New Program Allows Providers of Pre-Approved Plan to Correct Missed Deadlines
The April 30, 2016 deadline for pre-approved plan adopters to sign a restated plan that complies with the Pension Protection Act passed. After the first 6-year cycle for pre-approved plans ended on April 30, 2010, we received many Voluntary Correction Program (VCP) submissions from plan sponsors who didn’t sign a restated plan by the deadline.
While plan sponsors may continue to make VCP submissions for correcting a failure to restate their plans by the deadline, the IRS invites financial institutions or other service providers to submit proposals for umbrella closing agreements to correct the same failure on a larger scale by addressing employers affected by the failure as a group.
Umbrella closing agreement parameters:
- Minimum of 20 plans covered by closing agreement
- $5,000 fee for the first 20 plans plus $250 for each additional plan. Maximum amount: $50,000 (similar to the Group Submission fee arrangement under VCP) Note: When we first announced this program on April 1, 2016, the base fee was $10,000. We reduced that fee to $5,000 to offer a 50% reduction for the first year after the April 30, 2016 deadline.
- The closing agreement should include plans maintained by eligible participating employers for whom the service provider can certify that they have a record of their:
- Consent to participate - affirmative agreement to participate in the closing agreement program
- Prior document compliance - adoption of pre-approved defined contribution plans for the Economic Growth Tax Relief Reconciliation Act of 2001 (EGTRRA) by the required deadline stated in Notice 2004-84; or if late, IRS compliance statements to correct for the late adoption of EGTRRA documents
- Correction of the document issue - execution of the PPA restatement using the service provider’s pre-approved document
- Financial institutions or other service providers that apply and are approved will have until the later of 120 days from the closing agreement execution date or May 1, 2017, to:
- provide a final list of employers covered by the closing agreement
- pay additional fees (if applicable).
You can send a letter outlining your proposal to:
Internal Revenue Service
TE/GE:EP:VC Group 7554
Request for Voluntary Closing Agreement
9350 Flair Drive, 3rd Floor
El Monte, CA 91731
Call Stephanie Bennett at 818-274-0720 or Avaneesh Bhagat at 626-927-1410 if you have questions.