IRS Compliance Statement

When a plan sponsor and the IRS agree with the proposed correction of plan failures disclosed in a Voluntary Correction Program (VCP) submission, the IRS issues a compliance statement listing the failures and the applicant’s proposed corrections. We mail the final compliance statement to the applicant and, if applicable, the plan representative.

Correcting the failures by the end of the correction period

The compliance statement is conditioned on the plan sponsor correcting the failures before the end of the correction period. The correction period in most cases is 150 days after the date the compliance statement is signed by the Manager of Employee Plans Voluntary Compliance (there is a longer correction period for group submissions). You must completely correct plan errors by following the compliance statement terms relating to proposed corrections. This includes taking actions to locate former employees and beneficiaries, and revising any administrative procedures as described in the compliance statement.

Requesting an extension of the correction period

If you’re near the 150-day expiration date or know that you can’t meet the deadline, you can send the IRS employee, whose contact information is on the closing letter issued with the compliance statement, a letter to request an extension of the correction period and explain why you need an extension. The Employee Plans Voluntary Compliance function considers such requests at its discretion if you send the request before the 150-day correction period expires. If the IRS agrees to extend the correction period, it will mail a letter to the applicant and plan representative, confirming the extended due date. Keep this letter with the original compliance statement.

Failing to meet the correction period

If the plan sponsor doesn’t fully correct according to the compliance statement by the end of the correction period or approved extension date, the compliance statement is not valid. To correct the plan failures, the plan sponsor may, if eligible, submit a new Voluntary Correction Program submission to the IRS along with a new user fee. New versions of all applicable IRS forms and other VCP attachments must also be submitted. Include a copy of the previously issued compliance statement and an explanation as to why correction was not completed. When making the new VCP submission, follow the procedures of the current Employee Plans Compliance Resolution System (EPCRS) revenue procedure that is in effect at the time the new VCP submission is to be made to the IRS.

Modifying the compliance statement

Generally, once the compliance statement is issued, it can’t be modified. Therefore, you’d need to submit a new Voluntary Correction Program submission accompanied by a new user fee payment and request that a new compliance statement be issued. If the modification is minor we’ll consider it. For example, your compliance statement listed 200 affected participants; however, after recalculating the failure affected 225 participants.

The new VCP submission must:

  • Include all items listed in of Rev. Proc. 2016-51, Section 10.07(10), or current EPCRS revenue procedure that is in effect at the time the new VCP submission is made.
  • Include new VCP Forms (i.e. Form 8950, Form 8951, Form 14568, and revised narrative attachments, etc.)
  • Don’t forget to include the payment for the VCP user fee
  • Send the new VCP submission to the IRS.
  • There is no reduced user fee for this VCP submission. The user fee is determined by the annual revenue procedure that sets forth the user fees for VCP submissions in effect at the time the new VCP submission is filed with the IRS.

If approved, the IRS issues the revised compliance statement to you and your plan representative reflecting the minor modification. Keep those documents with your original compliance statement.

For those rare instances where the IRS makes a clerical error with regards to the issued compliance statement, just call the “Person to Contact” listed on the IRS closing letter to discuss the matter. Refer to IRM 7.2.2.30

Keeping the compliance statement and correction records

Because the compliance statement resolves plan failures, you should keep this statement, evidence of corrections, and any follow up letters, including IRS letters, such as an extension letter, minor modification letter and revised compliance statement.