs

    12. Form 14568–E, Appendix C Part II Schedule 5 Plan Loan Failures (Qualified Plans and 403(b) Plans)

    13. Form 14568-F, Appendix C Part II Schedule 6 Employer Eligibility Failure (§ 401(k) and 403(b) Plans only)

    14. Form 14568–G, Appendix C Part II Schedule 7 Failure to Distribute Elective Deferrals in Excess of the § 402(g) Limit

    15. Form 14568–H, Appendix C Part II Schedule 8 Failure to Pay Required Minimum Distributions Timely under § 401(a)(9)

    16. Form 14568-I, Appendix C Part II Schedule 9 Correction by Plan Amendment (in accordance with Appendix B)

    17. Any narrative elements or attachments submitted by the POA or VCP Applicant relating to the description of the failures, correction methods and changes to administrative procedures.

  2. Conduct a preliminary review of the submission focusing on the submitted qualification failures, proposed correction methods and requests for tax relief (if any).

    IF the preliminary review involves a determination as to whether: AND THEN the Specialist must
    The described failures are eligible for VCP, There appears to be a problem, Discuss this matter with their Group Manager or Group Coordinator before contacting the POA or TP. This applies even if the VCP submission has been labeled a Category 1 or 2 case.

    Note:

    To ensure that cases are being properly classified as ineligible, consult the Manager of Voluntary Compliance and the Program Coordinators before closing the VCP submission as ineligible.


    The plan sponsor is requesting tax relief that is not authorized by EPCRS, If so, Discuss this matter with their Group Manager or Group Coordinator.
    The Group Manager or Group Coordinator will contact the Manager of VC and the Program Coordinators to discuss the matter.
  3. Review the category type for the submission to determine if it is correct. The category types are described in detail in IRM 7.2.2.4, Technical Screening of VCP Submission Cases.

    1. The Specialist must contact the Group Manager if there is an error in order to see if the category should be changed.

    2. If the category is changed, make a handwritten change to The EPCRS Inventory Control Worksheet.

      Note:

      the Specialist may reconsider their initial determination after receiving additional information from the Applicant or their representative.

  4. Review comments on the Technical Screening Sheet or the EPCRS Inventory Control Worksheet.

    1. Document the Form 5464, Case Chronology Record or workpapers when the comments are not followed or addressed.

    2. Request concurrence from the Group Manager or group coordinator if not following the Technical Screening Sheet or EPCRS Inventory Worksheet instructions that touch upon compliance fees, VCP eligibility, and issue development.

  5. If the VCP submission was made in accordance with Rev. Proc. 2008-50 provisions and contains Appendix C/D/F plus any applicable Appendix F Schedules or made in accordance with Rev. Proc. 2013-12 and contains Appendix C plus any applicable Appendix C Schedules, see IRM 7.2.2.9, Reviewing Pre-Formatted Compliance Statement, for additional procedures.

  6. Social security numbers (SSNs) are not used on compliance statements, Appendix documents, including Schedules or on TRAC-ERIM. If the plan sponsor used an SSN:

    1. Once the EIN has been obtained, secure revised VCP documents.

    2. The plan sponsor can obtain an EIN at irs.gov.

    3. Immediately alert the Group Manager. TRAC-ERIM and TRAC-HQEP must be updated to the correct number.

  7. If corrective plan amendments are used to fix any qualification failures, determine whether a required determination letter application has been submitted. See IRM 7.2.2.13, Required Determination Letter Application with VCP Submission, for additional procedures.

  8. Document any decisions and consultations with a Group Manager or Group Coordinator in the submission's Form 5464, Case Chronology Record or workpaper or by printing out and including any relevant internal correspondence (e.g. OCS chat, email, fax, etc.) in the VCP case file.

7.2.2.9  (09-29-2014)
Reviewing Pre-Formatted Compliance Statements

  1. Pre-formatted compliance statements are model documents provided by the IRS in an attempt to provide more efficient processing.

  2. Ensure that Rev. Proc. 2008–50IRB 464 submissions do not contain any documents or references associated with Rev. Proc. 2013–12IRB 2013-4. Conversely, submissions made in accordance with Rev. Proc. 2013-12 provisions may not use model Appendix D, Appendix F or Appendix F Schedules.

  3. As current VCP submission inventory is composed of submissions made in accordance with Rev. Proc. 2008-50 provisions and Rev. Proc. 2013-12 provisions, the following paragraphs discuss how to review each submission type separately.

  4. Rev. Proc. 2008-50, offers two types of model compliance statements known as “Appendix D-VCP Submission”, and “Appendix F- Streamlined VCP Submission” plus nine supporting Schedules.

  5. When reviewing Appendix D or F documents Specialists should verify:

    1. The documents have not been submitted on plan sponsor or POA letterhead.

    2. The documents have not been modified in any way.

      Example:

      Examples of modifications include:
      • Removal of items and language
      • Modifying the standardized language, such as revising the Examination statement or Penalty of Perjury statement.
      • Modifying the correction methodology on a Schedule.

    3. The EIN, Plan Name and Plan # appears on each page of the documents. Verify that these items are included on each page of the submitted documents and that such information is consistent. If items are missing or the information is not consistent on all pages, secure revised pages as necessary.

    4. Appendix F Parts I & II and Appendix D Part I were completed properly. Most line items must be completed; they cannot be left blank or "NA"

    5. For Appendix D cases and some Appendix F cases, attachments have been properly referenced as official attachments to Appendix D or to an Appendix F Schedule. For Appendix F cases, this only applies to failure descriptions on Schedules 1 and 2.

    6. Schedule 1 is accurate and complete.

      Example:

      Issues observed on several submissions:
      • Incorrect listing of items as late interim amendments even though such amendments were adopted after the end of the applicable remedial amendment cycle (RAC) that first included them. (Note: These failures are not late adoptions of interim amendments.
      • Failure to include copies of executed amendments with the VCP submission. This is mentioned in Part II of the Schedule and is a required enclosure.
      • Incomplete failure descriptions in the "Other Box" in Part I., such as:

       
      1. The plan sponsor or their representative must list each specific interim amendment that was adopted late.

      2. It is not acceptable to simply refer to “interim amendments associated with a specific tax law or a Cumulative List. Items must be described with a level of specificity similar to the descriptions in the Cumulative List.

      3. Each interim amendment provision that was adopted late must be listed separately.

      4. Any acronyms should be defined.

    7. Addition of amendment failures to the “Other Box” in Part 1 that are not late interim amendment failures. Instead they are operational failures.

      Example:

      Operational Failures
      References to "Technical Amendments"
      Errors made while completing an adoption agreement or in the drafting of an adopted plan document.
      References to late discretionary amendments.

    8. Schedule 2 is accurate and complete.

      Example:

      Issues observed on several submissions:
      • Multiple boxes with regard to Cumulative List (CL) failures are checked. No submission should have consecutive cycles checked. Multiple CLs can be checked if the plan is late for more than one cycle.
      • Missing copy of the plan document in effect prior to the adoption of the corrective amendments. This is a required item mentioned in Part IV Enclosure list.
      • Copies of corrective plan amendments/restatements that resolve all plan document failures are not included with the VCP. They are required items mentioned in Part II and the Part IV Enclosure list. For late amender failures occurring before 2002, it may be reasonable to accept "snap-on" amendments if no restated plan documents can be secured by the plan sponsor.
      • If the corrective documents are pre-approved plans, the applicable IRS opinion letters are not being included with the submission. While the Specialist could secure the missing letter(s) from the VCP Applicant it may be more efficient to review the pre-approved listings that are on irs.gov and document if the submitted documents are IRS pre-approved plans.
      • If any of the above items are missing or the information is not consistent on all pages, secure the missing items or request revised pages, as necessary.

  6. Rev. Proc. 2013-12 offers a single model compliance statement as "Appendix C Part One" plus nine supporting Appendix C Part II Schedules. Specialists should verify the following when reviewing Appendix C or Appendix C schedules:

    Review Appendix C or Appendix C Schedule to determine whether: Action Examples
    1. The documents are not submitted on plan sponsor or POA letterhead. If submitted on plan sponsor or POA letter letterhead, the Specialist will secure a new Appendix C or Schedule that is on plain white paper that does not contain any letterhead.
    • Representative firm name or plan sponsor name appears on top or bottom of any page of the Appendix C or applicable Schedule.

    • Plan sponsor or representative logo appears on any page of the Appendix C, Schedule C or applicable narrative attachment.

    2. The documents have not been modified by the plan sponsor or their POA. If modified, the taxpayer must submit a new Appendix C or Schedule that has not been modified or an individually drafted traditional compliance statement will be prepared by the Specialist.
    • Removal of items and language from Appendix C or Schedule.

    • Modifying the correction methodology on a Schedule.

    • Modifying the Enforcement Resolution Language on Appendix C.

    3. The EIN, Plan Name and Plan # must appear on each page of the documents. Verify that these items are included on each page of the submitted documents and that such information is consistent. If items are missing or the information is not consistent on all pages, secure revised pages as necessary.
    • EIN is on one page, but is missing on other pages.

    • Plan name listed on Appendix C model compliance statement is different than the plan name listed on enclosed Schedule or Form 8950.

    4. Section 1 of the Appendix C model compliance statement was completed properly. Verify that applicable line items are properly completed and are not left blank or labeled as "NA."
    • Applicant's Name is not completed.

    • Applicant's EIN is omitted or conflicts with other information in the case file or Appendix C pages.

    5. Attachments are properly referenced as official attachments to Appendix C or to an Appendix C Schedule. Verify that narrative attachments have been properly labeled as an attachment to the model documents.
    • A listing that details specific late amender failures associated with the Pension Protection Act of 2006 is not labeled as an attachment to Schedule 1

    • A representative's cover letter contains information regarding correction methodology, but such information is not part of the narrative attachment associated with Part III of Appendix C.

    6. Schedule 1 is accurate and complete. Review for the following types of issues:
    1. Incorrect listing of items as late interim amendments even though such amendments were adopted after the end of the applicable remedial amendment cycle (RAC) that first included them.

      Note:

      These failures are not late adoptions of interim amendments.

    2. Failure to include copies of executed amendments with the VCP submission. This is mentioned in Section II and is a required enclosure.

    3. POA or TP lists incomplete failure descriptions in Section 1. The plan sponsor or their representative must provide a list of each interim amendment(s) that was adopted late.

    4. Failure to incorporate by reference an attachment listing the interim amendments that were not timely adopted.

    • Schedule 1 lists several good faith amendments for EGTRRA that were adopted late. The corrective amendments included with the VCP submission were adopted in 2014. The RAC for EGTRRA amendments has expired prior to 2014, therefore, Schedule 1 is not available. The failure to timely adopt these amendments requires the use of Schedule 2 as the plan is a late amender for the applicable Cumulative List that first included these items.


    • The Schedule 1 indicates that the plan failed to timely adopt interim amendments for final regulations associated with IRC 415 final regulations. The VCP case contains no signed amendments.

    • The Schedule 1 indicates that interim amendments associated with the Pension Protection Act of 2006 were adopted late, it failed to list the specific provisions that were adopted late.

    • See example discussed above in item 5.

    7. Schedule 2 is accurate and complete. Review for the following types of issues :
    1. Multiple consecutive boxes with regard to Cumulative List (CL) failures are checked.

    2. Missing copy of the plan document in effect prior to the adoption of the corrective amendments is included with the submission.

    3. Copies of corrective plan amendments or restatements, including a copy of a signed 403(b) written plan (if applicable) that resolve all late amender failures are not included with the VCP.

    4. Addition of amendment failures to the “Other Box” in Part 1 that are not late interim amendment failures. Instead they are operational failures.

    5. Addition of non-interim amendment failures to Section 1 that are considered operational failures.

    1. Item #1: No submission should have consecutive cycles checked. Multiple CLs can be checked if the plan is late for more than one cycle.

    2. Item #2: It is a required item mentioned in the Part IV Enclosure list.

      Note:

      For late amender failures that occurred before 2002, it may be reasonable to accept "snap-on" amendments if no restated plan documents can be secured by the plan sponsor.

    3. Item #3: These documents are required items mentioned in Section II and the Section IV Enclosure list.

      • It is not acceptable to simply refer to interim amendments associated with a specific tax law or a Cumulative List.

      • Instead each interim amendment provision that was adopted late must be listed separately.

      • Items must be described with a level of specificity similar to the descriptions in the Cumulative List. Any acronyms must be defined.

    4. Item #4: Examples include:

      • References to "Technical Amendments"

      • Errors made while completing an adoption agreement or in the drafting of an adopted plan document.

      • References to late discretionary amendments.

    5. Item #5: Examples include:

      • References to "Technical Amendments"

      • Errors made while completing an adoption agreement or in the drafting of an adopted plan document.

      • References to late discretionary amendments.

    8. Missing Items If any of the above items are missing or the information is not consistent on all pages, secure the missing items or request revised pages, as necessary.
    • Page 1 of Appendix C lists an EIN, however the EIN listed on subsequent pages is different.

7.2.2.10  (09-29-2014)
Procedures for Compliance Fee Issues

  1. Occasionally, compliance fees may be waived and/or refunded under certain circumstances for the following types of cases:

    1. Ineligible Cases

    2. FDIC Cases

    3. 457(b) Plans

    4. Orphan Plans

    5. Overpayments

      Types of Cases Circumstances for Waiver or refund include: Additional Information and Instructions
      Ineligible Cases The compliance fee will be refunded if the VCP case is closed as "ineligible" . Refund procedures are in IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP Compliance Fees Ineligible cases are:
      • VCP submissions where the plan sponsor fails to describe an actual qualification failure or other failure that can be addressed as provided in Rev. Proc. 2008–50IRB 464 or Rev. Proc. 2013–12IRB 2013–4.

      • VCP submissions where it is determined that the Plan or plan sponsor was "Under Examination" at the time the VCP submission was mailed to the IRS.

      • 403(b) submissions where all of the failure(s) reported in the submission relate to pre-2009 years, but are not one of the 403(b) operational failures defined in Rev. Proc. 2008-50, as outlined in IRM 7.2.2.2, Types of Failures . Typically this involves a failure to follow the terms of a written plan in pre-2009 plan years.

      FDIC Cases The compliance fee will not be required (and if it has been paid will be refunded) if the VCP case was submitted by the FDIC (Federal Deposit Insurance Corporation). See IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP Compliance Fees
      • These are VCP submissions made by the FDIC on behalf of a bank that the FDIC has taken over and is in the process of terminating the bank's plan.

      • Specialists will not pursue any missing compliance fees and will refund any compliance fee that may have been paid by the FDIC on any open case.

      457(b) Plans VC submissions involving 457(b) plans where VC declines to accept the submission for additional processing and the plan sponsor included an initial payment with their submission. See IRM 7.2.2.21, Voluntary Submissions involving 457(b) Eligible Plans of Deferred Compensation
      Orphan Plans The Eligible Party may make a written request for waiver of the compliance fee in a submission with respect to a terminating Orphan Plan. The Specialist will:
      • Review the written explanation submitted by the Eligible Party to see if it is appropriate to waive the compliance fee. See IRM 7.2.2.10.3, Compliance Fee Waiver Requests Involving Terminated Orphan Plans, for detailed procedures on evaluating these requests.

      • Document the consideration of the request, and decision in the Form 5464, , Case Chronology Form or case workpapers.

      Overpayments VCP submissions where the Applicant has simply overpaid the owed compliance fee and/or situations where they are entitled to a reduced fee but paid the full fee. The Specialist will refund the difference between the full and reduced fee. See IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP Compliance Fees
  2. Soliciting Additional Compliance Fees: Follow these procedures with regard to soliciting additional VCP compliance fees. The Specialists should determine whether the plan sponsor owes additional compliance fees to the IRS with respect to their VCP submission under the following circumstances.

    1. Errors - An error discovered while verifying the correct fee as discussed in IRM 7.2.2.7, VCP Submissions-Initial Review.

    2. Egregious or Intentional Failures - The additional fee imposed by Rev. Proc. 2013-12 Section 12.07 (Section 12.06 of Rev. Proc. 2008-50) because the failures in the VCP submission are egregious or intentional.

    3. SEP or SIMPLE IRA with retention of excess assets - The additional fee imposed by Rev. Proc. 2013-12 Section 12.06 (Section 12.05 of Rev. Proc. 2008-50) because the VCP submission involves a SEP or SIMPLE IRA plan where excess assets are retained within the affected IRA accounts.

    4. Group Submission - The fee imposed by Rev. Proc. 2013-12 Section 12.05 (12.04 of Rev. Proc. 2008-50) for Group Submissions covering more than 20 affected plans must be collected.

    5. DO 8-3 Closing Agreement - The collection of a sanction payment imposed by any VC DO 8-3 closing agreement not previously collected by VC.

    6. Additional fee - The additional fee imposed in lieu of not pursuing additional income tax imposed by IRC 72(t) as allowed by Rev. Proc. 2013-12 or Rev. Proc. 2008-50 Section 6.09(6).

    7. Follow the collection procedures in Securing Additional Fees-Procedures detailed in IRM 7.2.2.10.1, Instructions on Soliciting Compliance Fees Owed if an additional compliance fee is owed.

  3. Follow the detailed refund procedures in IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP Compliance Fees, if a full or partial refund of the paid compliance fee is due to the appropriate entity who paid such fee.

  4. Dishonored Compliance Fee Checks

    1. The Beckley Service Center will notify the EP/EO Adjustments Unit, Group 7845 that a compliance fee associated with a VCP submission has been dishonored.

    2. Group 7845 will determine the location of the VCP case by checking TRAC-ERIM.

    3. If the VCP case is assigned to a specific group, the Group Manager will be notified of the dishonored check. The Group Manager will contact their employee.

    4. If the VCP case is not assigned to a specific group or person, Group 7845 will contact the Manager of the EP Determinations Group 7526.

    5. The Manager of EP Determinations Group 7526 will pull the unassigned case and assign it to select EP Determinations personnel.

    6. Select EP Determinations personnel or Specialist will contact the TP or POA and attempt to secure payment of the VCP compliance fee. The sample 21 day letter Letters V-6a (assigned to official Letter 5344) or V-6b (assigned to official Letter 5345) has an item that deals with this matter.

    7. If the POA or TP does not submit payment of the compliance fee, the VCP case will be closed as a rejected case using TRAC-ERIM status code 34.

    8. If the POA or TP agrees to pay the compliance fee, this new payment will be treated as an additional payment on an existing case and EP Determinations personnel or Specialist will follow the IRM 7.2.2.10.1, Instructions on Soliciting Compliance Fees Owed, procedures regarding the solicitation of the additional fee.

    9. Once the new payment is recorded on HQEP, the select EP Determinations personnel will include this payment information in the VCP case file via a new HQEP printout. If the case is being worked by a VC group the Specialist will also place the new HQEP printout in the case file.

    10. The Specialist will hold the case file for approximately 30 days to ensure the validity of the 2nd check. This waiting period does not apply to EP determinations personnel who are screening the VCP case for missing items.

    11. If the 2nd check is dishonored, the VCP case should be closed as a failure to respond case. Use closing letter V-05d (assigned to official Letter 5343). Closing information for TRAC-ERIM purposes is as follows:

      Enter these closing codes on TRAC-ERIM if a dishonored check has not been secured:
      Status Code is 34
      Failure Code is 99D
      Correction Code is U
      Years affected are 0000

7.2.2.10.1  (09-29-2014)
Instructions on Soliciting Compliance Fees Owed

  1. The following instructions/procedures are used by Specialists to solicit additional or missing compliance fees that may be owed on a specific VCP submission case that has been assigned to them. This applies to any open VCP submission, including cases submitted in accordance with Rev. Proc. 2008-50 provisions.

  2. The Specialist must discuss the fee issue with their Group Manager and/or Group Coordinator and secure their agreement that the additional (or missing) compliance fee is owed. Such discussion should be documented in the Form 5464, Case Chronology Record.

  3. The Specialist should discuss the matter with the POA or TP and get their concurrence that the additional compliance fee is owed to the IRS.

  4. To ensure that the additional fee payment is credited to the proper VCP case, the Specialist should send to the TP or POA a partially completed Fee Letter. This Fee Letter is on the VC SharePoint site.

  5. Before mailing or faxing the Fee Letter to the POA or TP, the Specialist must complete the following items on the Fee Letter:

    1. Enter the 9 digit VCP Case number that is listed on the EPCRS Inventory Control WorkSheet into the box labeled "HQEP (ERIM) Control Number."

    2. Enter the name of the plan sponsor (Employer) into the box labeled "Applicant" . In most cases this should be the same name that is listed on the EPCRS Inventory Control Worksheet.

    3. Enter the name of the Plan into the box labeled "Plan Name" . In most cases this should be the same name that is listed on the EPCRS Inventory Control Worksheet.

    4. Enter the EIN number into the box labeled "Employer Identification Number" . In most cases this should be the same number that is listed on the EPCRS Inventory Control Worksheet.

    5. Enter the 3-digit plan number into the box labeled "Plan Number" . In most cases this should be the same number that is listed on the EPCRS Inventory Control Worksheet.

    6. Enter his or her name into the box labeled "Name of IRS Employee Who Requested the Compliance Fee" .

    7. Enter the amount of the additional compliance fee that is owed to the IRS in the box labeled "Amount of Additional Compliance Fee being Submitted" .

  6. The Specialist should tell the POA or TP to follow the instructions on the Fee Letter. This means that they must fill in the date and the IRS address box. In addition, the POA or TP must submit a partially completed Form 8951.

    Note:

    Remind the taxpayer/POA that the completed Fee Letter, partially completed Form 8951, the check for the additional fee and a copy of such check must be mailed together to the IRS Service Center in Covington, KY. See Form 8951, Compliance Fee for Application for Voluntary Correction Program (VCP). Copies of these documents should be obtained from the POA or TP by the Specialist.

  7. After the check has been deposited by the Service Center, it is expected that the Specialist will be contacted and provided proof that the IRS has received the payment and that it has been deposited and recorded on the HQEP system. However, it may be more efficient for the Specialist to have their Group Manager check TRAC-HQEP once they know that the additional fee has been sent to the Service Center.

7.2.2.10.2  (09-29-2014)
Refund Procedures and Instructions for VCP Compliance Fees

  1. If a Specialist believes a full or partial refund is applicable special procedures apply. Follow these instructions when it has been determined that a refund is owed:

    1. Discuss the fee issue with your Group Manager and/or Group Coordinator and confirm that a full or partial refund of the paid fee must be made. The discussion should be documented in the VCP case file. This can be done via an email exchange, VCP workpapers or on Form 5464, Case Chronology Record.

    2. Discuss the fee issue with the POA or TP and obtain agreement that a full or partial refund is owed.

    3. Prepare a refund request and submit it to your Group Manager once all parties have agreed as to the appropriateness and amount of the refund.

    4. Complete Part 1 of the VCP Refund Form.

    5. Prepare Form 3210, Document Transmittal. A sample Form 3210 illustrating the proper way to complete it is on the VC SharePoint site.

    6. When closing the VCP case, follow the instructions in IRM 7.2.2.25, Required Use of Standardized VC Letters, for the appropriate closing letter to use when a refund is or was issued.

      Note:

      Standardized VC closing letters are on the VC SharePoint site.

  2. Include the following when preparing a refund request:

    1. A VCP Refund Form, with Part 1 completed,

      Note:

      VCP Refund Form is located on the VC SharePoint site

    2. A copy of the HQEP printout, and

    3. A partially completed Form 3210, for your manager to use when forwarding the refund request for processing.

  3. Follow these instructions for completing Complete Part 1 of the VCP Refund Form.

    Note:

    For items 1(A) through 1(G), use the information on the HQEP printout that is in the VCP case file. If the printout is not in the case file, contact your Group Manager and he or she will provide it to you.

    1. Part 1(A): Enter the Name of the Payor or Entity listed on the HQEP printout. Also, enter the mailing address for the payor. If you do not have an actual mailing address for the Payor/Entity, contact the power of attorney or taxpayer to secure the mailing address.

      Note:

      Compliance fees can only be returned to the Payor/Entity listed on HQEP. The plan sponsor is often not the one who wrote the compliance fee check.

    2. Part 1(B): Enter the Name of the Plan.

    3. Part 1(C): Enter the Date Received that is recorded on the HQEP printout.

    4. Part 1(D): Enter the 9 digit TRAC-ERIM number (beginning with “911”) listed on the HQEP printout. It should match the number recorded on the EPCRS Inventory Control Worksheet. If the numbers differ, contact your Group Manager before proceeding any further.

    5. Part 1(E): Enter the fee originally paid as recorded on the HQEP printout. If the amount shown on the HQEP printout differs from the amount shown on a copy of the compliance fee check that may be part of the VCP case file, contact your group manager before proceeding any further.

    6. Part 1(F): Enter the check number that is recorded on the HQEP printout.

    7. Part 1(G): Enter the name of the bank that is recorded on the HQEP printout.

    8. Part 1(H): Enter the amount of the refund in the box next to “Amount To Be Refunded.“ Also, enter the refund amount in columns 1 and 2 of the table entitled “Refund Breakout.”

      Note:

      The 3rd column is always $0

      .

    9. Part 1(I): Use the drop-down menu to indicate whether the VCP case was a Rev. Proc. 2008-50 case or Rev. Proc. 2013-12 case.

    10. Part 1(J):. Explain why the fee paid is incorrect.

    11. Part 1(K): Sign and date the form. An electronic signature is preferred, in order to speed processing.

    12. Email the electronically signed form to your Group Manager. Attach Form 3210, Document Transmittal, partially completed as described in paragraph (4) of this subsection, along with the HQEP printout to the email.

      Note:

      If you signed the form by hand, mail or fax it to your Group Manager, along with a copy of HQEP printout and Form 3210.

  4. If a Group Manager receives a refund request from a Specialist, special procedures apply. The Group Manager should:

    1. Review the form to determine if it is accurate and consistent with prior discussions within five business days of receiving a refund request from a Specialist. If there are questions or the form was not completed properly, the Group Manager will contact the specialist to resolve the questions and secure a new refund form if necessary.

    2. Sign and date Part II of the refund form, if the form is accurate and the Group Manager believes the refund should be issued. If the Group Manager received an electronically signed form he or she is encouraged to sign the form with an electronic signature so that it can be E-mailed to the EP/EO Adjustments Unit, Group.

    3. Update the case record on TRAC-ERIM. Input the following into the "Explanation" field on the case information page: "Refund form sent on {date} (showing the date the form was sent to the EP/EO Adjustments Unit, Group)." Briefly explain the reason for the refund and amount of the refund.

      Note:

      Update "Sanction" field to reflect the actual fee, if any, net of the refund. If zero, enter $1.

    4. Send the signed refund form, a copy of the HQEP screen printout for the case, and the completed Form 3210, Document Transmittal to the designated individual in the EP/EO Adjustments Unit, Group 7845. The information can be sent by email, fax or mail.

    5. Follow-up with the EP/EO Adjustments Unit, if some form of acknowledgement (i.e. signed Form 3210, Document Transmittal, email) indicating receipt of the refund request is not received within 10 days.

7.2.2.10.3  (09-29-2014)
Compliance Fee Waiver Requests Involving Terminating Orphan Plans

  1. Compliance fees associated with VCP submissions generally may not be waived by the IRS.

  2. An Eligible Party who makes a VCP submission on behalf of a terminating Orphan Plan may request that the IRS waive any applicable VCP compliance fee. Such request is not automatic and will not be granted in all circumstances. See Rev. Proc. 2013-12IRB 2013-4, section 12.02(4).

    1. If the VCP submission was made in accordance with Rev. Proc. 2008-50IRB 464 provisions, the fee waiver request must be part of any applicable cover letter. For submissions made in accordance with Rev. Proc. 2013–12, the applicable box on Form 8951, Line 8j must be checked.

    2. The VCP applicant must satisfy the definition of "Eligible Party" in section 5.03 of the EPCRS revenue procedure. As with all VCP submissions involving Orphan Plans if the applicant has not established that it is an Eligible Party the submission cannot be processed and the VCP should be closed as a no action case. See Rev. Proc. 2013–12, section 11.10 and Form 8950 Instructions.

    3. A written explanation that details or justifies why the IRS should waive the compliance fee must be part of the VCP submission. If that information is missing, the Specialist must secure it. See Rev. Proc. 2008–50 or Form 8951 if the VCP submission was made in accordance with Rev. Proc. 2013–12 provisions.

  3. All compliance waiver requests should be analyzed based on the facts and circumstances. Waiver requests should not be granted unless the information presented to the IRS provides justification as to why the fee waiver should be granted.

    1. A claim of financial hardship alone is not sufficient unless such claim is supported by additional information to support the existence of a financial hardship. Secure additional information to support the financial hardship.

    2. If the fee waiver request is made by an Eligible Party who is a widow/widower and is the sole beneficiary of a plan that has never been subject to ERISA it is appropriate to consider the assets they will be receiving due to the plan's termination when determining whether a financial hardship exists with regard to the Eligible Party. Generally, these retirement plans are sponsored by very small businesses where participation at all times has been limited to owner employees and their spouses.

      Note:

      Significant plan assets do not mean that the widow/widower is not experiencing a financial hardship as the individual may have liabilities that exceed plan assets.

    3. If the Eligible Party is a court appointed representative for the plan on behalf of the participants who have assets in the plan, it may be appropriate to apply a more liberal standard if there are multiple participants. However, such submission should still include an explanation to support the waiver request.

  4. If there is uncertainty over whether the fee waiver request should be approved, the Specialist should refer the matter to the Group Manager or Group Coordinator.

  5. If the fee waiver request is not approved, the Specialist must notify the Eligible Party (or their representative) who made the VCP submission of the IRS's decision. At this point, the Specialist must solicit the owed compliance fee from the Eligible Party following the procedures in IRM 7.2.2.10.1, Instructions on Soliciting Compliance Fees Owed, before continuing to process the case.

7.2.2.11  (09-29-2014)
Special Tax Relief Requests

  1. Generally, excise taxes and income tax consequences associated with qualification failures cannot be resolved through EPCRS. However, plan sponsors may make a written request that the IRS not pursue certain specific income and excise taxes imposed by IRC 72(t), IRC 4972, IRC 4973, IRC 4974 and IRC 4979 associated with certain operational failures.

  2. The special tax relief can only be obtained through VCP. It is not available through SCP or Audit CAP.

  3. Special tax relief is not granted automatically; in some cases it will be approved in appropriate cases and only if certain conditions are met. The following table provides the tax relief provided by Section 6.09 of the EPCRS revenue procedure and includes the requirements/conditions, and how to evaluate requests.

    Tax Requirement/Conditions Evaluating Requests
    IRC 72(t)-special additional income tax. See Rev. Proc. 2008-50 or Rev. Proc. 2013-12 Section 6.09(6). Limited to correction of Overpayments associated with premature distributions of a vested benefit. Consult with your Group Manager or Group Coordinator before discussing with plan sponsor.
    Written request justifying tax relief must be part of the VCP submission. It may be appropriate to provide 100% relief from the IRC 72(t) tax if the Overpayment was inadvertent. No additional fee is needed.
    Participant/beneficiary must return the Overpayment to the Plan. For owner employees and HCE participants it may be appropriate to deny such relief if there are indications that the Overpayment distribution was deliberate.
    No tax relief from regular income tax consequences of receiving an Overpayment as discussed in section 6.06 of Rev. Proc. 2008-50 or Rev. Proc. 2013-12. If it is not clear after analyzing all facts and circumstances as to whether the Overpayment was deliberate or inadvertent, the Specialist may:
    1. recommend tax relief from IRC 72(t), and

    2. must collect an additional compliance fee equal to 50% of the additional 72(t) tax if the relief is granted.

     
    IRC 4972-Excise Tax on non-deductible contributions. See Rev. Proc. 2008-50 or Rev. Proc. 2013-12 Section 6.09(3). Written request justifying tax relief must be part of the VCP submission. Consult with Group Manager or Group Coordinator before discussing with plan sponsor.  
    Limited to situations where corrective contributions paid to a plan are not tax deductible. Specialist may recommend that VC reject the request if the corrective contributions primarily benefit HCE or owner employees.  
    Specialist may recommend relief from the IRC 4972 tax if the corrective contributions primarily benefit NHCE participants.  
    IRC 4973-Excise Tax imposed on excess contributions to a 403(b) Plan and IRA. See Rev. Proc. 2008–50/2013–12 Section 6.09(5) Limited to situations where excess contributions were made to a 403(b) plan or to an IRA. Consult with Group Manager or Group Coordinator before discussing with plan sponsor.  
    Written request justifying tax relief must be part of the VCP submission. The Specialist may recommend relief from the IRC 4973 tax if the excess contributions primarily benefits NHCE participants.  
    Participant/beneficiary must remove excess amounts (adjusted for earnings) from the 403(b) plan or IRA and treat it as a taxable distribution Or Specialist may recommend that VC reject the request if the corrective contributions primarily benefit HCEs or owner employees.  
    Participant/beneficiary must remove the excess amounts from the 403(b) plan or IRA (adjusted for earnings) and returns that amount to the plan.  
     
    IRC 4974-Excise Tax imposed on late Required Minimum Distributions of IRC 401(a)(9). See Rev. Proc. 2008-50IRB 464 or Rev. Proc. 2013-12IRB 2013-4 section 6.09(2). If some affected participants are owner employees, including a 10% owner of a corporation, a written explanation supporting the request must be submitted. If the affected participants are limited to NHCE participants, the Specialist should automatically approve the request unless there are some unusual facts or circumstances.  
    Accumulated RMD amounts (adjusted for earnings) must be distributed to the affected participants and beneficiaries. For owner employees, the request should be approved if the failure was inadvertent and does not appear egregious.  
    Specialists should consult with Group Manager or Group Coordinator if unsure if the request should be granted or if request involves some unusual circumstances.  
    IRC 4979-Excise Tax imposed on certain excess contributions defined in IRC 4979(c) & (d) resulting from an operational failure. See Rev. Proc. 2008–50 or Rev. Proc. 2013–12, section 6.09(4). Limited to ADP/ACP testing failures where correction of excess contributions does not occur within 2 ½ months after close of plan year. Consult with Group Manager or Group Coordinator before discussing with plan sponsor  
    Not available if the ADP/ACP test was not prepared in a timely manner. Determine whether the original ADP/ACP test was performed timely, but was inaccurate due to incorrect data. If the original test was prepared after the 2 ½ month deadline then do not approve tax relief request.  
    Written request justifying tax relief must be part of the VCP submission. If the original ADP/ACP test failed, determine if corrected within 2 ½ months after the end of the year.  
     

7.2.2.12  (09-29-2014)
Power of Attorney Form 2848 and Form 8821

  1. Individuals named on Form 8821 are not considered taxpayer representatives and cannot act as a Power of Attorney with regard to any VCP submission. The only right they have is to receive copies of IRS correspondence addressed to the plan sponsor.

    Note:

    Specialists may not call or write to individuals named on Form 8821 to discuss any issues pertaining to the VCP submission.

  2. Verify that the Form 2848 is valid before contacting or sending out any correspondence to any named person that is not the plan sponsor.

  3. All Forms 2848 should have a revision date of (Rev. 7-2014) if the submission was made after September 1, 2014. If the submitted Form is an earlier version, the Specialist will need to solicit a new Form 2848.

  4. For all VCP submissions, Specialists should review Form 2848 in order to ensure that it was completed properly in accordance with the following instructions:

    1. The taxpayer name and EIN should be that of the plan sponsor or other entity making the submission. See "Who May File" on the Form 8950 Instructions.

    2. Line 3 (Matters) should be filled out in a sufficient manner to describe the matter covered, as described in paragraph (3) of this subsection.

    3. The named representative must satisfy the Power of Attorney requirements discussed in Rev. Proc. 2013-12 Section 11.07 and Rev. Proc. 2012-4 sections 9.02(11) and (12). An “Unenrolled return preparer” cannot be a Power of Attorney with regard to any VCP submission.

    4. The representative must sign and date the Form 2848 with an original signature.

    5. The Form 2848 must be signed by an officer/owner of the plan sponsor. If the plan sponsor is other than an individual, ensure the printed name of an officer/owner, title, and name of business is included.

  5. Follow these instructions for completing Line 3 - Matters.

    1. The entry for "Description of Matter" should clearly indicate that the Representative is appointed to represent the taxpayer in connection with the VCP submission.

      Example:

      The matters description need not refer to the EPCRS Rev. Proc. as long as Form 8950 is referenced, as in the following:
      •"Voluntary Correction Program Submission"
      • Abbreviations such as: "VCP" or "RP"

    2. The entry for Tax Form Number should list "8950" if the submission was made in accordance with the provisions of Rev. Proc. 2013-12. It is not necessary to list "8951" but the inclusion does not make the Form 2848 unacceptable.

      Note:

      If the Form 2848 is associated with a Rev. Proc. 2008–50 submission this column can read "N/A" or "Not applicable" .

    3. Generally, "Years or Periods column" should be marked with "Not applicable or N/A" as provided for in the Form 2848 instructions. Alternatively, it can include the years, provided the dates listed correspond to the period of the failure(s) noted in the submission.

  6. An "anonymous" VCP will not include a Form 2848. See IRM 7.2.2.20, Anonymous VCP Submissions, for more details regarding the processing of Anonymous VCP cases.

7.2.2.13  (09-29-2014)
Required Determination Letter Application with VCP Submission

  1. If a 401(a) plan qualification failure is being corrected via a retroactive plan amendment a plan sponsor may need to include a determination letter (DL) application with their VCP submission. The Specialist must determine whether a DL application is required.

  2. Section 6.05 of Rev. Proc. 2013-12 (and Rev. Proc. 2008–50) details when such DL application is submitted to the IRS. The following table describes when a DL application must be included with a VCP submission. If it is not required then a determination letter application may not be included with the VCP submission.

    Qualification Failure Plan is Individually Designed at the Time of the Failure Plan is Pre-approved Plan at the Time of the Failure
    Failure to timely adopt tax law changes involving major legislation. Form 5300/5310 Application must be included with any submitted VCP submission. No DL Application is required and may not be submitted with the VCP submission if the plan sponsor adopts an IRS pre-approved plan document to correct each late amender failure.
    No application is required and may not be submitted with the VCP submission if the failure is being corrected via the adoption of IRS model amendments or pre-approved plan documents.
    Operational Failures that are corrected via retroactive plan amendments. If the Plan is On-cycle at the time the VCP submission is sent to the IRS, A Form 5300/5310 application must accompany the VCP submission. No DL Application is required and may not be submitted with the VCP submission if the plan sponsor adopts an IRS pre-approved plan document for which the plan sponsor has reliance.
    If the Plan is Off-Cycle at the time the VCP submission is sent to the IRS then no DL application is required and may not be submitted with the VCP. A DL application may be required if the corrective amendments cause the plan sponsor to lose its reliance on the IRS issued opinion letter. IRM 7.2.2.28, Corrective Plan Amendments To Pre-Approved Plans, for procedures dealing with corrective amendments to pre-approved plans.
    An Off-Cycle plan sponsor is required to submit a determination letter application during the next on-cycle period.
    Late Interim Amendment/Optional Tax Law changes. If corrective amendments are adopted before the beginning of the applicable On-Cycle period then no DL application is required and may not be submitted with the VCP. No DL application is required and may not be submitted with the VCP submission.
    If adopted after the beginning of the applicable On-Cycle period, but no later than the last day of the applicable cycle then a determination letter application must be included with the VCP.  
    Demographic Failures. No DL application is required and may not be submitted with the VCP submission. No DL application is required and may not be submitted with the VCP submission
  3. VCP cases are generally separated from related determination letter applications before VCP cases are assigned. Check the "DL Required" field on the EPCRS Inventory Sheet.

    1. If the field has a "1" or a set of numbers that means a related DL application was submitted.

    2. If there is an "N" then no DL case number was recorded on TRAC-ERIM possibly indicating that a related DL application was not submitted with the VCP.

    Follow these instructions if a determination letter application is required by section 6.05 of Rev. Proc. 2013-12 (or 2008-50, if applicable):

    IF THEN the Specialist should Special Instructions
    (1) An “N” indicator is in the "DL Required" field on TRAC-ERIM Check any included cover letter and EDS to determine if a required DL application was submitted concurrently with the VCP.
    Alternatively, email the information to their Group Manager and ask them to update TRAC-ERIM.

    Note:

    Specialists who do not have access to EDS should consider securing access by completing Form 5081 or contact your manager to see if some other individual can check EDS.

    (2) The DL application is on EDS, but the ERIM-TRAC Field contains an "N" indicator Note the DL case number and mark the EPCRS Inventory Sheet with the information. The specialist should check EDS and coordinate with EP Determinations if the DL case has been assigned to a EP Determinations group or specialist.
    (3) There are indications a related DL application is associated with a VCP submission or the DL ERIM-TRAC field contains one or numbers. Check EDS before closing the VCP case to determine if a related DL case was submitted to EP Determinations and has assigned to a EP Determinations group or agent.

    Note:

    Specialists who do not have access to EDS should consider securing access by completing Form 5081 or contact your manager to see if some other individual can check EDS.

    (4) A required DL application has not been submitted, Request that a complete DL application with the applicable user fee, be submitted to Covington, KY.

    Note:

    This DL application should include a cover letter indicating that the DL is part of a VCP submission and disclose the VCP case control number.

    (5) The case is assigned, Employees in VC should coordinate with EP Determinations to determine if there are any additional failures or problems with the corrective plan amendments.

    Note:

    Specialists who do not have access to EDS should consider securing access by completing Form 5081 or contact your manager to see if some other individual can check EDS.

    (6) The DL application has not been assigned, No further coordination is necessary if the VCP is otherwise ready to be closed. The Specialist may close the VCP case if the related DL has been assigned.
  4. Obtain confirmation from the plan sponsor or representative that the DL application was mailed to Covington, KY and verify its establishment on EDS. The Specialist should make a note of the DL case number on the EPCRS Inventory Control Worksheet before closing the VCP case.

  5. The Specialist documents the Form 5464, Case Chronology Record or individual workpapers whether a DL application was required to be included with the submission, and if it was included or how it was obtained.

7.2.2.14  (09-29-2014)
Contacting and Corresponding with Applicant and POA representative

  1. POA/Applicant may be contacted by telephone or in writing. Any contact made by telephone should be documented in the Form 5464, Case Chronology Record and include the name of the person contacted and summary of what was discussed.

  2. Letters or faxes must be sent out concurrently to both the Applicant and appropriate individual listed on Form 2848 or Form 8821, if applicable.

  3. The table below lists the types of contact and the conditions relating to their use with taxpayers:

    Type of Contact Special Conditions
    Letter
    • Specialists should use the Sample Letters that are on the VC SharePoint when requesting additional information or when asking for an Applicant's signature on a compliance statement or closing agreement.

    • The Applicant and his or her representative must receive a copy of all letters sent. If the original IRS letter is addressed to a POA use Letter V-23B as a cover letter when sending the copy to the Applicant. If the letter was addressed to the VCP Applicant use Letter V-23A as a cover letter when sending the copy to the representative listed on Form 2848 or individual listed on Form 8821.

      Note:

      See Exhibit 7.2.2-1 for links to the latest versions of these Sample Letters IRM 7.2.2.25, Required Use of Standard VC Letters, for the required use of standardized VC letters.

    Fax
    • The Specialist should contact the plan sponsor/POA before faxing, if the fax includes personal identifiable information (PII).

    • Group Managers and Specialists are encouraged to sign up and use EEFAX.

    E-Mail
    • Use of email must follow IRM 1.10.3, Standards for Using E-Mail.

    • Specialists cannot send email to taxpayers or POAs for any reason. Taxpayer email addresses are considered PII information.

    • If the VCP applicant or representative sends an email with PII information, it must be moved to a secure file or be encrypted.

    Note:

    See paragraph (4) for information you can relay to the taxpayer and their POA about sending email to the IRS.

  4. If a VCP applicant or representative wishes to send an email to the Specialist, inform them of the following:

    • Email sent to the IRS is not secure and the IRS cannot guarantee the security of any information sent via email.

    • The IRS prefers that any information sent to the IRS be accomplished by mail or fax.

  5. All written requests for additional information should be in “Plain Language”, and be free of grammatical and spelling errors.

  6. For initial requests, Specialists should allow for a 21-day response time.

    1. If the plan sponsor does not respond to an initial request for additional information, follow-up by telephone to ensure that the initial request has been received. Document the conversation in the Form 5464, Case Chronology Record. If no response to the initial request is ever received, the Specialist should follow-up with a 10-day letter. If the 1st request was done via the telephone, the sample 10 day letter should be modified before issuance.

    2. If no response received to the 10 day follow-up letter, the Specialist, including EP Determinations personnel who are working or screening VCP cases should call the plan sponsor/POA to make sure he or she received the letter.

    3. If the plan sponsor/POA received the 10 day letter but fails to respond to the letter, consult the Group Manager to determine if the VCP case should be closed using status code 23 as a "Failed to Respond" case.

  7. See IRM 7.2.2.25, Required Use of Standardized VC Letters, for a listing of the appropriate letters to use. The sample letters are available on the VC SharePoint site.

7.2.2.15  (09-29-2014)
Use and Types of VCP Compliance Statements

  1. A compliance statement is generally a written agreement between the IRS and a plan sponsor that results from a successful VCP submission. A more detailed description can be found in Rev. Proc. 2014-4IRB 2014-1 and Rev. Proc. 2008-50 or Rev. Proc. 2013-12 section 10.08(1).

  2. Types of Compliance Statements. Following is a list of the types of VCP compliance statements and their characteristics:

    Type Characteristics NOTES
    Model Compliance Statement, including Schedules •Submitted by plan sponsor or POA using Appendix C documents in Rev. Proc. 2013-12 or Appendix D and Appendix F documents in Rev. Proc. 2008-50

    Note:

    Sample Appendix C documents are on irs.gov as official forms. See Form 14568 for Appendix C and Form 14568-A, Form 14568-B, Form 14568-C, Form 14568–D, Form 14568–E, Form 14568-F, Form 14568–G, Form 14568–H, and Form 14568-I for the applicable Appendix C Schedules.

    Streamlined Compliance Statement.
    • Prepared by Specialist. The Specialist must draft detailed failure descriptions based upon the information submitted by the POA or TP.

    • POA/plan sponsor’s letters and narrative are incorporated by reference and are an official part of the issued compliance statement.

    Note:

    Sample documents are on the VC SharePoint site.

    Traditional Compliance Statement. •Prepared by Specialist.
    •Structured into six basic sections:
    1. Describe the failures

    2. Describe the proposed correction method

    3. Describe the procedures used to locate and notify former employees and beneficiaries

    4. Describe the changes made to administrative procedures so that failures do not recur

    5. Applicant’s Payment

    6. Enforcement Resolution

    Note:

    Sample documents are on the VC SharePoint site.

  3. If a model compliance statement or Schedule (or both) are submitted, those documents will generally be the issued compliance statement.

    1. If the Specialist determines that it is in the best interest of the IRS and/or the plan sponsor, a traditional compliance statement may be prepared.

    2. The Specialist will consult with the Group Manager or group coordinator before preparing a traditional compliance statement.

    3. Specialists should document this discussion in the Form 5464, Case Chronology Record.

  4. If drafting a streamlined or traditional compliance statement, Specialists will use the electronic sample documents posted on VC SharePoint. To the extent that sample language exists (and is appropriate) for failure descriptions Specialists must use it.

  5. Specialists who draft streamlined or traditional compliance statements need to secure the approval of their Group Manager or Group Coordinator before sharing the draft with the plan sponsor or POA. Specialists are encouraged to use E-mail and fax, including EEFAX in getting this approval.

  6. The Specialist should revise the compliance statements in accordance with any comments/revisions from the Group Manager/Group Coordinator. This new draft of the compliance statement should be faxed to the plan sponsor or the POA for review.

    Note:

    The plan sponsor’s/POA’s acceptance of the draft document should be documented in the Form 5464, Case Chronology Record. If the plan sponsor or POA wants changes to the document, such requests should be discussed with the Group Manager or Group Coordinator.

  7. VCP Compliance statements generally do not have to be signed by the plan sponsor. There are a few exceptions to this general rule:

    1. Material change in fact or issues for which a new penalty of perjury statement has not and will not be secured. The inclusion of additional late amender failures is not considered a material change in fact. However, adding new operational failures to an open VCP case would be a material change.

    2. Specialist believes the plan sponsor/POA may not be aware of or understand the terms of the compliance statement and that it is in the interests of both parties that it be signed by the plan sponsor. Before taking this action, the Specialist should consult with the Group Manager and document the discussion in the Form 5464, Case Chronology Record.

    3. Group Submission compliance statements must be signed.

  8. If the compliance statement is to be signed by the plan sponsor, the Specialist should send it out for signature by mailing two copies to the plan sponsor/POA. Use the sample V-13a cover letter that is available on the VC SharePoint .

    Note:

    Specialists are reminded that when using a streamlined compliance statement, attach the referenced letters and/or documents.to each compliance statement.

7.2.2.16  (09-29-2014)
Dealing With Disagreements and Conference of Right

  1. If any part of the submission is not acceptable, the Specialist should notify the POA or plan sponsor requesting any necessary changes and explaining why they are necessary.

    1. If there is disagreement between a Specialist and plan sponsor/POA concerning how a qualification failure should be corrected, changes to administrative procedures or whether a failure has been properly described or is eligible for VCP, the Specialist should discuss the issue with the Group Manager and Group Coordinator.

    2. The Group Manager, Group Coordinator and the Specialist should consult with the Manager of VC and the VC Program Coordinators as appropriate.

  2. If the Specialist’s position is upheld agreement from the plan sponsor/POA should be sought, indicating that the matter has been discussed with the Group Manager and Group Coordinator.

  3. If the taxpayer continues to disagree, the taxpayer is entitled to a formal Conference of Right with the Specialist’s Group Manager.

    1. Generally, the conference will be held via conference call. The Applicant will have 21 calendar days after the date of the conference to submit additional information in support of his or her position.

    2. Any request for an extension of the 21-day period must be made in writing within the 21-day period and must be approved by the Group Manager.

  4. If after the conference call, and consideration of any additional information provided, the Group Manager and Specialist still believe problems with the submission exist, they must discuss the matter with the Manager of VC and the Program Coordinators in order to ensure consistent treatment of taxpayers.

    Note:

    Where appropriate it may be necessary to schedule another conference call with the plan sponsor/POA. At least one Program Coordinator will attend.

  5. If the IRS and plan sponsor/POA cannot reach agreement the VCP submission will be closed and no compliance statement will be issued.

  6. The compliance fee generally will not be returned to the payor if the disagreement relates to failure descriptions, correction methods, changes to administrative procedures or a failure to provide requested information. However, the following exceptions exist:

    1. Anonymous Submissions-If the disagreement is limited to the proposed correction method the payor is entitled to a 50% refund of the paid compliance fee. SeeRev. Proc. 2013-12IRB 2013-4, section 10.07(7), and similar provision in Rev. Proc. 2008-50IRB 464.

    2. If the failure was an issue that was not eligible to be resolved via VCP or a DO 8-3 closing agreement, the payor is entitled to a 100% refund of any paid compliance fee. This applies to all VCP submissions.

      Note:

      See IRM 7.2.2.10, Procedures for Compliance Fee Issues, and IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP Compliance Fees, for more information regarding possible refunds.

  7. If no compliance statement is issued, the Specialist may consult with the Group Manager to determine if it would be appropriate for VC to make a referral to EP Examination. The Manager of VC must be consulted before any referrals are actually made to EP Examination.

    Note:

    The Specialist must document all actions in the Form 5464, Case Chronology Record or workpapers.

7.2.2.17  (09-29-2014)
Analyzing Qualification Failures and Correction Methods in VCP Submissions

  1. Review plan sponsor/POA cover letters, or attachments to Appendix D per Rev. Proc. 2008-50 or attachments to Appendix C per Rev. Proc. 2013-12 to determine if actual qualification failures are present and whether the correction proposal complies with the IRC and EPCRS requirements.

  2. In general, EPCRS may only be used to protect the qualified tax favored status of certain retirement plans and provide limited relief from certain excise taxes or additional income taxes. However, if the plan sponsor/POA requests some additional relief not offered by EPCRS the Specialist should discuss the request with the Group Manager to determine if it would be appropriate to enter into a DO 8-3 closing agreement.

    Note:

    The Manager of EP Voluntary Compliance should be routinely consulted with regard to these requests.

  3. Descriptions of failures, correction methods, and changes to administrative procedures must be reviewed and analyzed. When analyzing the descriptions of failures, correction methods and changes to administrative procedures, the Specialist should consider the following:

    Description Requirements
    The following narrative elements must be present in every VCP Submission
    Common Problems
    Failure descriptions are incomplete.
    General Rule • A detailed and complete description of each qualification failure. • POA/plan sponsor fails to describe an actual failure to comply with the IRC or with the terms of the written plan.
    • A detailed explanation as to how and why each failure arose. • Proposed change in administrative procedures is not an actual change, or would not prevent future failures.
    • A detailed description of the administrative procedures that were in effect at the time the failures occurred.  
    • For Operational, Demographic, or Eligible Employer failures • The description doesn't specify the period of time in which the failures occurred; the number of affected employees and the estimated cost of correction per failure, if applicable.
    • Detailed Correction method and changes in administrative procedures for each failure.  
    Plan Document Failure •Describe how the plan document is defective because either it:
    1. Doesn't comply with the requirements of IRC 401(a) and/or

    2. Wasn't updated to comply with law changes.

    Note:

    For item (i) the Applicant must state why the plan did not comply with 401(a) and for item (ii) the Applicant must list each specific tax law change that was not adopted timely.

    •Plan sponsor fails to specify all the tax laws for which the plan was not amended.
    •Late good faith/interim amendments or late amendments to reflect optional tax law changes cannot be incorporated by a reference to a tax law or Cumulative List. •Plan sponsor fails to define acronyms when describing late amender failures.
    •Amendment failures are described as late good faith/interim amendment failures but the corrective amendment was adopted after the end of the applicable cycle. EPCRS revenue procedure does not classify this item as a late interim amendment issue.
    •Submission narrative does not indicate how the failures are being corrected. In most cases, the plan must be retroactively amended.
    Operational Failure •Failure description must describe a failure to comply with a specific IRC, such as 401(a) or 401(k), and/or a failure to follow the Plan’s written terms. Correction method narrative must be complete and fully describe each step in the proposed correction. •Narrative limited to a failure to conduct testing or errors in testing that relate to top heavy, Actual Deferral Percentage/Actual Contribution Percentage, IRC 410(b) or IRC 401(a)(4).
    •If corrective contributions, allocations, or repayments are to occur, the narrative must describe how earnings are determined. •Narrative that describes the Plan's (or plan sponsor's) problems with IRC 414(h) and IRC 125, FICA compliance and requests relief special tax relief not authorized by EPCRS.
    •For operational failures, separate corrective narratives that focus on how affected terminated plan participants will be handled must be included. •Earnings methodology is not included nor does it specify that they will be provided through the date of correction.
    • Narrative must describe how former employees, participants and beneficiaries will be located. •Submission lacks detail that justifies the use of reasonable estimates.
    •Narrative must describe how lost participants/beneficiaries will be located. •Methodology for locating terminated participants or beneficiaries is missing from the correction methodology narrative.
    •Methodology for locating lost participants/beneficiaries is missing or incomplete from VCP correction narrative.
    •Methodology for locating lost participants refers to discontinued IRS and SSA Letter forwarding programs.
    Ineligible Employer. •Narrative must describe why plan sponsor is not eligible to sponsor the plan. •Correction narrative fails to provide necessary details that fully explain why the plan sponsor is ineligible to sponsor the plan.
    •Correction narrative must indicate that the Plan has already been frozen and that all employer and employee contributions were suspended as of a stated date. This date generally can be no later than the date of the VCP submission. •Correction narrative fails to include the date all employer and employee contributions ceased.
    •Cessation of contributions is not required if continuation of contributions would not be an Employer Eligibility Failure (for example, with respect to a tax-exempt employer sponsoring a 403(b) plan that lost its exempt status and then subsequently regained it). •Correction narrative indicates that contributions were allowed to continue past the date of the VCP submission.
    •For IRC 403(b) and 401(k) plans, correction narrative must indicate that the plan will be terminated or that a frozen plan will be maintained indefinitely subject to the distribution restrictions of the IRC.
  4. VCP allows the plan sponsor/POA to propose correction methods that are outside of the safe harbors described in Rev. Proc. 2008-50 or Rev. Proc. 2013-12 Appendix A or B.

    1. Depending on specific facts and circumstances, alternative proposals may be acceptable.

    2. A prime consideration in evaluating these correction methods is whether the correction method is reasonable given the described facts and circumstances.

    3. Information regarding the plan sponsor’s current financial condition may need to be solicited by Specialists to justify a special exception to full correction.

    4. Specialists are required to consult with the Group Managers or Group Coordinators to discuss the merits of such correction methods. Where appropriate, the Manager of VC or the Program Coordinators may be consulted.

  5. To ensure consistency, any issues that involve 401(h) retiree health benefits, require VC Specialists, Group Coordinators and VC Group Managers to consult with the VC Program Coordinators.

  6. With regard to governmental 401(a) plans, issues involving IRC 414(h) pickup contributions cannot be part of any VCP submission as the taxation of employee contributions does not satisfy the definition of a qualification failure and is not eligible for EPCRS relief.

7.2.2.18  (09-29-2014)
IRC 72(p) Participant Loan Failures

  1. Limited tax relief is provided in Rev. Proc. 2008-50 or Rev. Proc. 2013-12 section 6.07 if part of a VCP or Audit CAP submission is for participant loans that did not comply with IRC 72(p) requirements:

    1. A Form 1099-R can be issued in the year of correction rather than in the year of the deemed distribution. In VCP, this relief must be requested by the plan sponsor/POA.

    2. Alternatively, the plan sponsor can request relief from the income tax consequences associated with a deemed distribution. The IRS will approve this relief in appropriate circumstances if the plan sponsor complies with all of the requirements specified in section 6.07.

  2. Applicants may use Appendix F Schedule 5 in Rev. Proc. 2008-50 or Appendix C Part II Schedule 5 in Rev. Proc. 2013-12 to report participant loans that do not comply with IRC 72(p). Problems noted in VCP cases involving participant loans that do not comply with 72(p) involve:

    1. Sample computations showing original loan terms and new amortization schedule(s) were not included with the submission.

    2. Sample computations and correction narrative does not explicitly state how the loan failure is being corrected.

    3. For defaulted loans, narrative and sample computations do not indicate that missed interest is included in the re-amortized amount.

    4. The re-amortized loan period exceeds the five year period measured from when the loan proceeds were provided to the plan participant. Generally, not permitted by section 6.07 of Rev. Proc. 2008-50 or Rev. Proc. 2013-12.

  3. In submissions where the taxpayer has requested income tax relief from the deemed distribution rules, the Specialist should generally allow income tax relief if all of the applicable rules in section 6.07 of Rev. Proc. 2008-50 or 2013-12 have been met and the failure appears to have been inadvertent. However, it may be appropriate to deny income tax relief if:

    1. There are indications that the participant loans were not bona fide loans. This is evidenced by a lack of a signed loan agreement(s) or indications there was no real intent that the affected loans would be repaid by the plan participants.

    2. Affected loans to owner employees or HCE participants may be held to a higher standard in some cases where the HCE may be responsible for ensuring the loans satisfy the requirements.

    3. Affected loans greatly exceed the maximum loan amount specified by IRC 72(p)(2).

  4. If the participant loan exceeds $75,000 the Specialist must bring this matter to their Group Manager’s/Group Coordinator’s attention. The Group Manager/Group Coordinator will coordinate with the Manager of VC and the VC Program Coordinators to determine whether it would be appropriate to provide income tax relief from the deemed distribution.

7.2.2.19  (09-29-2014)
Correction By Retroactive Amendment To Resolve Operational Failures

  1. Conforms an IRC 401(a) or 403(b) plan document to the Plan's actual operation. Authorized by section 4.05 of Rev. Proc. 2008-50 or Rev. Proc. 2013-12.

    1. Permitted under VCP or Audit CAP.

    2. A very limited exception allows a Plan Sponsor to use SCP to correct certain specific Operational Failures by a plan amendment in order to conform the terms of the plan to the Plan’s prior operations with respect to certain Operational Failures listed in section 2.07 of Appendix B.

  2. To use this type of correction, the amendment must comply with IRC 401(a), including IRC 410(b), IRC 401(a)(4) and IRC 411(d)(6). When reviewing a VCP case that uses this type of correction methodology to resolve operational or demographic failures, the Specialist has an obligation to verify that the amendment complies with those IRC requirements.

  3. If the corrective plan amendment increases participant benefits, Specialists are required to:

    1. Determine if the additional benefits are permitted to be provided by a IRC 401(a) qualified retirement plan and for 2009 and later years, a 403(b) plan.

    2. Determine if the amendment would violate IRC 411(d)(6). Allowing some plan participants, including terminated plan participants to retain excess contributions/allocations in a defined contribution plan may violate IRC 411(d)(6) in some circumstances because had the Plan’s written terms been followed in operation, the Plan’s other participants would have received higher allocations or additional benefits.

    3. If the plan is a governmental plan or 403(b) plan there is no need to evaluate IRC 411(d)(6) since it does not apply. However, Treas. Reg. 1.401-1(a) and (b) require a qualified retirement plan to operate in accordance with its written terms. Beginning in 2009 a similar requirement was imposed on 403(b) plans. See Treas. Reg. 1.403-3(b)(3). Therefore, as a general rule, Specialists should not ignore this requirement by approving retroactive plan amendments to conform the written plan to the Plan’s operation if it would deny some plan participants benefits specified by written terms of the plan document.

    4. Determine if the corrective amendment is non-discriminatory as permitted by IRC 401(a)(4). If HCEs are benefiting, the Specialist should secure additional information to determine if the corrective amendment is non-discriminatory. Additional information may include a detailed benefits/rights or features demonstration or a detailed General Test, or a Demo Nine if dealing with an amendment to the Plan’s definition of Compensation or revised 401(m)/(k) testing.

    5. Inquire about the Plan’s funded status if it is a DB plan. Specialists must ask for the most recent Adjusted Funding Target Attainment Percentage (AFTAP) certification in effect at the time of correction to determine if the Plan’s funding ratio is below 80%. IRC 436 may prohibit any retroactive plan amendments that increase participant benefits or allow for certain restrictive payments.

    6. When evaluating a corrective plan amendment and related general test or average benefits test, Specialist should confirm that short service employees are not improperly used to pass these tests. Refer to the October 22, 2004 Memorandum from the Director of Employee Plans.

  4. If the amendment decreases accrued benefits provided by the written plan Specialists need to carefully review this correction proposal. Specialists will follow these instructions when evaluating such correction proposals:

    1. Reject the amendment if it does not comply with IRC 411(d)(6), and ask the POA or TP to propose an alternative correction method that is consistent with EPCRS correction principles. However, a IRC 411(d)(6) violation will be deemed to not have occurred if the plan sponsor can establish that the Plan’s written terms were drafted incorrectly.

    2. In the case of a governmental plan or 403(b) plan, see IRM 7.2.2.19, Correction By Retroactive Amendment To Resolve Operation Failures, section 3C

    3. If the plan sponsor states the plan document was drafted incorrectly, review the file to determine if the Applicant has established, through clear and convincing evidence, employer intent and employee expectations with regard to the way the Plan would be administered.

      Note:

      The Specialist may not rely on affidavits from the plan sponsor or affected employees to establish employer intent or employee expectations

  5. In evaluating this issue, consider the following documents, if available (this list is not exhaustive):

    1. Present and former SPD documents;

    2. Present and former Employee Handbooks;

    3. Present and former versions of the plan document and amendments;

    4. Letters to actuaries, accountants, TPAs, lawyers regarding the plan’s design and operation;

    5. Past emails or memos to employees regarding plan benefits; and

    6. Additional documents could be submitted to help establish employer intent and employee expectations such as: Applicable Power Point presentations given to employees, employee newsletters, enrollment forms or benefit distribution forms, or plan highlights or other written documents distributed to plan participants.

  6. If any actuarial issues are present in cases involving DB plans, the Specialist should consult with the EP Exam Field actuaries. In addition, the actuaries should be consulted if the correction method in any VCP case for any plan type uses the average benefits test of IRC 410(b) or a general test allowed by IRC 401(a)(4) to correct any operational or demographic failures.

  7. After developing the case, the Specialist should make a recommendation to their Group Manager or Group Coordinator as to whether the amendment should be approved. The Group Manager or Group Coordinator will notify the Specialist if he or she agrees with the Specialist’s recommendation.

  8. Taxpayers may not request nor may VC grant IRC 7805(b) relief, even if the Plan received a favorable determination letter with respect to its plan document.

    1. VCP corrections and failure descriptions cannot be based upon defective plan language and must be applied retroactively.

    2. A VCP Applicant wishing to avoid retroactive correction or to rely on defective plan document provisions, must apply for 7805(b) relief via a technical advice request following the procedures in Rev. Proc. 2014-5 IRB 2014-1.

    3. If 7805(b) relief is requested, the VCP submission will be closed as a no action case using ERIM-TRAC Status Code 24- Discontinued Review.

  9. If the plan is a pre-approved plan and the corrective amendment is not provided among the pre-approved plan options, see IRM 7.2.2.28, Corrective Plan Amendments To Pre-Approved Plans, for special instructions.

7.2.2.20  (09-29-2014)
Anonymous VCP Submissions

  1. Anonymous VCP cases are generally worked in the same manner as other VCP cases except that the plan sponsor’s identity is not disclosed to the IRS until there is agreement with regard to correction. See Rev. Proc. 2008-50IRB 464Rev. Proc. 2013-12IRB 2013-4 Section 10.10 for details.

  2. Confirm that the required penalty of perjury statement was provided by the POA who made the submission.

  3. For Rev. Proc. 2008-50 cases, the written statement from the taxpayer representative, signed under penalty of perjury, must indicate that the taxpayer representative satisfies the requirements referenced in section 11.08 of Rev. Proc. 2008-50 and that the individual will submit an executed copy of Form 2848 upon disclosure of the plan and plan sponsor’s identity to the IRS.

    Figure 7.2.2-1

    Sample Penalty of Perjury Statements for Anonymous VCP submissions
    The VC SharePoint site contains a sample statement for Rev. Proc. 2008-50 submissions that can be sent out for signature. The text of such statement is as follows:
     
    Declaration of Authorized Representative-Anonymous Submission
    VCP Case Control No.: XXXXXXXX
    Under penalties of perjury, I declare that I am authorized to represent the plan sponsor making this Voluntary Correction Program (“VCP”) submission (and, if applicable, related determination letter application) before the Internal Revenue Service (“Service”) and that I am one of the following:
      Attorney—a member in good standing of the bar of the highest court of any state, territory or possession of the United States, including a Commonwealth or the District of Columbia. Any other person, as described in section 9.02(11)(e) of Rev. Proc. 2014-4, who has received a “Letter of Authorization” from the Director, Office of Professional Responsibility under section 10.7(d) of Treasury Department Circular No. 230.
      Certified Public Accountant—duly qualified to practice as a certified public accountant in any state, territory or possession of the United States, including a Commonwealth or the District of Columbia.
      Enrolled Agent—enrolled as an agent under the requirements of Treasury Department Circular No. 230 (31 CFR, Part 10).
      Enrolled Actuary—enrolled as an actuary by the Joint Board for the Enrollment of Actuaries under 29 U.S.C. 1242.
      Enrolled Retirement Plan Agent—enrolled as a retirement plan agent under the requirements of Treasury Department Circular No. 230.
      Any other person, as described in section 9.02(11)(e) of Rev. Proc. 2014-4, who has received a "Letter of Authorization" from the Director, Office of Professional Responsibility under section 10.7(d) of Treasury Department Circular No. 230.
    I further declare that I am in possession of a properly executed Form 2848 (Power of Attorney and Declaration of Representative) authorizing me to represent the plan sponsor in connection with this VCP submission.
    When and if I provide the information that identifies the plan sponsor as required under Section 10.10 of Rev. Proc. 2008-50, I will submit a properly executed Form 2848 verifying that the plan sponsor has authorized me to represent it in connection with the VCP submission (and, if applicable, the related determination letter application.)
         
    Add Signature and Date signed
    Add Printed name
  4. For Rev. Proc. 2013-12 cases, a signed and dated statement is required for anonymous submissions. See Form 8950 Instructions and Rev. Proc. 2013-12 Sections 10.10 and 11.08.

    • The penalty of perjury statement must read as follows: Under penalties of perjury, I declare that I am an authorized representative of the Plan Sponsor who complies with the Power of Attorney requirements described in section 11.07 of Rev. Proc. 2013-12. I will submit an executed Form 2848 upon the disclosure of the identity of the Plan Sponsor to the Service.

  5. Analyze the failures, correction methods and changes to administrative procedures following the described procedures set forth in other sections of this IRM

    1. A draft anonymous compliance statement should be prepared and must be acceptable to the Group Manager/Group Coordinator and the POA.

      Note:

      Alternatively, if the POA has expressed an interest in using the model compliance statements, the Specialist may work with the POA to obtain the revised narrative attachments that would be attached to the model compliance statement.

  6. If the Specialist believes the proposal is acceptable, send a draft compliance statement to the Group Manager or Group Coordinator for review and approval before requesting the disclosure of the plan sponsor’s identity or before presenting the draft compliance statement to the POA. See IRM 7.2.2.16, Dealing With Disagreements and Conference of Right, if there are ongoing disagreements over the disclosed failures and proposed correction methodology.

  7. Once there is full agreement between VC and the POA, the Specialist must formally request the disclosure of the plan sponsor’s identity. See IRM 7.2.2.25, Required Use of Standardized VC Letters, for a listing of the appropriate sample letters. Generally, Sample Letters A-01 or A-02 are used for this purpose.

  8. Upon disclosure of the taxpayer’s identity, the Specialist should provide the Group Manager with the plan sponsor's identification, including the EIN, name of plan sponsor, name of plan, and plan number. The Group Manager will arrange to have someone check IDRS to verify that the plan sponsor/plan is not under audit. If the submission is "Under Examination" as of the date of disclosure they are not eligible for VCP and no compliance statement can be issued.

  9. If ATAT issues were included with the disclosure documents, the Specialist will contact their Group Manager as it may be necessary to coordinate with the EP Exam ATAT Coordinator. See Rev. Proc. 2008-50 or Rev. Proc. 2013-12 Section 4.13.

  10. If there are no "Under Examination" or ATAT issues, the Specialist should revise the draft compliance statement to include the necessary identifying information. This final draft should be shared with the plan sponsor/POA to get feedback on accuracy.

7.2.2.21  (09-29-2014)
Voluntary Submissions involving 457(b) Eligible Plans of Deferred Compensation

  1. The following voluntary submissions are permitted by section 4.09 of the EPCRS revenue procedure:

    1. Rev. Proc. 2008-50, such submissions are limited to 457(b) plans sponsored by governmental plan sponsors.

    2. Rev. Proc. 2013-12, 457(b) plans sponsored by tax exempt organizations may also make a voluntary submission under limited circumstances.

    3. These filings are not VCP submissions. Resolution of any 457(b) failure is accomplished outside of EPCRS, in the form of a DO 8-3 closing agreement that will be signed by the plan sponsor and the Director of EP Rulings and Agreements.

    4. Plan sponsors are permitted to make voluntary submissions with regard to 457(b) plans, however, VC retains complete discretion as to whether to accept the submission for processing. Standards similar to EPCRS will be applied to accepted submissions.

    5. All corrective actions must be completed by the plan sponsor before the closing agreement is signed. There is no correction period.

    6. Generally, these submissions are in the form of a cover letter from a representative of a plan sponsor.

  2. Rev. Proc. 2013-12 required that a completed Form 8950, signed by the plan sponsor, be submitted. A compliance fee or Form 8951 is not required for these submissions, however, some plan sponsors/POAs may submit an initial payment and Form 8951 even though it is not required.

  3. Model compliance statements (Appendix D & F including Schedules part of Rev. Proc. 2008-50, and Appendix C, including Schedules part of Rev. Proc. 2013-12) are not applicable for these submissions; however, plan sponsors (or their representative) may try to use them to submit information.

  4. During the screening performed by Cincinnati these cases should be identified and assigned to a VC Program Coordinator. If the case was directly assigned to a Specialist, the Specialist should notify the Group Manager to determine whether it is appropriate for VC to accept this case for processing.

  5. These cases require significant coordination. Any questions with regard to correction methodology and the sanction must be discussed with a VC Program Coordinator.

  6. The Manager of VC and the VC Program Coordinators, in consultation with other EP functions if appropriate will determine whether it would be appropriate to issue a closing agreement in response to the voluntary submission.

    1. If the case is accepted for processing, the case will generally be assigned to a VC Group. This acceptance will be documented and placed into the case file before assignment.

      Note:

      For those cases directly assigned, an E-mail will be sent to the applicable Group Manager and Specialist.

    2. If it is determined that the submission will not be processed and that no closing agreement will be issued, the submission will be closed and a no action Sample VC Closing letter V-25a will be issued. If the plan sponsor did submit an initial payment it should be refunded.

      Note:

      Specialist should follow the refund procedures in IRM 7.2.2.10, Procedures for Compliance Fee Issues, and IRM 7.2.2.10.2, , Refund Procedures and Instructions for VCP Compliance Fees.

    3. The group consideration mentioned in item 6, above, is generally not needed if the case involves governmental 457(b) plans that have operational failures limited to 401(a)(9) required minimum distribution failures and/or participant loans that did not comply with IRC 72(p). However, Specialists must still consult and coordinate with a VC Program Coordinator.

  7. If an assigned 457(b) case is sponsored by a governmental entity, the Specialist must take the following actions before beginning work on the case:

    1. Contact the plan sponsor/POA and verify that they are aware of the self-correction rule discussed in IRC 457(b) and Treas. Reg. 1.457-9.

    2. Ask the plan sponsor/POA whether the IRS should continue to process the voluntary request for a closing agreement.

    3. Document both actions and describe the POA or TP response.

    4. If the plan sponsor/POA is no longer interested in pursuing a closing agreement, the case can be closed using TRAC-ERIM closing code 21. Use Sample VC Letter V-25b. Any paid fee would be refunded to the payor, the entity on the check.

      Note:

      Specialist should follow the refund procedures in IRM 7.2.2.10, Procedures for Compliance Fee Issues, and IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP Compliance Fees.

  8. Once the case is fully developed and there is agreement between the Specialist, the Group Manager or Group Coordinator and the Plan Sponsor as to the acceptability of the correction methodology and the sanction, the Specialist needs to take additional actions. The Specialist should follow these steps:

    1. Draft a DO 8-3 closing agreement. Sample document are available on the VC SharePoint for a governmental 457(b) plan and 457(b) plan sponsored by tax-exempt organizations.

    2. Send the draft closing agreement to the Group Manager or Group Coordinator for review/comment.

    3. After updating for any suggested revisions, E-mail the draft closing agreement, and fax or E-mail any applicable correspondence to the designated VC Program Coordinator for review. Any suggested revisions must be agreed to by the Specialist and the Group Manager.

    4. Once the document is approved by the VC Program Coordinator, fax this latest draft to the POA for review and comment.

    5. Discuss changes requested by the plan sponsor/POA with the VC Program Coordinator. If no changes are requested inform the VC Program Coordinator that the draft closing agreement is acceptable to the plan sponsor/POA.

  9. If changes were made e-mail or fax the new draft to the POA for review and comment (addressed in paragraph (8)c. The POA should be informed orally or in writing that:

    1. The draft closing agreement is not necessarily the final version.

    2. The existence of the draft does not mean that the IRS has agreed to enter into a closing agreement.

    3. The final decision on the terms of the agreement and whether it will be accepted rests with the Director of EP Rulings and Agreements.

  10. The VC Program Coordinator will e-mail the closing agreement draft and applicable attachments to the Director of EP Rulings and Agreements to see if the Director would be willing to sign the closing agreement.

  11. If the Director of EP Rulings and Agreements requests changes to the draft closing agreement, the Program Coordinator will make the changes and provide a copy of the revised version of the closing agreement to the Specialist. The Specialist should notify the plan sponsor or their representative of the changes and request their informal concurrence.

  12. If the Director of EP Rulings and Agreements approves the closing agreement draft, the Program Coordinator will contact the Specialist via email to advise them to mail the closing agreement (or the revised closing agreement) to the plan sponsor/POA for signature.

  13. The Specialist should use Sample Letter V-24 to request signed closing agreements and any owed sanction payment. The Specialist should secure evidence that all corrective actions called for by the closing agreement were accomplished before the closing agreement is signed.

    Note:

    The sanction payment must be in the form of a cashier’s check or certified check.

  14. Once the Specialist receives the signed closing agreements and sanction check, if applicable, the Specialist should make a copy of the sanction check.

  15. The Specialist should mail the closing agreements, the copy of the sanction check and Form 3210, Document Transmittal to the Director of EP Rulings and Agreements via next day mail. The Specialist should retain possession of the sanction check.

  16. The Director of EP Rulings and Agreements will sign the closing agreements and return them to the Specialist.

  17. Once the Specialist receives the signed closing agreements, the sanction check should be sent to IRS Service Center in Covington, KY. To ensure proper processing, the Specialist should:

    1. Complete Form 8951 by filling out Lines 1-6.

    2. Complete the Special Fee letter associated with the securing additional fee procedures of IRM 7.2.2.10.1, Instructions on Soliciting Compliance Fees Owed.

    3. Mail the Form 8951, Special Fee Letter and the Sanction Check to the IRS Service Center in Covington, KY along with a completed Form 3210, Document Transmittal. Use the street address that receives delivered mail.

    4. After seven days, the Specialist should have the Group Manager check HQEP to determine if the deposit of the check has been recorded on HQEP. A print out of the HQEP screen documenting the deposit must be secured and placed into the case file.

  18. Prepare special closing letter. Use the Sample V-26 letter as the favorable closing letter for these 457(b) types of submissions. Otherwise follow the same Closing procedures discussed in IRM 7.2.2.23, Closing Procedures For Specialists.

7.2.2.22  (09-29-2014)
Group VCP Submission Procedures

  1. A Group VCP submission is submitted by an Eligible Organization for qualification failures affecting at least 20 individual client plans. The qualification failures must result from a systemic error involving the Eligible Organization.

  2. Generally, a single submission will be made. If the qualification failure affects more than one pre-approved plan maintained by the eligible organization then more than one group submission may be necessary. See Rev. Proc. 2013-12IRB 2013-04 sections 10.11 and 12.05 and comparable sections in Rev. Proc. 2008-50IRB 464.

  3. The Specialist should determine if the proper number of submissions have been made. The Specialist should discuss with the Group Manager or Group Coordinator if he or she believes that additional submissions are necessary or if too many related group submissions have been made.

  4. If a Specialist believes that a self-described group submission does not satisfy the group submission eligibility requirements he or she should discuss the matter with the Group Manager or Group Coordinator before contacting the POA or VCP Applicant.

  5. The compliance fee amount of $10,000 should accompany the submission. If more than 20 plans will be part of the submission the remaining fee will be collected near the end of the VCP process. The additional fee is $250 per plan in excess of 20 with the total compliance fee capped at $50,000.

    1. If the minimum fee was not fully paid, collect any amounts owed as soon as possible.

    2. If the minimum fee was not paid at all, the Specialist should consider returning entire submission to the VCP applicant unless there are indications of unique circumstances.

    3. If (a) or (b) applies, discuss with the Group Manager before taking any action.

    4. If more than $10,000 was submitted, the Specialist should determine that the amount submitted is the appropriate compliance fee for the Group Submission.

    5. If additional monies are owed, the Specialist will need to follow IRM 7.2.2.10.1, Instructions on Soliciting Compliance Fees Owed, when collecting any additional compliance fee.

  6. Group submissions, generally, should be reviewed like any other VCP submission.

  7. The Model Compliance Statements and Schedules in Rev. Proc. 2008-50 (Appendix D/F) and Rev. Proc. 2013-12 (Appendix C) are not designed for Group VCP Submissions and may not be used as the issued compliance statement.

  8. If the stated qualification failures or correction methods do not uniformly apply to the listed employers/plans that are part of the group submission, the submitted attachments and narrative provided by the Applicant must clearly indicate which specific failures apply to specific employers/plans.

    1. The group submission compliance statement must include a narrative and listing that clearly shows which specific failures apply to the employers/Plans.

    2. If using the sample group submission compliance statements that are available on the VC SharePoint site, this information would be part of a modified Attachment A or a separate attachment (for example , Attachment B) created to indicate this information.

  9. Once the issues and correction methods have been finalized, Specialists should prepare a draft group submission compliance statement that will be signed by the eligible organization and the IRS. Sample group compliance statements have been posted to the VC SharePoint site.

  10. A Group Manager or Group Coordinator must approve all correction methods and the draft compliance statement before it is sent out to the POA/eligible organization.

  11. When the draft Group Submission compliance statement is approved by the Group Manager or Group Coordinator:

    1. Share the draft with the POA/eligible organization and request their comments or approval.

    2. If the draft document is acceptable to the POA/eligible organization, the Specialist will mail two copies to the eligible organization for signature.

    3. Obtain the required certifications as well as attachments, if not already provided. See Rev. Proc. 2008-50 and Rev. Proc. 2013-12 section 10.11(3)(b) and 10.11(3)(c). Use the Sample Letter V-13b letter for this purpose. See Rev. Proc. 2008-50/2013-12 section 10.11(3)(c).

      Note:

      The POA/eligible organization may have an extended deadline of 120 days to submit these items to the IRS.

7.2.2.23  (09-29-2014)
Closing Procedures For Specialists

  1. When a VCP case is ready for closing, the Specialist is required to take the following actions:

    1. Prepare a VCP closing letter for the taxpayer and POA or individual listed on Form 8821, if applicable. Closing letter types are described more fully in IRM 7.2.2.25, Required Use of Standardized VC Letters, relating to the required use of standardized VC letters.

    2. Do not date or sign the closing letters.

    3. Sample Letter V-15 is for VCP cases that are closed favorably.

    4. Prepare addressed mailing envelops for Applicant and POA or individual listed on Form 8821, if applicable.

    5. Specialist should make additional copies of closing letters and compliance statements.

      Document # of Copies
      Closing Letter Original plus 2* copies.
      Closing Letter-POA, if applicable Original plus 2* copies.
      Model Compliance Statement Original versions stay in case file. However, 3* copies of the final version must be prepared.
      • Two* to mail and one for the case file. This includes any applicable Schedules or Appendix C/D/F attachments.

      • Each set of applicable Schedules or attachments should be joined to each model compliance statement copy.

      Streamlined Compliance Statement Original plus 2* copies.

      Note:

      Three copies of all referenced letters must be made and one copy will be attached to each streamlined compliance statement.

      Traditional Compliance Statement Original plus 2* copies.
      *This assumes one POA listed on Form 2848 or a single individual listed on Form 8821. Reduce copies if no POA or if no other individual has been authorized to receive copies of written correspondence. Additional copies may be needed if you have multiple individuals listed on Form 2848 or 8821 and the box has been checked indicating that they will be sent notices and communications. In order to reduce costs, the maximum number of POA letter packages is limited to two.
  2. Organize the compliance statement items mentioned above into three paper clipped piles as follows (top to bottom)

    1. Closing Letter to VCP Applicant (generally V-15)

    2. Closing Letter to POA, if applicable (V-17)

    3. Compliance statement

    4. Referenced attachments, if using a model or streamlined compliance statement

  3. Organize the VCP case file as follows:

    VCP Case File Instructions
    a) Outside of case file, Place the EPCRS Inventory Control Worksheet
    b) Inside of case file all materials are placed on the right side in the following order from top to bottom:
    1. A completed Closing Worksheet for VCP

    2. Closing documents composed of compliance agreements, closing letters, and referenced attachments, if applicable

    3. If applicable, a copy of the compliance fee refund form that was previously sent to the Specialist’s group manager in accordance with the VC Refund Procedures in IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP Compliance Fees, (if applicable)

    4. Form 2848, Power of Attorney or Form 8821, Tax Information Authorization

    5. Form 5464, Case Chronology Record

    6. VCP workpapers prepared by Specialist, if any

    7. Correspondence, including emails (in chronological order)

    8. Sample computations that illustrate correction

    9. Plan documents, amendments, determination letters, etc. (clipped or banded together

    10. Miscellaneous items, including Exhibits associated with the initial VCP submission

  4. Complete a Closing Worksheet for each VCP case that is closed. Review the EPCRS Inventory Control Worksheet and enclosed TRAC-ERIM printouts, if any, before closing the case.

  5. Consider completing the Closing Worksheet electronically.

    Note:

    If the information on the EPCRS Inventory Control Worksheet is correct, there is no need to update the information on the Closing worksheet. For anonymous submissions, update all fields with the disclosed identifying information.


    Provide the following information:

    1. Case ID. Enter VCP case ID# from the VC case file.

    2. Closed Status. Choose a closed status from the drop down menu. If the case is being closed favorably, the appropriate status code is 20. Other closed status code can be found in the TRAC-ERIM General Codes listing, a copy is located on the VC SharePoint.

    3. Grade. Enter the VC Case grade if there is no entry on the EPCRS Inventory Control Worksheet or if it is incorrect. See IRM 7.11.2, Employee Plans Determinations Letter Program, EP Case Assignment Guide, for VC case grading criteria.

    4. Type of VCP 1. Check all appropriate boxes if the submission was originally an anonymous submission and/or reported an egregious failure or was involved with an ATAT. If none apply, click on the box for "Not Applicable" .

    5. Type of VCP 2. If a submission was limited to only late interim amendments (Schedule 1 type failures), check the applicable box. If a submission was limited to only Nonamender failures (Schedule 2 type failures) check the applicable box. If the submission contains an “International Issue” check the applicable box. If none of the choices are applicable then click on the box for "None of the above" .

      Note:

      If a VCP submission contains both late interim amendments and other nonamender failures do not check either box and instead click on the box for "None of the above" .

    6. Appendix C/F Schedules. If an Appendix C/F Schedule was part of the submitted VCP case file, enter the Schedule number(s) for each included Schedule. Generally, this should be consistent with Item 6 from Form 8950 if applicable. If none were submitted, click on the checkbox next to "None" .

    7. Work Code. Confirm work code by choosing one item from the drop down list. Click on the textbox to see the menu. If the entry on the EPCRS Inventory Control Worksheet is correct choose "No Change" . Other EPCRS Program/Work codes can be found on the TRAC-ERIM General Codes listing, a copy is located on the VC SharePoint.

    8. EIN. Enter the EIN if there is no entry on the EPCRS Inventory Control Worksheet or if it is incorrect. See, Form 8950 Line 1i or page one of Appendix C/D/F. For Anonymous submissions that are closed favorably, enter the EIN of the plan sponsor that was disclosed to the IRS.

    9. NAICS Code. Enter the six digit number that is located on line 2d of the latest filed Form 5500 series return. Governmental Entity: use 921000, public schools: use 611000. Other Non-filers: See Form 5500 Instructions or this link http://www.dol.gov/ebsa/pdf/2012-5500-SFinst.pdf for a listing of the Codes. The business code can be obtained through IDRS using the ERTVU command. Alternatively if a plan sponsor files a Form 5500 or Form 5500-SF, the filed returns may be accessed via the DOL’s website at https://www.efast.dol.gov/portal/app/disseminate?execution=e1s1 or at freeerisa.com. A Form 5500EZ filer can only be accessed via IDRS.

    10. Plan Sponsor. Enter the VCP Applicant/plan sponsor name if there is no entry on the EPCRS Inventory Control Worksheet or if it is incorrect. See, Form 8950 Line 1a or page one of Appendix C/D/F. If everything is correct, no entry is required.

    11. State. Enter the 2 digit state abbreviation for the VCP Applicant/plan sponsor. See, Form 8950 Line 1d or page one of Appendix C/D/F. For anonymous submissions, indicate the State of the plan sponsor from the identifying information supplied to the IRS.

      Note:

      If this information was not provided use the State of the POA.

    12. Zip Code. Enter zip code of VCP Applicant/plan sponsor. See, Form 8950 Line 1e or page one of Appendix C/D/F. For anonymous submissions, indicate the zip code of the plan sponsor from the identifying information supplied to the IRS.

      Note:

      If this information was not provided use the zip code of the POA.

    13. POA Firm Name. Enter the POA firm name if a properly completed Form 2848 was submitted and there is no entry on the EPCRS Inventory Control Worksheet or if it is incorrect. Information from a submitted Form 8821 should not be entered. If there is no Form 2848, enter “None” and skip the POA Contact Name and POA Telephone.

    14. POA Contact Name. Enter the name of the lead POA from Form 2848. If there is no POA leave blank.

    15. POA Telephone. Enter the POA’s telephone number, including extension from Form 2848. If no POA, leave blank.

    16. Plan Name. Enter the name of the Plan if there is no entry on the EPCRS Inventory Control Worksheet or if it is incorrect. See, Form 8950 Line 4a or page one of Appendix C/D/F.

    17. Plan Number. Enter the applicable 3 digit Plan # if there is no entry on the EPCRS Inventory Control Worksheet or if it is incorrect. See, Form 8950 Line 4b or page one of Appendix C/D/F. If everything is correct, no entry is required. A plan number is not required for SEP, SARSEP, SIMPLE, 457(b) and some 403(b) plans, in such case enter "000" .

    18. Plan Type. Confirm plan type by choosing one item from the drop down list. If the entry on the EPCRS Inventory Control Worksheet is correct choose "No Change."

    19. Total Assets. Enter Plan asset value if there is no entry on the EPCRS Inventory Control Worksheet or if it is incorrect. See, Form 8950 Line 4d or page one of Appendix C/D/F.

    20. Total Participants. Enter # of plan participants if there is no entry on the EPCRS Inventory Control Worksheet or if it is incorrect. See, Form 8950 Line 4e or page one of Appendix C/D/F.

    21. Fee/Sanction. Enter the net VCP compliance fee that was collected if there is no entry on the EPCRS Inventory Control Worksheet or if it is incorrect.

      Note:

      If you have collected an additional compliance fee or have issued a refund, record the total net fee collected. If a 100% refund was issued, type in $1 as the sanction fee amount.

    22. Related DL File. If there is a related DL application the full DL case number must be listed in this item. Specialists can type in a case number. The DL case number can be located by using EDS. If everything is correct, no entry is required.

    23. Hours at Closing. Enter the total hours the Specialist charged to the case. This should equal the total time reported on the Specialist's WebETS for the case.

    24. CA/CS Type. Confirm CA/CS type by choosing one item from the drop down list. If the entry on the EPCRS Inventory Control Worksheet is correct choose "No Change" . Other CA/CS codes can be found in the TRAC-ERIM General Codes listing, a copy is located on the VC SharePoint.

    25. Screening Hours. If the case was screened, the screener should record screening hours. Otherwise leave blank. If it appears that the Screener’s time was not entered into TRAC-ERIM, enter the time.

    26. Failure Class. Enter the type of qualification failure for each failure. Choose among the following: P=Plan document failure, O-Operational Failure, D-Demographic Failure, and E-Employer Eligibility Failure.

    27. Failure Code(s). For each failure, enter all applicable sub failure codes. Specialists can find the applicable codes on Document 6476 for the applicable fiscal year or via an EPCRS lookup table located on the VC SharePoint.

      Note:

      Do not enter any retired codes that may be included on these listings.

    28. Years Affected. If the failure is a plan document failure, enter “0000”. For all other failures enter the period of the failure expressed using 4-digit years--for example "2010" . If the failure occurred over several years all of the years must be listed. If they were consecutive, simply use the word "through" or "thru" . For example, "2001 through 2010" .

    29. Failure Corrected Prior to Closing. If the failure was fully corrected at the time the VCP case is being closed, enter "Yes" . If correction will occur during the 150 day correction period then enter "No" . Do not leave blank.

    30. Text Entry Field. Required if failure codes ending in Z are entered or if correction method codes C, D, E, F, M, R, T, U and Z are entered. The entry should explain the failure that is being corrected and/or why it was acceptable to use the above correction method code for a specified failure.

  6. Place a copy of the completed Closing Worksheet in the VC case file. Group Managers may allow Specialists to email a copy of the Closing Worksheet.

  7. If the Specialist is not in the same POD as the Group Manager, the Specialist will prepare a Form 3210, Document Transmittal and mail the case file to the Group Manger via UPS Ground.

  8. Close the VCP case off WebETS once the VCP case has been mailed or hand delivered to the Group Manager for issuance of the compliance statement and final closing actions with regard to TRAC-ERIM. If the case is returned by the Group Manager, the Specialist will re-open the case and list it on WebETS.

  9. Maintain electronic copies of the specific closing letters, and drafted compliance statement, if applicable for each closed case. Once the case is closed by the Group Manager, these electronic files can be deleted by the Specialist.

7.2.2.24  (09-29-2014)
Closing Procedures For Group Managers

  1. For VCP case(s) with a Form 3210, Document Transmittal, Group Managers should verify receipt of the case(s); sign the Acknowledgment Form and fax/mail/email such document to the Specialist. The group manager can delegate this responsibility to a group secretary or any other employee.

  2. Within five business days of receiving a VCP case file for closing, Group Managers should issue the compliance statement along with the closing letters and update TRAC-ERIM or, if the case is not ready for closure, send the case back to the Specialist.

  3. The Group Manager must issue the compliance statement and update TRAC-ERIM on the same date.

  4. When closing cases, the Group Manager should take the following actions:

    1. Review the case file, including closing letters and compliance statements to determine if the VCP case is ready for closure.

    2. If there are technical errors or the case was not developed properly, the VCP case should be returned to the Specialist for correction or further development.

    3. Errors in the compliance statement or closing letters should be addressed and corrected before the VCP case is closed.

    4. Sign and date (using a stamp for the Manager of VC’s name and signature) the compliance statements and closing letters found at the top of the VCP case file.

    5. Promptly mail one approved compliance statement plus applicable closing letters to the VCP Applicant and mail copies to the POA, if applicable. One set of the signed and dated documents, stapled together and labeled "Copy" will remain in the VCP case file.

    6. Update TRAC-ERIM, on the same day as the compliance statements were signed and dated, and close the case off the system. The Specialist should have provided the necessary information by completing the Closing Worksheet. The Group Managers should ensure that the selected codes are correct and complete.

      Note:

      The closing date should correspond to the date the compliance statements were mailed to the Applicant and POA.

  5. Using the information from the Specialists Closing Worksheet, Group Managers update the following fields in TRAC-ERIM when closing a VC case:

    1. Update the status code to a closed status code. Use status 20 for favorable closings. Otherwise refer to TRAC-ERIM General Codes.

    2. Check the applicable box(s) if the submission involved an egregious issue, an ATAT or an international issue.

    3. Check the applicable box if a submission was limited to only late interim amendments. If a submission was limited to only Nonamender failures (aka Schedule 2 failures) check the applicable box.

      Note:

      if a VCP contains both late interim amendments and other nonamender failures (i.e. Schedule 2) or also includes operational failures do not check either box.

    4. Check the applicable box(s) if Appendix C/F Schedules were submitted or the "None" “ box if nothing was submitted.

    5. Enter the six-digit NAICS Business Code.

    6. Enter the Applicant’s State and Zip Code.

    7. Enter the POA Contact Name and telephone number.

    8. Enter the Specialist’s total time in the "TLS Hours" field.

      Note:

      Group Manager's should reconcile WebETS closing hours against the Specialist's Form 5464, Case Chronology Form when a case is submitted for closing and TRAC-ERIM update.

    9. Enter all failure and correction method codes that are associated with each failure resolved by the VCP submission. The Failure codes are listed in EPCRS Failure and Correction Method Code Lookup Table or Document 6476.

      Note:

      Failure codes ending in "Z" and some correction method codes require narrative comments to be entered into the remarks section of TRAC-ERIM that explain the use of these codes.

      Note:

      The table and the Closing Worksheet explain when a narrative is needed.

    10. Enter the "Years Affected" for each failure.

      Note:

      For plan document failures enter "0000" .

      Note:

      For multi-year failures, start with the most recent year and list each year separated by a dash (i.e. 2009-2008-2007).

      Note:

      If number of affected plan years exceeds the allowable input space then complete what you can. In the "Explanation box" add an explanation that describes the full period of the failure.

    11. Enter brief remarks into TRAC-ERIM to explain why a refund was issued or any issue regarding compliance fees. Also, enter an explanation as to why it was necessary to use failure codes 97 or 98.

    12. Enter the date closed. This is the date the compliance statement was signed and mailed out to the plan sponsor (and POA, if applicable). This action must be done concurrently with the issuance of the compliance statement.

      Note:

      The closing date must not be post or back dated and must be consistent with the stamped date on the issued compliance statement and closing letters.

    13. If a refund form was processed or additional payment was received, the “Fee/Sanction” field must be updated to reflect the total amount collected or the net payment if a refund is being issued.

      Note:

      Where a 100% refund is being issued, reduce sanction amount to $1.

    14. Review the remaining TRAC-ERIM fields to ensure that the data has been entered correctly. Check if the Specialist noted any possible revisions on the Closing Worksheet.

  6. If there is a related DL application being worked by EP Determinations, Group Managers should fax a copy of the issued compliance statement to EP Determinations using a TEDS form if it was included with the VCP case file. Otherwise, a copy of the issued compliance statement must be faxed or mailed to the Manager of EP Determinations Group 7526.

  7. For VCP Group Submissions, Group Managers should email, fax, or EEFAX a copy of the issued compliance statement and list of participating employers to a VC Program Coordinator.

7.2.2.25  (09-29-2014)
Required Use of Standardized VC Letters

  1. Specialists and Group Managers are required to use specific, formatted letters when corresponding with plan sponsors with regard to the processing of VCP submissions. This includes VC’s closing letters.

  2. VCP closing letters should contain the title of the Manager of Voluntary Compliance. A special stamp that contains the printed name and signature of the current Manager of Voluntary Compliance should be used on all closing letters.

  3. Letters requesting missing or additional information should contain the local contact address for the Specialist and should be signed by the individual Specialist.

  4. Sample letters must be customized. The items that need customization are identified.

  5. The Applicant and the representative listed on Form 2848 must receive concurrent copies of all letters sent, if the applicable box was checked. Specialists should prepare a cover letter to accompany the copy.

  6. The following table is a current listing of all valid sample letters. Discard any previous versions and use these documents as the formatting and content of all letters have changed from previous versions. If a letter previously listed on the VC SharePoint is not on this list it is no longer a valid letter.

    Note:

    All of the sample VC Letters listed below are in the process of being revised and once approved will be issued as official letters. All sample letters are currently available on the VC SharePoint site.

    Letter Type Letter # Description When to Use
    Request plan sponsor identity for Anonymous Submissions using model compliance statement (Appendix C or Appendix D). V-01 Cover letter to POA requesting plan sponsor’s identity where Model IRS compliance statements are used. Use if Appendix D under Rev. Proc. 2008-50 is the final compliance statement.
    Use if Appendix C under Rev. Proc. 2013-12 is the final compliance statement.
    Request plan sponsor identity for Anonymous Submissions using an individually drafted compliance statement. V-02 Cover letter to POA requesting plan sponsor’s identity where the Specialist has drafted a compliance statement. Use if the Specialist has drafted a streamlined or traditional compliance statement.
    Return VCP Submissions mailed to Washington DC-Rev. Proc. 2008-50 case. V-03a Cover letter when the Washington DC office returns a VCP submission made in accordance with Rev. Proc. 2008-50 received on or after July 1, 2013. Use only for cases mailed to Washington DC by taxpayers.
    Return VCP Submissions made in accordance with Rev. Proc. 2013-12 cases mailed to Washington DC. V-03b Cover letter when the Washington DC office returns a VCP submission made in accordance with Rev. Proc. 2013-12 received on or after July 1, 2013. Use only for cases mailed to Washington DC by the taxpayer.
    Closing Letter to Return VCP Submissions that failed to include a required compliance fee check. V-04 Cover letter when a VCP submission is returned to a POA or TP due to the failure to submit a required compliance fee check. Use primarily by employees who screen VCP cases
    Return file to the POA, if applicable
    Ineligible for VCP-No Qualification Failure. V-05a Closing letter where no action taken for ineligible VCP cases. Use for ineligible VCP submission with no IRS qualification failures or participant loan failures.
    Entitles taxpayer to 100% refund of paid compliance fee.
    Ineligible for VCP-Under Examination. V-05b No action letter for ineligible VCP cases determined to be "under examination" at the time the submission was made. Use for ineligible VCP submissions where IDRS, TP or POA cover letter, or Form 8950 indicates the case is under Examination prior to the control date of the VCP.
    Entitles taxpayer to 100% refund of paid compliance fee.
    Ineligible for VCP-403(b) pre-2009 Issues that are not Failures. V-05c No action letter for ineligible VCP cases where all failures in the submission involve pre-2009 years, but the described failures do not conform to a failure described in Rev. Proc. 2008-50 Section 5.02. Use for ineligible VCP submissions where taxpayer attempts to apply plan document and operational failures associated with final 403(b) regulations. See IRM 7.2.2.10, Procedures for Compliance Fee Issues
    Entitles taxpayer to 100% refund of paid compliance fee.
    Closing Letter-No Action Letter-Dishonored Check Not Replaced. V-05d No action letter for VCP cases with dishonored check where TP or POA refused to submit a new check. Use for a dishonored check where the POA or TP fails to submit a new check.
    21 Day Letter to Request additional info. V-06a Request for missing or additional information for all VCP submissions made in accordance with Rev. Proc. 2008-50. Use with Rev. Proc. 2008-50 cases.
    Letter for use by Specialists.
    21 Day Letter to Request additional info. V-06b Request missing or additional information for all VCP submissions made in accordance with Rev. Proc. 2013-12. Use with Rev. Proc. 2013-12 cases.
    2nd Request for information-10 day letter. V-06c Follow up letter if no response to an initial 21 day request for information. Use if plan sponsor/POA fails to submit requested information.
    Closing Letter- No Action Letter-Anonymous Submission with 50% refund. V-07 No action letter for anonymous submissions that do not result in the disclose of a plan sponsor’s identity.
    Payor is allowed a 50% refund of paid compliance fee if sole issue was a disagreement with regard to correction methodology.
    Use for Anonymous submission cases where the IRS and POA can't reach agreement.
    A refund is not owed where the POA or TP refuses to provide requested information.
    Favorable Closing Letter-VCP with Related DL Application. V-08 Favorable closing letter where a DL Application was submitted concurrently with the VCP submission Use for a favorable closing where:
    • Related DL application.
    • No refund is owed.
    Closing Letter-No Action Letter-Failure to Respond. V-09 No action closing letter is used when no response received to any requests for additional information. Use when TP or POA fails to respond to requests for missing or additional information.
    Closing Letter-No Action Letter-VCP submitted in error. V-10 No action letter for cases where the POA or TP realizes that the VCP submission was made in error. Use when the POA or TP informs VC that the submission was made in error.
    Usually occurs when POA or TP obtains new information or realizes that no qualification failure occurred.
    Letter to Request signed compliance statements-Regular VCP cases. V-13a Cover letter when the compliance statement must be signed by the plan sponsor. Use when material change in VCP narrative affecting failures and correction and no new penalty of perjury statement has been secured.
    Letter to Request signed Group Submission compliance statement. V-13b. Cover letter to request signed Group submission compliance statements, and final procedural items. Use for all VCP Group Submissions.
    Favorable Closing Letter-to Applicant. V-15. Regular Favorable Letter sent to the VCP Applicant with the issued compliance statement. Use for favorable closings where:
    • No refunds.
    • No related DL applications.
    Favorable Closing Letter to POA. V-17. Cover letter that accompanies closing letter addressed to VCP Applicant and copies of issued compliance statement. Use for any VCP case with a Form 2848 or Form 8821.
    Favorable Closing Letter with partial refund. V-18. Favorable letter where a partial refund was processed due to taxpayer error. Use for a favorable closing where:
    • No related DL application.
    • Partial refund is owed due to taxpayer error in computing VCP fee.
    Letter to Extend 150 day correction period. V-19. Letter that extends the standard VCP correction period. Use if the Specialist or Group Manager grants a request for an extension to the 150-day correction period on a closed VCP case.
    Coordination with the Manager of VC may be required in some cases. IRM 7.2.2.26, Extension of The 150 Day VCP Correction Period.
    Letter to POA that is sent with a copy of a letter addressed to VCP Applicant. V-23a. Cover letter when copying a POA on a letter addressed to a VCP Applicant. Use when Letters V-6a, V-6b, V-6c, V-13a, V-13b, V-24 are addressed to VCP Applicant and a copy is sent to a POA.
    Letter to VCP Applicant that is sent with a copy of a letter addressed to POA. V-23b. Cover letter to copy the VCP Applicant on a letter addressed to a POA. Use when Letters V-6a, V-6b, V-6c, V-13a, V-13b, V-24 are addressed to POA and a copy is sent to the VCP Applicant.
    Letter to request a signed DO 8-3 closing agreement for a 457(b) plan. V-24. Cover letter requesting plan sponsor to sign DO 8-3 closing agreement. Use only if the closing agreement has been approved by VC Program Coordinator.
    Closing Letter-No Action -457(b) Decline to Process. V-25a. Cover letter when VC declines to process a submission involving a 457(b) plan. Use if VC Management and others decline to process a submission involving a 457(b) plan.
    Refund paid compliance fee payment, if any. Follow IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP Compliance Fees.
    Closing Letter-No Action-457(b) governmental plan using SCP. V-25b. Cover letter when a governmental 457(b) submission is withdrawn by plan sponsor/POA because any described failures will be resolved using SCP rules available to these plans. Use when a governmental plan sponsor chooses to use SCP after being informed of the liberal SCP already in the IRC and Regs.
    Refund any initial compliance fee payment per IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP Compliance Fees.
    Closing Letter-Favorable Letter for 457(b) submissions. V-26 Favorable closing letter. Issue after securing signed closing agreements and sanction payment.
    Confirm that sanction payment is recorded on HQEP.

7.2.2.26  (09-29-2014)
Extensions of The 150 Day VCP Correction Period

  1. Specialists or Group Managers may receive requests to extend the 150 day correction period associated with a closed VCP case. VC will consider these requests if:

    1. The request is made in writing to a Group Manager or Specialist before the end of the 150-day correction period provided in the issued compliance statement.

    2. The request explains why the extension is needed and specifies the amount of additional time sought.

  2. The Group Manager should locate the closed VCP case file and review the request in consultation with the Specialist who originally worked the closed VCP case.

  3. Generally, the Group Manager has the authority to approve or deny the request. The Group Manager will need to seek approval from the Manager of VC and the VC Program Coordinators if:

    1. The extension request exceeds six months.

    2. The TP or POA requests a second extension.

  4. If the request is granted, the Group Manager should issue letter V-19 extending the 150 day correction period.

  5. No fee is charged for an extension of the correction period.

  6. If the request is denied or if it was not timely submitted, the Group Manager should advise the taxpayer that they need to file a new VCP submission to obtain a new compliance statement if they are still eligible for VCP. The old compliance statement is no longer valid as the taxpayer has failed to comply with its terms.

7.2.2.27  (09-29-2014)
Information Requests Regarding Open and Closed VCP Cases

  1. A VCP submission and any resulting compliance statement is subject to the confidentiality requirements of IRC 6103 and are not a written determination within the meaning of IRC 6110.

  2. Generally, VC will not provide copies of compliance statements or information about specific individual VCP applicants to other functions of the IRS, including EP Examinations.

  3. In order to provide efficient tax administration and to lessen taxpayer burden, VC will provide limited information about a VCP submission under the following circumstances:

    1. If a VCP submission is associated with a determination letter application required by the EPCRS revenue procedure, VC will fax a copy of the issued compliance statement to EP Determinations.

    2. EP Determinations and EP Examination should contact VC if they believe that an open or closed VCP submission is ineligible due to the plan sponsor or plan being Under Examination as defined in the EPCRS revenue procedure, at the time of the VCP filing.

    3. If a plan sponsor has lost, misplaced or never received a copy of their compliance statement, EP Determinations or EP Examinations may, with the consent of the plan sponsor, contact VC to obtain information about a past submission.

    4. As allowed by IRM 7.11.8.2.1(1), Preparing the Case for the Closing Agreement Process, and IRM 7.11.8.2.1(2), Preparing the Case for the Closing Agreement Process, Closing Agreement Coordinators for EP Determinations may contact VC to discuss a prior VCP case if additional failures that were not addressed in the issued compliance statement are discovered in a related DL application.

  4. Inquiries concerning a VCP case are made to the VCP Status Inquiry Line at 626-927-2011. If this does not result in a full and timely response, EP Exam and EP Determinations may call or email a VC Program Coordinator or the Manager of Voluntary Compliance. VC Group Managers may also be contacted.

  5. For situations discussed in IRM 7.11.8.2(1), Preparing the Case for the Closing Agreement Process and IRM 7.11.8.2(2), Preparing the Case for the Closing Agreement Process, EP Determinations Closing Agreement Coordinators should contact a VC Program Coordinator or the Manager of Voluntary Compliance to determine if it would be appropriate to resolve any newly discovered failures or disclosed failures through a new VCP submission.

  6. If a submitted VCP case is determined to be Under Examination at the time it was mailed to the IRS, the submission will be closed as ineligible if it is still open. If the VCP was closed favorably, the issued compliance statement is not valid. While, not required, VC may choose to rescind the issued compliance statement.

  7. If the VCP case was submitted prior to becoming Under Examination, the EP Examination function should suspend their examination while the VCP is in process. The VC Specialist should coordinate with the applicable function as to when the VCP case is resolved. With regard to EP Examination coordination, Specialists are referred to Memorandums issued to EP Examination and Voluntary Compliance employees dated 9/12/05 and 9/26/06.

7.2.2.28  (09-29-2014)
Corrective Plan Amendments To Pre-Approved Plans

  1. A corrective plan amendment to a pre-approved document that modifies the terms of a prototype plan or a volume submitter plan may cause that plan to lose reliance on the plan’s opinion or advisory letter. The corrective plan amendment will not result in loss of reliance if:

    1. The corrective amendment would otherwise be permitted in accordance with the rules for pre-approved plans and

    2. No other modifications have been made to the pre-approved plan that would cause the plan to lose its reliance on the opinion or advisory letter.

  2. If the corrective amendment would normally cause the plan sponsor to lose reliance on the plan’s opinion or advisory letter or if the Specialist is not certain as to whether a corrective amendment will cause the plan sponsor to lose reliance on the plan’s opinion or advisory letter, the Specialist should:

    1. Ask the Group Coordinator to contact the Pre-approved Plan Program Coordinators and inquire whether the corrective amendment would be permitted for pre-approved plans.

    2. Document the response and the name of the Coordinator who provided the response within the VCP case file.

    3. If the amendment is acceptable to the Pre-approved Plan Coordinators, include a caveat on the issued compliance statement in the enforcement section. Sample language for this enforcement caveat is part of Appendix C in Rev. Proc. 2013-12.

    4. If the corrective amendment relates to an operational failure or demographic failure, it must also satisfy section 4.05 of Rev. Proc. 2013-12.

  3. The rules discussed in this IRM section are applicable to submissions made in accordance with Rev. Proc. 2008-50 provisions.

7.2.2.29  (09-29-2014)
Missing Prior Plan Document (Relevant Sections)

  1. Section 11.04 of Rev. Proc. 2013-12 or Rev. Proc. 2008-50 requires a copy of the prior plan document (or relevant sections) that was in effect at the time of the described qualification failures be included with every VCP submission. If this document is missing, the VCP submission is incomplete.

    Note:

    This rule is not enforced if the submission is limited to late interim/good faith amendments that were adopted before the end of the extended remedial amendment cycle that first included them.

  2. Specialists, including appropriate EP Determinations personnel working VCP cases should secure the missing prior plan document. If the Applicant or POA refuses to provide the missing document then the case should be closed as a Failure to Respond.

  3. If the Applicant or POA informs the Specialist that a copy of the prior plan document cannot be submitted because it does not exist or cannot be located:

    1. For cases assigned to appropriate EP Determinations personnel for screening, contact the Group Manager to have the VCP case reassigned to a VC Group.

    2. For cases assigned to a VC Group or eligible EP Determination Letter Specialist working the case to closing, check all appropriate IRS records, including EDS and IDRS to determine if there is some evidence of a prior plan document or issued determination letter. If there is, the matter will be considered resolved for VCP processing purposes even though no actual document was secured. This only applies to VCP submissions that are limited to late amender failures (Schedule 2 failures)

  4. If there is no IRS record of a prior plan document, Specialists should provide the Applicant or POA with an opportunity to expand the VCP submission to include the failure to timely adopt an initial plan document. In order to approve the VCP submission, the Applicant/POA must provide clear evidence that a qualified retirement plan existed in these earlier years and was made available to all eligible employees. This can be accomplished by submitting:

    1. Old financial statements in the name of the plan or trust

    2. Form 5500s. IDRS command code EMFOLI will provide a listing of filed Form 5500’s associated with an EIN and Plan number.

    3. Old correspondence issued to employees

    4. Old annual plan statements issued to individual plan participants

    5. Correspondence with legal advisors and past TPAs

    6. An IRS Employee Plans favorable audit closing letter

  5. Correction would generally require retroactive adoption of a plan document back to the initial plan year.

  6. If the Applicant /POA cannot establish that a plan existed in prior plan years, the Specialist should consult with the Group Manager or Group Coordinator to determine if the case should be closed as not complete. Consider using the V-9 letter.

  7. If the VCP submission is not expanded to include a new failure, a no action letter should be issued as the VCP submission is not complete due to the missing prior plan document. It may be appropriate to waive this requirement if you are dealing with a FDIC case or Orphan plan.

7.2.2.30  (09-29-2014)
Taxpayer Requests For Modifications to Issued Compliance Statements Relating To Closed VCP Cases

  1. Once a compliance statement is issued to the VCP Applicant it will, generally, not be subsequently modified nor will the VCP case be reopened by any Group Manager or Specialist.

  2. If the former VCP Applicant or their representative requests a change to any of the provisions of the compliance statement relating to failure descriptions, factual information, changes to administrative procedures or correction methodology a new VCP submission that will result in a new compliance statement must be submitted. See Rev. Proc. 2013-12IRB 2013-4, section 10.07(10).

  3. In limited circumstances the new VCP submission may qualify for a reduced compliance fee if the requested changes are minor. Taxpayers are expected to follow the procedures detailed in Rev. Proc. 2013-12, section 10.07(10) and the Instructions to Form 8950.

  4. Fees and time spent working these types of VCP submissions are charged to the new VCP case. The original VCP case is not reopened nor should any new time/fees be charged to it.

  5. If a Specialist or Group Manager is notified by the VCP Applicant or their representative that a recently issued compliance statement contained clerical errors made by the IRS and such document is not consistent with the information contained in the original VCP submission a corrected compliance statement may be issued by the Group Manager and the provisions of Rev. Proc. 2013-12, section 10.07(10) would not apply. Some examples of clerical errors include:

    1. Incorrect plan name

    2. Incorrect EIN

    3. Incorrect name of plan sponsor or VCP Applicant

  6. The revised compliance statement issued, discussed in paragraph (5) of this subsection (IRM 7.2.2.30), should reflect the same execution date as the original issued compliance statement.

  7. If IRM 7.2.2.30(5) is applicable, the original VCP submission should not be reopened. Time spent preparing and mailing the revised compliance statement is charged to Group Manager Time (WebETS Code 680) or VC Coordination (WebETS Code 111) depending on who prepares the revised compliance statement.

  8. In rare situations it may be appropriate to reopen a closed VCP case. Written permission of the Manager of Voluntary Compliance is required if a Group Manager wants to reopen a closed VCP case.

Exhibit 7.2.2-1 
Miscellaneous Links to the VC SharePoint site

Listing of internet links to the VC SharePoint site for various miscellaneous items
(1) Latest versions of Standardized Sample VC Letters-Closing & requesting additional information
(2) EPCRS failure and correction code lookup table
(3) TRAC-ERIM General Codes
(4) Special Fee Letter mentioned in IRM 7.2.2.10.1, Instructions on Soliciting Compliance Fees Owed
(5) VC Refund Form mentioned in IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP Compliance Fees
(6) Sample Form 3210, Document Transmittal mentioned in IRM 7.2.2.10.2 , Refund Procedures and Instructions for VCP Compliance Fees
(7) Closing Worksheet for VCP Cases
(8) Sample Compliance Statements

Exhibit 7.2.2-2 
Guide to VCP Case Processing Procedures

Guide to VCP Case Processing Procedures:
Receipt and Limited Screening (DC, Covington, and Cincinnati)
Technical Screening and Case Assignment---Group Managers
Procedures for Specialists Working VCP Cases at the Group Level:
(1) Required Use of Form 5464, Case Chronology Record and WebETS
(2) Actions To Be Taken Upon Receipt of New VCP cases
(3) Reviewing VCP Cases-Initial
  a) Basic Responsibilities
  b) Verify correctness of fee and check to see if paid with plan assets
  (c) Check Form 2848
  (d) Check to see if Under Examination
  (e) Check ATAT Statement
  (f) Check for missing or incomplete Forms 8950 and Form 8951
  (g) Check for required enclosures
  (h) Check prior plan document
  (i) Check for missing explanations for special tax relief
  (j) Check for penalty of perjury-Anonymous Submissions
  (k) Request additional information
  (l) Documentation
(4) Reviewing VCP Cases-Technical Review Procedures
  a) Basic Responsibilities
  b) Conduct an initial review of the submission
  c) Check category type
  d) Review & respond to Screener comments
  e) Model compliance statements
  f) Check and see if SSN is being used
  g) Check and see if required DL application is missing
5 Model Compliance Statements
  a) Reviewing pre-formatted compliance statements-Rev. Proc. 2008-50
  b) Reviewing pre-formatted compliance statements-Rev. Proc. 2013–12
6 Procedures Involving Compliance Fee Issues
  a) Special fee waivers/refunds
  b) Additional fees and Instructions
  c) VCP Refunds and Instructions
  d) Dishonored Compliance Fee Checks
7 Special Tax Relief Requests permitted by section 6.09 of Rev. Proc. 2008-50 and Rev. Proc. 2013-12
  a) Basic Principle and authority
  b) IRC 72(t) additional income tax
  c) IRC 4972, IRC 4973 and IRC 4974
  d) IRC 4979
8 Power of Attorney Form 2848 and Limitations of Form 8821
  a) Limitations and basic requirements
  b) Verify that Form 2848 correctly completed
  c) Anonymous submissions
9 Check and see if a determination letter application (DL) is required with VCP
  a) When is a DL required to be submitted with a VCP
  b) Checking to see if the DL application has been submitted and procedures for soliciting missing application
  c) Coordination with EP Determinations
  d) Specialist's required documentation
10 Procedures for contacting and corresponding with POA and VCP Applicant
  a) Permitted contacts and conditions involving Letters, Fax, and email
  b) Use of plain language
  c) Letter types
  d) Procedure if no response
11 Compliance Statements
  a) Defined
  b) Types and characteristics
  c) General procedures
12 Conference of Right and dealing with disagreements with VCP Applicant/POA
13 Analyzing qualification failures
  a) Principle
  b) General rule and plan document failures
  c) Operational failures
  d) Ineligible employer
  e) Corrections outside of Appendix A/B safe harbors
  f) Required coordination if the failure involves IRC 401(h) and/or IRC 420 Retiree Health Benefits
  g) Pick-up contributions permitted by IRC 414(h)
14 Participant loan failures-IRC 72(p) violations only
15 Procedures for handling retroactive plan amendments that conform the written plan to the Plan's operation
  a) Basic rules
  b) Amendment increases benefits
  c) Amendment decreases benefits
  d) Required coordination
  e) Effect on Pre-approved plans
16 Dealing with Anonymous Submissions
  a) General rule
  b) Required penalty of perjury of perjury statement from POA-Rev. Proc. 2008–50 case
  c) Required penalty of perjury of perjury statement from POA-Rev. Proc. 2013–12 case
  d) Analyze case and required coordination
  e) Requesting disclosure of plan sponsor's identity
  f) Check audit status as of date of disclosure
17 Procedures for 457(b) submissions
  a) Special rules
  b) Special screening
  c) Assignment to Specialist, special duties
  d) Required coordination with Group Manager and VC Program Coordinator
  e) Specific procedures to be followed by Specialist and VC Program Coordinator
  f) Processing of sanction payment and closing letter
18 Procedures for Group VCP Submissions
19 Closing procedures for Specialists
20 Closing procedures for Group Managers
21 Required use of Standardized VC letters; listing of sample letters
22 Extensions to 150 day correction period
23 Information requests from EP Exam and EP Determinations
24 Amendments to Pre-approved plans
25 Procedures- Missing prior plan document
26 Modifications to issued compliance statements associated with closed VCP cases

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