Most submissions made under VCP are subject to a user fee and such fees fall under IRC section 7528. User fees for VCP submissions are based solely upon the amount of total net assets in the retirement plan (including SEPs/SARSEPS/SIMPLE IRAs). Refer to, Revenue Procedure 2020-4 for additional information and Appendix A.09 for specific user fee amounts. The user fee will be paid via the Pay.gov website as part of making a VCP submission to the IRS.
VCP fees* based on net plan assets (effective for submissions made on or after January 1, 2020)
|$0 to $500,000
|Over $500,000 to $10,000,000
*The IRS reserves the right to issue a special closing agreement in lieu of a compliance statement order in order to impose a sanction that may be larger than the VCP user fee in the following circumstances:
- A correction methodology that permits excess amounts to remain in affected SEP/SARSEP/SIMPLE IRAs
- Any submission where the failures are egregious or intentional
- An additional amount that a Plan Sponsor may pay as a condition for the IRS to not pursue some or all of the 10% additional tax under section 72(t)
- See Rev. Proc. 2019-19, sections 4.10(3), 6.09(6), 6.11(5) & 11.07.
Determining net plan assets
The amount of net plan assets is determined from the most recently filed Form 5500-series return. If your plan isn’t required to file a Form 5500-series return, use the total amount of plan assets as of the last day of the most recently ended plan year. If the information is not available when mailing the VCP submission to the IRS, you may use the most recently ended plan year for which the amount of total plan assets is available. This exception doesn’t apply for VCP submission mailed to the IRS more than seven months after the close of the most recently ended plan year. For SEP/SARSEP/SIMPLE IRAs, the amount of plan assets is the total value of all plan participants’ IRA account balances associated with the plan.
Exceptions to Asset Based VCP fee
|Orphan plans||If a written request is included with the VCP submission, the IRS has discretion to waive the fee in appropriate cases if the plan is a terminating orphan plan. See Rev. Proc. 2019–19, sections 4.08 & 11.04(14).||Fee may be waived|
|Group Submissions||Special type of VCP submission authorized per Rev. Proc. 2019-19, section 10.10.||The initial fee is $10,000. An additional fee is due equal to $250 for each plan affected in excess of 20 plans. Maximum compliance fee for a group submission is $50,000.|
|457(b)||These plans are resolved outside of VCP and are not subject to VCP User Fees||Subject to a negotiated closing agreement sanction. No upfront payment required.|
Avoid Overpaying User Fees for Your VCP Submission
The Employee Plans Voluntary Compliance function (VC) has noticed an increase in submissions with incorrect user fees. Many of these submissions include user fees higher than what is required.
To avoid the overpayment of user fees by plan sponsors, we want to remind plan sponsors and their representatives:
- The current Employee Plans Compliance Resolution System (EPCRS) Revenue Procedure 2016-51 no longer lists Voluntary Correction Program (VCP) user fees.
- Plan sponsors need to refer to Rev. Proc. 2017-4, Appendix A.08 to determine the appropriate VCP user fees for submissions made in 2017.
- As of February 1, 2016, we lowered the user fees for many types of 401(a) and 403(b) plan VCP submissions.
- Only use the 2016 version of Form 8951 (Rev. September 2016) , Compliance Fee for Application for Voluntary Correction Program (VCP), to determine specific user fee amounts; don’t use the pre-2016 versions of this form as they contain inaccurate information.
Determining the VCP User Fee
To determine the correct VCP submission user fee, plan sponsors may:
- Refer to the annual Employee Plans revenue procedure for user fee amounts. See Rev. Proc. 2017-4, Appendix A.08, which contains all the user fee amounts and other information for VCP submissions in 2017; or
- Visit the Voluntary Correction Program (VCP) Fees webpage. While less comprehensive, it lists current user fees.
The number of participants in a plan generally determines the user fees for 401(a) and 403(b) plans. See Rev. Proc. 2017-4, Appendix A.08, for how to determine this number. When looking at the user fee table, be sure you use the fee that lines up with the number of plan participants.
For 401(a) (including 401(k)) and 403(b) plan sponsors, do not overlook these common situations in which you may be eligible for a reduced fee:
- If you maintain a 401(a) or 401(k) IRS pre-approved defined contribution plan and didn’t amend it by April 30, 2016, for the Pension Protection Act, you’re eligible for a 50% reduced fee if you correct the failure and mail your VCP submission to the IRS by April 30, 2017.
- If your submission is limited to participant loans that didn’t comply with Internal Revenue Code Section 72(p), lower fees may apply. See Rev. Proc. 2017-4, Appendix A.08.
- If your submission is limited to a failure to make minimum required distributions, lower fees may apply. See Rev. Proc. 2017-4, Appendix A.08.
- VCP Fill-In Submission Documents
- Correcting Plan Errors
- Rev. Proc. 2018-52 – New Electronic VCP Submission Process video
(Note Rev. Proc. 2019-19 made no changes to the VCP Submission Process)