7.2.4 Employee Plans Voluntary Closing Agreement Requests

Manual Transmittal

November 23, 2020

Purpose

(1) This transmits revised IRM 7.2.4, TE/GE Closing Agreements - Employee Plans Voluntary Closing Agreement Requests.

Material Changes

(1) Revised IRM 7.2.4.1.1 to update for Automated Clearing House.

(2) Added IRM 7.2.4.3 (11) and IRM 7.2.4.5 (7) and updated IRM 7.2.4.4 (3) to reflect the handling of any paid user fees for a VCP case that is converted into a VCAP request.

(3) Revised IRM 7.2.4.3.1 (1) and IRM 7.2.4.3.3 (10) to update the list of items that should be included with requests to reflect requests from entities that are not a plan or plan sponsor.

(4) Revised IRM 7.2.4.3.2 to reflect all actions performed by the individual assigned to process VCAP requests in El Monte, California.

(5) Revised IRM 7.2.4.3.3 and IRM 7.2.4.4 to reflect changes to screening process and the coordination between the VC Specialist and program coordinator when VCAP requests are assigned to VC Specialists.

(6) Revised IRM 7.2.4.3.3 (12) to update for items to review before closing a VCAP request.

(7) Edited for plain language and clarity.

Effect on Other Documents

This supersedes IRM 7.2.4 dated November 5, 2019.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(11-23-2020)

Eric D. Slack
Director, Employee Plans
Tax Exempt and Government Entities

Procedure Scope and Objectives

  1. Purpose: This IRM describes the procedures Employee Plans (EP) Voluntary Compliance (VC) follows to process requests for closing agreements under the Employee Plans (EP) Voluntary Closing Agreement Procedures (VCAP).

  2. Audience: EP Employees who process closing agreement requests and any IRS employee who transfers a closing agreement request to VC.

  3. Policy Owner: Director, Employee Plans.

  4. Owner: EP.

  5. Objective: To encourage sponsors of qualified plans, and others that service qualified retirement plans, to voluntarily disclose discovered violations of qualified plan requirements and federal tax requirements that apply to qualified plans to the IRS along with a proposed correction of those violations.

Acronyms, Terms and Definitions

  1. This table lists commonly used terms and provides their definitions.

    Term or Acronym Definition
    ACH Automated Clearing House
    Code Internal Revenue Code of 1986, as amended
    EP The Employee Plans Division
    EPCRS Employee Plans Compliance Resolution System
    IDRS Integrated Data Retrieval System
    POA Power of Attorney. For purposes of this IRM, an individual designated on a signed and completed Form 2848 authorized to represent the plan sponsor or taxpayer before the IRS.
    R&A Employee Plans’ Rulings and Agreements
    RCCMS Reporting Compliance Case Management System
    Specialist Any Internal Revenue Agent or Tax Law Specialist in EP that processes VCP submissions or VCAP requests.
    TE/GE Tax Exempt and Government Entities
    VCAP Voluntary Closing Agreement Procedures
    VCP Employee Plans’ Voluntary Correction Program

Authority

  1. The IRS Commissioner may enter into and approve a written closing agreement with any person for his/her liability with respect to any internal revenue tax for any taxable period ending before or after the date of such agreement (IRC 7121 and the regulations thereunder).

  2. Treasury Regulation Section 301.7121-1(a) permits the IRS to enter into a closing agreement in any case in which there appears to be an advantage to permanently and conclusively closing the case, or if the taxpayer shows good and sufficient reasons for a closing agreement, and the Commissioner determines that the United States will not sustain any disadvantage through consummation of an agreement.

  3. The Commissioner delegates to the Commissioner, Tax Exempt and Government Entities Division (TE/GE) in cases under his or her jurisdiction to enter into and approve a written agreement with any person for internal revenue tax liability of such person, or the person or estates for whom he or she acts as authorized by IRM 1.2.2.9.3 and Delegation Order 8-3 (DO 8-3).

  4. Delegation Order 8-3 (DO 8-3) delegates the authority to enter into and approve a written closing agreement with any person relating to their federal tax liability to the EP Director and the Director, EP Rulings and Agreements (R&A).

  5. Voluntary closing agreement requests are resolved by issuing a Director’s closing agreement authorized by IRM 1.2.2.9.3, DO 8-3 signed by the appropriate party (for example, the plan sponsor, plan administrator or plan trustee) and IRS representative, as authorized under the Delegation Order.

  6. For approved closing agreement requests processed under this IRM 7.2.4, the Director of EP R&A will sign the closing agreement.

Roles and Responsibilities

  1. The VC Manager oversees the processing of voluntary requests for closing agreements, assigns them to specialists and collaborates with VC program coordinators to monitor the overall progress on assigned requests.

  2. VC program coordinators review and process assigned closing agreement requests and collaborate with specialists assigned closing agreement requests and VCP submissions that are resolved with a closing agreement.

Employee Plans Voluntary Closing Agreement Requests Overview

  1. These procedures apply to closing agreement requests submitted to:

    1. VC under the EP VCAP.

    2. Any IRS employee, including employees of the Office of Chief Counsel, Wage and Investment (W&I), Small Business/Self-Employed (SB/SE), Large Business and International (LB&I) and Tax Exempt and Government Entities (TE/GE) Operating Divisions, who transfers the request to VC.

    3. VC for 457(b) plans (See Rev. Proc. 2018-52 Section 4.09 for requests received January 1, 2019- April 18, 2019, and Rev. Proc. 2019-19 Section 4.09, for requests received on and after April 19, 2019.).

    4. VC as a result of an EPCRS VCP submission converted to a closing agreement request because the VCP submission includes failures and/or other issues ineligible to be corrected under EPCRS, as authorized under Rev. Proc. 2020-4, Section 4.

      Note:

      With your group manager’s approval along with the approval of the VC Manager, employees may offer a VCP applicant the option to resolve failures or issues by converting the VCP case to a VCAP request.

  2. VC has discretion to determine whether to accept or reject any closing agreement request and whether to resolve the issues disclosed in the request.

Guidelines for Voluntary Requests for EP Closing Agreements

  1. Generally, VC will consider closing agreement requests for failures or problems that aren’t eligible for resolution under EPCRS.

    Example:

    Some issues ineligible for EPCRS:
    • Excise taxes associated with prohibited transactions.
    • Failure to provide (or accurately provide) Forms 1099-R or W-4P.

    Note:

    A closing agreement request that includes issues in IRM 7.2.4.3 (1), may also include failures that are resolvable under EPCRS.

  2. Requests from a plan sponsor or entity or requests involving a plan that is under any type of IRS exam at the time they mail the closing agreement request to the IRS should be rejected.

  3. Requests from a plan sponsor, any other party to the closing agreement, including any entity that makes the request, or requests involving a plan that was or may have been a party to an abusive tax avoidance transaction, may be rejected.

  4. VC receives requests submitted:

    1. Anonymously by a representative of the taxpayer. The taxpayer’s identity is not disclosed until after the IRS and representative have agreed to the closing agreement terms.

    2. To reduce or relieve penalties associated with a failure to pay and/or failure to file that are in addition to the taxpayer’s liability for income or excise tax amounts.

    3. By an organization involving several plans for an umbrella or mass closing agreement.

  5. Generally, for closing agreement requests under this IRM 7.2.4, requests to negotiate the following will be denied:

    1. Any applicable income or excise tax amounts, including applicable interest owed to the IRS.

      Exception:

      A request may be made to waive the 100% excise tax imposed by IRC 4971(b) and 4975(b) and such waiver may be provided in appropriate circumstances.

    2. Minimum funding deficiencies or correction of prohibited transactions. Taxpayers shouldn’t ask for the following actions in closing agreement requests:

    • Reduce a plan’s existing minimum funding deficiency.

    • Settle for less than 100% of the tax imposed by IRC 4971(a) and 4975(a).

    • Accept a reduction of a minimum funding deficiency.

    • Not require correction of prohibited transactions.

    Note:

    For plans subject to Title I of ERISA, a plan sponsor should correct a prohibited transaction using the Department of Labor’s Voluntary Fiduciary Correction Program before making a request for a closing agreement.

  6. All corrective actions described in the closing agreement must be completed before the agreement is executed.

  7. Closing agreements issued under this IRM:

    1. Provide administrative convenience allowing taxpayers to address tax consequences other than plan disqualification (such as excise tax or additional income tax) by paying their full tax liability, interest, and, if applicable, penalties.

    2. Won’t be open-ended, prospective or relate to future periods.

  8. An entity making a closing agreement request doesn’t receive audit protection, so the request doesn’t preclude the IRS from subsequently examining the plan or plan sponsor. However, if the VCAP request includes items eligible for EPCRS, we’ll exempt those items from exam while working the VCAP request, if they were originally made by a disclosed plan and plan sponsor.

  9. For anonymous closing agreement requests, if the plan or plan sponsor is under examination after they submitted their request, but before they have disclosed their identity to the IRS, then VC cannot consider their request and the request will be closed by VC without issuing a closing agreement. Instead, the issues in the closing agreement request will have to be resolved as part of the IRS examination.

  10. VC coordinates with the Director of EP R&A and the Director’s Senior Technical Advisor (Technical Advisor) to evaluate VCAP requests. Where appropriate, VC coordinates with the EP Exam Director, TEGE Division Counsel or EEE (Employee Benefits, Exempt Organizations and Employment Taxes) Associate Chief Counsel.

  11. Except as noted below, for VCP submissions that are converted into a VCAP, the full sanction amount should be paid without any offset of any VC user fee previously collected. VCP user fees should be refunded to the applicant. See IRM 7.2.4.5(7).

    Exception:

    Do not refund VCP user fees for VCP submissions that are converted into a VCAP due to the situations described in IRM 7.2.2.10(2)(b), (c) and (f).

Information Required in Voluntary Closing Agreement Requests

  1. If not submitted anonymously, the plan, plan sponsor, (or entity making the request), or the "eligible party" , (collectively referred to as the applicant), should include the following items in a VCAP request:

    A Employee Identification Number (EIN).
    B Name and address of the party expected to sign the closing agreement.
    C Name of Retirement Plan, if applicable.
    D Three digit plan number, if applicable.
    E Name of plan sponsor, if applicable.
    F Name of retirement plan, if known.
    G Six-digit North American Industry Classification (NAICS) code

    Note:

    Find the NAICS code on the filed Form 5500 series return for the retirement plan or choose the appropriate code from the Form 5500 instructions for making the request.

    H Explanation of the issue(s) in detail, including how and why it occurred, the number of people impacted, the plans or IRAs affected and the period of time the issue occurred.
    I Explanation of a proposed solution of the issue(s) and why the proposed solution is the best course of action.
    J Explanation of the method used to compute and computation of the tax, interest or penalties, if applicable.
    K Proposed sanction amount and an explanation of why it’s appropriate.
    L Number of plan participants and the total amount of plan assets. If not readily available or for a request covering multiple plans, provide estimates if possible.
    M Exhibits and/or spreadsheet with additional details.
    N Statement as to whether the plan sponsor, plan, or entity making the request is under any IRS exam.
    O Statement to certify the plan sponsor, plan, or entity making the request, has not been involved with an abusive tax avoidance transaction.
    P Signed penalty of perjury statement that the submitted information is accurate and complete to the best of their knowledge.
    Q Form 2848, Power of Attorney and Declaration of Representative, if a representative has been appointed.
  2. For anonymous submissions, the representative making the request should include items H-N, above, and the following:

    1. A unique identifying number the representative has assigned to the closing agreement request. The identifying number should not be used for any other closing agreement request.

    2. A penalty of perjury statement signed by the representative stating: "Under penalties of perjury, I declare that I am an authorized representative of the taxpayer who would be party to any closing agreement. I comply with the power of attorney requirements described in 26 C.F.R. § § 601.501-601.509. I will submit an executed Form 2848 upon the disclosure of the identity of the taxpayer to the IRS. I also declare that the issues and information included with this request are true, correct, and complete to the best of my knowledge and belief."

  3. VCAP requests should be sent to:

    Internal Revenue Service
    TE/GE:EP:VC: Group 7554
    Request for Voluntary Closing Agreement
    9350 Flair Drive, 3rd Floor
    El Monte, CA 91731

  4. Other IRS functions (including TEGE Division Counsel and TEGE Associate Chief Counsel) that receive VCAP requests involving tax-favored retirement plans should mail the requests to the El Monte, CA address.

Procedure for Receipt of VCAP Requests

  1. The VC Manager assigns an employee to convert paper VCAP requests into electronic records in RCCMS.

  2. When VC Group 7554 receives a VCAP request (either from a plan sponsor, POA or other business unit), the assigned employee:

    1. Establishes the request on the Headquarters Employee Plans System of TE/GE Rulings and Agreements Control (HQEP -TRAC) to obtain a unique identifying number that will be inputted as the "Work Unit" number in the Reporting Compliance Case Management System (RCCMS).

    2. Completes the identifying information and all required fields in the General (1 of 2) and Codes/Checksheets tabs for establishing cases in RCCMS:

      • TIN (i.e., EIN)

      • Name

      • Type as the appropriate type of case "Voluntary request for Closing Agreement," "Voluntary Closing Agr-Gp Submission," or "Voluntary Closing Agr-Anonymous" .

      • Work unit

      • Plan type

      • Plan number

      • Return received, as the postmark date of the request

      • Statute, as two years from the date entered in the "Return Received" field

      • Name control

      • Project code as the code that applies to the plan type submitted to VCAP

      • Status code

      • Activity grade

    3. Scans all documents received in the VCAP request into an Adobe Portable Document Format (PDF) file.

    4. Posts the PDF file to the Office Documents folder in RCCMS, after the request to establish the RCCMS case is approved.

    5. Conducts or request IDRS search to see if the applicant and/or plan is under audit.

      • Use AMDIS, EMFOLT and BMFOLT IDRS commands.

      • Place results in the “Office Documents” folder in RCCMS or note findings in workpapers.

      • Discuss indications of exam activity with the VC Manager.

    6. Sends a letter to the applicant (or the representative, if filed anonymously) notifying them of receipt of the request and the assigned Work Unit number.

    7. Coordinates with the VC Manager to assign the request to a specialist.

      • Notify VC Manager of newly received requests.

      • Transfer the RCCMS cases to the VC Manager for assignment.

Processing Closing Agreement Requests under the VCAP

  1. The VC Manager designates a program coordinator to follow the steps below for the VCAP request:

    Action Steps
    Email the other program coordinators and the VC Manager to have a preliminary discussion of any requests, after the case has been developed by the specialist working the request and the program coordinator has a summary of the request.
    • Circulate summaries of requests (using template) for discussion.

    • Schedule a teleconference for the group to discuss requests and make a determination whether the request is ready to be presented to the EP Director of R&A and the EP Technical Advisor or needs to be developed further.

    Schedule a teleconference with:
    • VC Manager

    • EP Director of R&A

    • EP Technical Advisor

    • Other program coordinators

    Include closing agreement summary template for each request, any other helpful documents and proposed sanction (if provided).
    Participate in a discussion.
    • The program coordinator assigned the case (or assisting the specialist assigned the case) should present the case to the group.

    • Discussion should address whether the IRS should:

    • proceed with addressing the issue disclosed in the closing agreement request.

    • accept the proposed correction or consider an alternative.

    • accept the proposed sanction or propose an alternative.

  2. The VC Manager, group manager or program coordinator may consult a local IRS Field Actuary, EP Exam, including area managers and/or area coordinators for technical assistance.

    Example:

    Some issues/failures that may require additional coordination:
    • IRC 412(i) plan issues
    • IRC 409(p) failures
    • Rollovers as Business Startups (ROBS) failures

  3. For program coordinators working cases, unless noted otherwise, they should follow the same procedures as the specialist to process the case.

  4. The VC Manager may assign some VCAP requests to specialists after discussing with their group manager. The specialist works with the program coordinator and VC Manager to finalize the closing agreement and sanction payment.

  5. Specialist: Upon receipt, see IRM 7.2.2.6, Actions Upon Receipt of Newly Assigned VCP Cases and IRM 7.2.2.6.1, Required Use of Form 5464 and WebETS for additional directions and requirements.

  6. Specialists develop and keep workpapers that document:

    1. analysis and research.

    2. explain conclusions.

    3. conversations that led to a conclusion or recommendation.

  7. After the case has been fully developed, a summary of the case has been circulated, and all parties (specialist, program coordinator, VC Manager and the entity) agree on the correction method and sanction the individual assigned the case will:

    Action Steps
    Draft a DO 8-3 closing agreement.
    • Use sample agreement on the VC SharePoint.

    • If the case is assigned to a specialist, the specialist will:

      1. ask a program coordinator for a sample closing agreement.

      2. send a draft of the closing agreement to a program coordinator for review.

      3. if the program coordinator requests revisions, discuss any questions about those changes.

      4. revise the agreement according to suggested revisions and comments.

    Send the draft agreement to the VC Manager for review and comments. If the case is assigned to a specialist, the program coordinator will:
    • Send the draft agreement to the VC Manager.

    • make any suggested revisions.

    • if changes are made, email an updated version to the specialist.

    Note:

    For cases assigned to a program coordinator, the program coordinator will email the draft agreement to the VC Manager and make any suggested revisions.

    Fax the draft approved by the VC Manager to the plan sponsor or POA for their review and comment. Inform the plan sponsor or POA that:
    • The draft closing agreement isn’t necessarily the final version.

    • The existence of the draft doesn’t mean that the IRS has agreed to enter into a closing agreement.

    • The Director of EP R&A has the final decision on the closing agreement terms and acceptance.

    Secure the plan sponsor’s or POA’s informal consent to the draft document.
    • Consider any requested changes by the POA or submitter and coordinate with the VC Manager, if needed.

    • If the case is assigned to a specialist, the specialist will:

      1. Discuss any requested changes with the program coordinator.

      2. inform the program coordinator that the draft agreement was accepted.

  8. Program coordinator: email the closing agreement draft, including attachments, to the EP R&A Director and his/her Technical Advisor for review.

  9. If the Technical Advisor requests changes to the draft closing agreement, then the program coordinator will make any requested changes and fax or mail the revised agreement to the plan sponsor or POA. If the case is assigned to a specialist, the program coordinator will send the revised draft agreement to the specialist and the specialist will fax or mail it to the plan sponsor or POA.

  10. For anonymous cases:

    1. Fax or mail the representative the revised agreement along with a letter requesting the following identifying information:

      A Employer Identification Number (EIN)
      B Name and address of the entity who will sign the closing agreement.
      C Name of retirement plan, if applicable.
      D Three-digit plan number, if applicable.
      E Type of retirement plan, if not previously provided.
      F Six-digit North American Industry Classification System (NAICS) code

      Note:

      Should be the NAICS code on the filed Form 5500 series return for the retirement plan. For other entities the filer should choose the appropriate code from the Form 5500 Instructions.

      G Statement as to whether the plan sponsor, plan, or entity making the request, is under any IRS exam.
      H Statement to certify neither the plan, the plan sponsor, or entity making the request, has not been involved with an abusive tax avoidance transaction.
      I If not previously provided, the number of plan participants and the total amount of plan assets. If not readily available, or for a request covering multiple plans, provide estimates if possible.
      J Plan documents, corrective amendments, exhibits and/or spreadsheets that are not redacted.
      K Any other identifying information needed to properly draft a closing agreement.
      L Penalty of perjury statement signed by the plan sponsor or eligible party that indicates the submitted information is accurate and complete to the best of their knowledge.
      M A signed and fully completed Form 2848, Power of Attorney and Declaration of Representative.

    2. Once you receive the identifying information take the following actions:

    • Check IDRS (or request an IDRS check) to see if the plan, plan sponsor, or entity making the request, is under IRS exam. If there are indications of exam activity, discuss with the VC Manager (or the program coordinator, if the case is assigned to a specialist).

      Note:

      If the plan sponsor or plan is under exam, a voluntary closing agreement may not be issued.

    • If there is no exam activity, update the approved anonymous closing agreement draft with the identifying information and fax or mail it to the POA for review.

  11. If the POA (or plan sponsor for cases without a representative) approves the revised draft, the specialist/program coordinator:

    • Mail the closing agreement to the plan sponsor/applicant requesting an authorized employee of the entity sign the agreement. Use a sample cover letter for closing agreement requests that do not involve 457(b) plans and includes information about sanction payments through pay.gov.

    • Request the sanction payment, if applicable, in the form of a Cashier’s Check or Certified Check for the sanction payable to the "United States Treasury" or by direct debit of a bank account through the pay.gov website.

      Note:

      Taxpayers may pay the sanction through the pay.gov website. Coordinate with a program coordinator if they pay this way.

    • Request evidence that the plan sponsor made all corrective actions under the closing agreement before signing it.

  12. Review the documents you receive from the POA/taxpayer:

    Action Steps
    Review documents
    • Check to see if the closing agreement was signed by an authorized employee of the entity.

    • Verify that the sanction check or pay.gov payment is the correct amount. Specialists should contact a VC program coordinator to ask them to get a pay.gov deposit ticket to confirm receipt of the payment.

      Note:

      Program Coordinators will wait 7 to 10 days from the payment date to take action in order to ensure that the sanction payment was successfully received and posted

    • For pay.gov payments, review deposit ticket information:

      1. Verify that "Transaction Amount" is the amount of the sanction

      2. For ACH payments, make sure the payment was processed, by verifying that "Collection Status" is "Settled." If it shows "Retired" or anything else the payment could not be processed. Look to the pay.gov "Transaction Detail " report for additional information. A new payment will need to be requested.

      3. For credit/debit card payments, make sure the payment was processed by verifying that the Collection Status is "Successful."

      4. Request a new or additional payment for any payment that was not the correct amount or was unsuccessfully processed.

    • For paper checks verify that check is:

      1. for the correct amount

      2. a certified or cashier’s check

      3. made payable to "U.S. Treasury" or "United States Treasury"

    • Record sanction payment information in the POA/Misc. tab of RCCMS.

    • Review documents that show completion of correction to verify that corrective actions are complete.

    • If there are problems, contact the taxpayer or POA to fix them.

    Scan the sanction check or save a copy of pay.gov deposit receipt Keep original check in a secure location perIRM 5.1.2.2.1.
    Email signed closing agreement (include supporting documents) to the EP R&A Director for signature Email EP R&A Director to request signature on closing agreement, attach:
    • A scanned version of the taxpayer signed closing agreement.

    • A scanned copy of sanction check (or deposit receipt if paid via pay.gov).

    • Correspondence verifying that the agreement was reviewed by the EP Technical Advisor.

    Note:

    If you don’t receive a response from the EP R&A Director within 7 days of your email, send a follow-up email.

     

  13. Specialist: When you receive the closing agreement signed by the EP R&A Director, prepare the forms for the sanction payment package by following the instructions in IRM 7.2.4.5 Processing Closing Agreement Sanction Payments, and process timely per IRM 5.1.2.3.

  14. Once Kansas City receives and processes the sanction payment (as indicated by your receipt of their signed acknowledgment copy of Form 3210) close the VCAP request:

    Action Steps
    Prepare taxpayer closing letter and POA letters (keep copy for case file) Get sample letters from a program coordinator or on the VC SharePoint.
    Prepare case file for closure
    • Record failure and correction codes in RCCMS.

    Specialists: contact the program coordinator to discuss specific failure and correction codes to record in RCCMS.
    • Upload the signed closing agreement into RCCMS.

    • Generally follow the procedures in IRM 7.2.2.23, except if a separate letter is needed, use the closing letters for VCAP requests.

    • Upload all documents and complete required fields for case closure in RCCMS.

  15. Group manager/designated employee: issue closing letters, signed closing agreements and close the case on RCCMS by following the procedures in IRM 7.2.2.24, Closing Procedures for Group Managers, as applicable to closing agreement cases.

Voluntary Submissions for 457(b) Plans

  1. Rev. Proc. 2019-19, Section 4.09, allows plan sponsors to voluntarily submit a closing agreement request (with identity disclosed or anonymously) for their 457(b) plan if they're either:

    • Government entities.

    • Tax exempt organizations (in limited circumstances, such as a plan that was erroneously established to benefit the entity’s non-highly compensated employees).

  2. EP VC applies standards similar to those under EPCRS to these submissions.

  3. Plan Sponsors/POAs should file submissions electronically via pay.gov by completing the online Form 8950 application and include:

    1. Description of the failure and proposed method of correction. Filers may find Form 14568Model VCP Compliance Statement helpful to understand what information the IRS needs.

      Note:

      The issues and correction methods in the model schedules (Form 14568-A through 14568-I) generally don’t apply to 457(b) plans. Governmental plan sponsors may find Form 14568-E, Schedule 5, and Form 14568-H, Schedule 8 helpful if their 457(b) plan has participant loans that don’t comply with IRC 72(p) or a failure to comply with minimum required distributions.

    2. Copy of the 457(b) plan document in effect during the period of failure.

    3. Exhibits and spreadsheets showing additional details for the description of the failure and/or proposed correction.

      Note:

      Plan sponsors shouldn’t submit a user fee because there is no fee required at the time of filing.

    4. Proposed sanction amount and an explanation supporting why it’s appropriate.

  4. While the submission may include the Form 14568 series, those documents are not model agreements for 457(b) submissions and we don’t issue them to resolve the failures disclosed in the submission.

  5. During the screening process, identify these submissions and determine:

    1. If VC should work the case.

    2. If the case is screened by a VC specialist, coordinate with a program coordinator on the case.

  6. The VC Manager and program coordinators may consult EP and TEGE Division Counsel to determine if VC will accept the case for processing and issue a closing agreement.

  7. Cases accepted for processing may be assigned to a VC Group. If they are, the program coordinator will document acceptance and post that in RCCMS.

  8. Process 457(b) submissions, using the case processing procedures in IRM 7.2.4.3.3, Processing Closing Agreement Requests under the VCAP, to the extent applicable.

  9. If VC doesn’t accept the 457(b) case, the program coordinator/specialist should:

    Action Steps
    Document reasons why VC won’t process this request. Prepare workpaper that explains why VC won’t process the closing agreement request.
    Inform the plan sponsor/POA. Call the plan sponsor/POA and inform them that the IRS has declined to process the closing agreement request.
    Document this call in the Form 5464, Case Chronology Record, (CCR).
    Prepare VC closing letters. Complete Letter 5360 VC Closing Letter Decline to Process 457(b).
    For cases with a representative under Form 2848, Power of Attorney and Declaration of Representative under or Form 8821, Tax Information Authorization, prepare Letter 5354, Voluntary Correction Program Closing Letter to POA with Compliance Statement.
    On Letter 5354, change “Enclosure list” to refer to the special closing letter
    Complete Case Closure in RCCMS. Use Disposal Code 777-Declined.
    Use appropriate Principal Issue Code from the 153 series.
    Complete all required closing fields in the closing record.
    Request case closure within RCCMS.
    If applicable, refund any submitted payment. Follow refund procedures in IRM 7.2.2.10, Procedures for User Fee Issues, and IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP User Fees.

  10. Generally, VC accepts cases involving governmental 457(b) plans that have operational failures limited to 401(a)(9) required minimum distribution failures and/or participant loans that didn’t comply with IRC 72(p), and specialists may work those cases. However, specialists should still work with a program coordinator on the submission.

  11. For assigned cases with a 457(b) plan sponsored by a governmental entity:

    Action Steps
    Contact the plan sponsor/POA. Verify that they’re aware of the self-correction option in IRC 457(b) and 26 CFR 1.457-9, but still want to proceed with the submission
    Document actions and describe the plan sponsor/POA response. Explain response on Form 5464, Case Chronology Record or specialist prepared workpapers.
    Close case if the plan sponsor/POA no longer wants to pursue a closing agreement Use RCCMS Disposal Code 778-Withdrawn.
    Prepare Letter 5361, VC No Action Closing Letter-457(b) Governmental Plan using SCP.
    If the submission included a payment, refund the payment.

    Note:

    Follow the refund procedures in IRM 7.2.2.10, Procedures for User Fee Issues and procedures in IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP User Fees.

    Action Steps
    Contact the plan sponsor/POA.
    Step: Verify that they’re aware of the self-correction option in IRC 457(b) and Treas. Reg. 1.457-9, but still want to proceed with the submission.
    Document actions and describe the plan sponsor/POA response.
    Step: Explain response on Form 5464, Case Chronology Record or specialist prepared workpapers.
    Close case if the plan sponsor/POA no longer wants to pursue a closing agreement.
    Step: Use RCCMS Disposal Code 778-Withdrawn.
    Step: Prepare Letter 5361, VC No Action Closing Letter-457(b) Governmental Plan using SCP.
    Step: If the submission included a payment, refund the payment.

    Note:

    Follow the refund procedures in IRM 7.2.2.10, Procedures for User Fee Issues and procedures in IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP User Fees.

  12. For processing procedures for 457(b) cases, see IRM 7.2.4.3.3 (5) through IRM 7.2.4.3.3 (15).

    Exception:

    Use the most current version of Letter 5359, to request the signed agreement, sanction payment, if applicable, and evidence of correction.

    Exception:

    Use Letter 5362, Approved case-457(b) Plan, as the favorable taxpayer closing letter.

Processing Closing Agreement Sanction Payments

  1. When you receive the signed closing agreements from the Director, prepare the following items using the most current version of the document posted on SharePoint, to send to Kansas City:

    Action Steps
    Prepare Form 3244 Payment Posting Voucher Using the sample posted on SharePoint, complete the following:
    • Taxpayer name, address, and ZIP code. Information comes from page one of the closing agreement.

    • SSN/EIN. Should be the information on page one of the closing agreement and add an “N” to the end of that number.

    • Form number/MFT. Enter 28.

    • Tax Period. Enter the year and month (i.e. YYYYMM) that the Director signed the agreement.

    • Plan/Report Number. If applicable, enter three-digit plan number.

    • Transaction/ Received date. Enter the date the Director signed the closing agreement.

    • Remarks. Enter "Closing Agreement- see attached"

    • Transaction Data. To the left of Code 670 for "Subsequent Payment" , enter total amount of sanction that you will send to Kansas City.

    • Total Payment. Make sure that the amount entered to the left of Code 670 also shows up to the left of this item.

    • Prepared by. Enter specialist’s name and telephone number.

    Prepare Form 5734 Non-Master File Assessment Voucher Using the sample posted on SharePoint, complete the following:
    • Line 1- Name and address. Enter name and address of entity signing the closing agreement. Information comes from page one of the closing agreement.

    • Line 3- Taxpayer Identification Number. Enter EIN/SSN listed on page one of the closing agreement.

    • Line 4- Type of Tax. Enter CLOSING AGREEMENT.

    • Line 5- Form number. Enter N/A- Voluntary Agree. No exam

    • Line 6- Period. Enter the year and month that the Director signed the agreement and three-digit plan number if applicable (i.e. YYYYMM Plan 00X).

    • Line 7- MFT code. Enter 28

    • Line 8-Abstract number. Enter 139

    • Line 10- Penalty.

      • I.R. Code Section or Type of Penalty. Enter IRC 7121

      • Trans. Code. Enter 240

      • Amount. Enter total amount of the sanction that you will send to Kansas City

    • Line 12- Total. Enter the same number entered into "Amount" on Line 10.

    • Line 13- Reason for assessment. Enter Closing Agreement-See Attached.

    • Line 14- Signature of Preparer. Enter name of specialist working the case and the specialist’s phone number.

    • Line 15- Date. Enter date you complete the form.

    Prepare Memorandum Using the sample posted on SharePoint, complete the following:
    • Date: Enter date mailed to Kansas City.

    • From: Enter Name of specialist working the case.

    • Payer’s Name: Enter entity’s name that is entering into the closing agreement.

    • Payer’s EIN: Enter EIN/SSN listed on page one of the closing agreement.

    • Payer’s Address: Enter an address of entity signing the closing agreement. Information comes from page one of the closing agreement.

    • Payer’s Name: Enter name of entity signing the closing agreement.

    • Phone Number: Enter phone number of the specialist who’s working the case.

    Prepare Form 3210 Document Transmittal
    • Prepare Form 3210 using sample posted on SharePoint

      Note:

      If the sanction is paid through pay.gov, request the Form 3210 that is designed for pay.gov payments from a program coordinator. The "REMITTANCE" Section of that Form 3210 will list deposit information from pay.gov instead of information about the check.

    • Release Date: Enter date mailed to Kansas City.

    • Remarks. Enter Voluntary Closing Agreement- monetary sanction deposited through Kansas City Submission Processing Center, ALC #09.

    • Document Identification: List (one item per line) the following:

      • "Cover Memorandum- Submission Processing Center"

      • "Closing Agreement"

      • "Payment Posting Voucher-Form 3244"

      • "Non-Master File Assessment Voucher-Form 5734"

      • "REMITTANCE" :

      • "Name" : Enter entity’s name that is entering into the closing agreement.

      • "EIN" : Enter EIN listed on page one of the closing agreement.

      • "Check #" : Input number(s) from sanction check(s).

      • "Amount" : Add amount of check.

      • "Plan #" : Add three-digit number, if applicable.

    • From: Enter the address and name of the specialist working the case.

    • Releasing Official: Enter the name of the specialist working the case.

    • Originator Telephone Number: Enter specialist’s telephone number.

  2. Email the attachments below to group manager for approval

    • Copy of signed closing agreement

    • Copy of sanction check(s) or pay.gov deposit receipt

    • Copies of completed Forms 3244, 5734, 3210 and memo to Kansas City

  3. The group manager (or VC Manager) reviews the documents for completeness and accuracy and resolve any issues with the specialist.

    • Confirm closing agreement was properly signed

    • Confirm sanction payment matches amount in closing agreement

    • Confirm check is a cashier’s check or certified check

    • Confirm check is payable to "United States Treasury" or "U.S. Treasury"

    • Review Forms and Memorandum

    • Once review is complete and any issues are addressed, notify specialist that documents can be submitted to Kansas City

  4. The group manager (or VC Manager) keeps copies of the following:

    • Signed closing agreement

    • Copy of sanction check(s) or pay.gov documents, if applicable

    • Copy of email to specialist that authorizes them to send the closing agreement, sanction payment and applicable forms and documents to Kansas City

  5. After receiving managerial approval, the specialist sends the following to Kansas City at the address on the 3210 via next day mail:

    Note:

    If the sanction is paid via pay.gov, you can email the items listed below to the designated contact in Kansas City.

    • Form 3210Document Transmittal

    • A copy of the signed closing agreement

    • The check or pay.gov documents

    • Form 3244 Payment Posting Voucher

    • Form 5734 Non-Master File Assessment Voucher

    • Memorandum

    Note:

    Follow IRM 10.5.1.6.7.3, Shipping Personally Identifiable Information (PII), procedures when mailing the package.

  6. The specialist should wait for the 3210 acknowledgment and upload that document to RCCMS showing receipt of sanction payment.

  7. For VCP submissions that were converted to VCAP (other than a conversion described in IRM 7.2.2.10(2)(b), (c) and (f)), follow the procedures inIRM 7.2.2.10.2 to refund the User Fee once the sanction payment has cleared and the Kansas City Campus has confirmed receipt of applicable processing documents.

Links to the VC SharePoint site

Internet links to the VC SharePoint site for documents, forms and other helpful information:
(1) Summary Listing of Published VC Letters
(2) Failure and correction codes for Voluntary Closing Agreements
(3) Sample Closing Agreement letters for non-457(b) plans
(4) RCCMS VC Codes
(5) Sample: Form 3244-A, Form 5734, Memorandum and Sample Form 3210 used to process closing agreement sanction payments
(6) VC Refund Form mentioned in IRM 7.2.2.10.2, Refund Procedures and Instructions for VCP Compliance Fees