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VCP Submission Kit - Failure to adopt a new Pre-Approved Defined Contribution Plan by the April 30, 2016 Deadline

Plan sponsors may use this Voluntary Correction Program (VCP) Submission Kit if they:

  • didn’t adopt an updated pre-approved defined contribution (DC) plan for the Pension Protection Act (PPA) by April 30, 2016, and
  • want to correct this failure by adopting an updated pre-approved DC retirement plan to bring their plans back into compliance.

Note: Before making a VCP submission to the IRS, plan sponsors should check with the law firm, bank, broker, other financial institution or plan administrator that created the pre-approved DC plan to see if they will request a closing agreement on behalf of all adopters who missed the deadline. (See Correct the Failure to Adopt the Pre-approved Plan by the Applicable Deadline for additional details.) If yes, then the plan sponsor doesn’t need to make an individual VCP submission.

Filing and IRS approval of this submission kit, however, doesn’t correct other failures in your plan. For example, not: amending the plan for major legislation before PPA; adopting required amendments for subsequent tax law changes; and operating the plan according to its written terms.

As a plan sponsor, you’ll need to take additional steps to correct any other failures. The Correcting Plan Errors page has helpful resources. Also note, there’s a separate submission kit for plan sponsors who didn’t adopt an updated pre-approved plan document by April 30, 2010, for the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).

Background

  • DC retirement plans include profit-sharing plans, 401(k) plans and money purchase pension plans.
  • Sponsors of pre-approved DC plans were generally required to sign a new plan document on or before April 30 2016, that incorporated changes required by the PPA.
    • Some plan sponsors have a later adoption deadline, for example, if a plan sponsor wishes to convert an existing individually designed plan into a current DC pre-approved plan, they have until April 30, 2017, to adopt the pre-approved DC plan.
  • If the plan sponsor didn’t sign a restated DC plan document by the April 30, 2016 deadline, the retirement plan is no longer entitled to tax-favored treatment.
  • The loss of tax-favored treatment may reduce the deduction for contributions paid to the plan and participants would not be allowed to accumulate retirement savings.
  • While not required by the IRS or the federal tax code, the financial institution holding the plan assets may refuse to make distributions or, if it does make distributions, those distributions would be taxable and ineligible for tax-free rollover.
  • Plan sponsors can restore the tax-favored status of their plan by adopting a restated PPA pre-approved plan document and filing a submission for a VCP compliance statement with the IRS.

Prepare and Collect VCP Submission Documents

Include these items in your VCP submission (see below for detailed instructions on completing each item):

  1. Form 14568, Model VCP Submission Compliance Statement. This form is a model compliance statement. Use attachments to explain the failure, how you’ll correct it, and what steps you’ll take to make certain the error will not occur again.
  2. Form 14568-B, Schedule 2, Nonamender Failures (other than those to which Schedule 1 applies) and Failure to Adopt a 403(b) Plan Timely. Submit only this schedule because it applies to the failure to amend by the required deadline.
  3. A signed copy of the PPA plan document (or adoption agreement, if applicable) and a copy of the IRS opinion/advisory letter for the plan that you adopted.
  4. A signed copy of your pre-PPA plan document (or adoption agreement, if applicable) in effect prior to the PPA restatement and a copy of the IRS opinion/advisory letter for this older plan document.

If applicable Form 2848, Power of Attorney and Declaration of Representative (Instructions) or Form 8821, Tax Information Authorization. See additional details below

All completed documents will have to be converted to PDF documents.

Combine all documents in this list into a single PDF file. If combined file exceeds 15MB, remove some documents so that it does not exceed this limit.  The documents that could not be included in the combined PDF file can be faxed to the IRS. See additional details below.

Complete Form 2848 or 8821

  • Form 2848 - Include a completed and signed Form 2848 with your submission if you want an attorney or other eligible person to represent you in communications with the IRS about this VCP submission. If your submission doesn't include a Form 2848, the IRS will contact the individual who signed Form 8950 or the employee named in Item 2 of Form 8950 if you included a completed Form 8821.
     
  • Form 8821 - If you want to authorize an individual to receive copies of correspondence from the IRS relating to this submission (but not to represent you or respond to IRS requests for information), complete and include a Form 8821.
     
  • In the Matters section of Form 2848 (or the Tax Matters section of Form 8821), enter “Voluntary Correction Program (Rev. Proc. 2018-52)” under “Description of Matter.” Enter “8950” under “Tax Form Number,” and enter “N/A” under “Years or Periods or leave it blank.”

Complete Form 14568

Part I, Section I. Plan Information

Item 1: Enter the name of the plan sponsor. This should match the name reported on Form 8950 that is part of this VCP submission.

Item 2: Enter the plan sponsor's Employer Identification Number. Do not enter a Social Security Number. If the plan sponsor doesn’t have an EIN, you can obtain one instantly on this website.

Item 3: Enter the plan sponsor's chosen three-digit plan number. If the sponsor has only one retirement plan, this number will usually be 001. This should match the plan number reported on Form 8950.

Item 4: Enter the full name of the plan, as shown on the written plan documents and Form 8950.

Part I, Section II. Applicant's Description of Failures - In the empty space provided, enter “See Form 14568-B.”

Part I, Section III. Applicant's Description of the Proposed Method of Correction - In the empty space provided, enter “See Form 14568-B.”

Part I, Section IV. Applicant's Proposed Procedures to Locate and Notify Former Employees or Beneficiaries - In the empty space provided, enter “No former employees or beneficiaries were affected by the failures and correction described in Section II and Section III.” Do not leave this section blank.

Part I, Section V. Applicant's Proposed Revision to Administrative Procedures - In the empty space provided, enter “See Form 14568-B.”

Part I, Sections VI and VII - Do not make any marks in Section VI or Section VII.

Completing Form 14568-B

  • Headings: Include the plan name, the EIN of the plan sponsor and the plan number on every page.
  • Include all pages: Include every page of the form.
  • Do not modify: Don't change the language or formatting of the form.

Form 14568-B, Section I. Identification of Failures

Item A, Qualified Plans -Check the box next to: “The changes required by the 2010 Cumulative List (Notice 2010-90) for Cycle A individually designed plans and any eligible employer using a pre-approved defined contribution plan who failed to adopt the pre-approved plan by 4/30/16, as required by Announcement 2014-16)”

Form 14568-B, Section II. Description of Proposed Method of Correction - Check the box for “A. Qualified Plan.”

Form 14568-B, Section III. Change in Administrative Procedures

Enter a brief description of the changes to the plan operating procedures you implemented or will implement to prevent similar failures from happening in the future. Do not leave this section blank.

Examples of some administrative procedure changes might include:

  • providing additional training for employees responsible for maintaining the plan,
  • implementing an automatic reminder to check that legal requirements are being met (a “tickler”)
  • hiring external legal counsel or other professionals to help make sure that the plan is updated as necessary

VCP User fee

VCP submissions are not free. A user fee must be paid by the employer who sponsors the retirement plan that was not timely amended. The applicable user fee is based on the total amount of assets in your plan. See the VCP Fee Schedule.

Make your VCP submission via Pay.gov 

  1. Go to www.Pay.gov and create an account
  2. After signing in, search for Form 8950, Application for Voluntary Correction Program
  3. Click on the link that will take you to the pay.gov version of Form 8950
  4. Follow the Form 8950 Instructions and these specific tips when completing Form 8950 on pay.gov:

Item 1: You must Include the NAICS Business Code. Select the applicable code for your type of business. A list of applicable codes will appear when you click on the “?” that is right above the place where the code must be entered. If you file a Form 5500 series return, simply copy the NAICS number that was listed on that form.

Item 2: If you're completing and signing the form but want us to directly contact a different employee of the plan sponsor for additional information, enter the appropriate individual’s contact information and include a completed Form 8821. If a Form 2848 is included, check the appropriate box and do not enter any other information for Item 2.

Item 3: Check the box for “VCP regular submission”

Item 4: Enter the name of the plan, the three-digit plan number, number of plan participants, and amount of plan assets

Item 5: Check the box associated with the type of retirement plan

Item 6: Generally, check the box for “No” for item 6a, the user fee amount will be determined automatically based upon the amount of plan assets you typed in item 4. However, see the instructions if the VCP submission concerns a terminating orphan plan.

Item 7: Check the box for “Yes.”

Items 8 through 11: Answer all questions. Include any requested attachments.

Item 8: See the Abusive Transactions webpage for more information on transactions that affect the availability of correction programs under EPCRS.

Signature block: Form 8950 must be signed by an owner of the plan sponsor or an employee authorized to sign documents for the plan sponsor. See Instructions for Form 8950 for more information on “Who Must Sign”. Simply check the box and type your name, title, and date fields. If you have an attorney, you have the option to permit them to make this submission and sign the form on your behalf. See Instructions.

5.      Upload the PDF file that contains all of the completed VCP submission documents listed above.

6.      Pay the applicable user fee via debit/credit card, or from a checking/savings account via an ACA transfer

7.      At the end of the submission process pay.gov will generate a receipt with a Pay.gov Tracking ID #. Retain this receipt. The Pay.gov Tracking ID # is the IRS control number assigned to your submission.

8.      If you have some required VCP submission documents that could not be uploaded to pay.gov due to the 15MB file size limitation, fax them to the IRS at 855-203-6996. 

What happens next?

The IRS:

  • reviews the VCP submission for completeness and may return it to you if there’s missing information or if it’s substantially incomplete.
  • assigns a complete VCP submission to a specialist for review. We’ll contact you (and your authorized representative if applicable) by mail or phone if we have questions.
  • on approval, sends you a signed version of the Model Compliance Statement you submitted (Form 14568 and incorporated attachments). This document is your VCP compliance statement.

Expect to receive your compliance statement four to six months after making your submission to the IRS. If you haven’t received it after six months, you may call 626-927-2011 (not a toll-free number) to check on the status. of your submission.

Keep your compliance statement and signed plan document in a safe place. If the IRS later audits your plan, the compliance statement shows you corrected the failure you identified through the VCP. A financial institution holding plan assets may also ask to see a copy of the compliance statement.

Additional resources