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VCP Submission Kit - Failure to Adopt a Pre-Approved Defined Benefit Pension Plan for Plan Sponsors Prior to the April 30, 2012 Deadline

This kit is for plan sponsors that maintain a pre-approved defined benefit pension plan but failed to adopt a new plan document by April 30, 2012 and are correcting the failure by adopting a pre-approved defined benefit pension plan that reflects the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).

IRS approval of a submission filed in accordance with this kit is not enough to restore the tax-favored status of your retirement plan if there were other failures in addition to the failure to timely adopt an EGTRRA restated pre-approved plan document.

Other failures could include failing to amend the plan for major legislation before EGTRRA, or failing to timely adopt required amendments for subsequent tax law changes or failing to operate the plan in accordance with its written terms. You’ll need to take additional steps to correct any other failures. The Correcting Plan Errors page has resources to help you correct other errors with your plan.

Background

Sponsors of pre-approved defined benefit pension plans were generally required to sign new plan documents, on or before April 30, 2012, that incorporated changes required by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). Pre-approved plans are plan documents that have been approved by the IRS and are sold to plan sponsors through law firms, banks, brokers, other financial institutions or plan administrators. The IRS issued favorable opinion letters approving these plans to the authors of these pre-approved plan documents in March of 2010 (or shortly after March 31, 2010).

If you, the plan sponsor, did not sign a restated EGTRRA plan document as required on or before the April 30, 2012 deadline, your plan is no longer entitled to tax-favored treatment. The loss of tax-favored treatment reduces your deduction for contributions paid to the plan, assets already in the plan may become taxable to the trust and or its beneficiaries and your employees would not accumulate retirement benefits, as the plan is no longer eligible for tax-favored treatment. While not required by the IRS or the federal tax code, the financial institution holding the plan assets may refuse to make distributions.

You can restore the tax-favored status of your plan by adopting a restated EGTRRA plan document and filing a submission for a Voluntary Correction Program (VCP) compliance statement with the IRS. If your submission is approved, the IRS will treat the plan as entitled to tax-favored status. Your deduction is protected, plan assets do not become taxable to the trust and benefits to plan participants continue to accrual in a tax-favored environment. A copy of the VCP compliance statement, signed on behalf of the IRS, will be returned to you. Keep it with the signed plan document.

Items to be Submitted

Your Voluntary Correction Program submission should include:

  1. Form 8950, Application for Voluntary Correction Program (VCP) Under the Employee Plans Compliance Resolution System (EPCRS)

  2. An explanation for item 7b on Form 8950

  3. Form 14568, Model VCP Submission Compliance Statement. This form is a model compliance statement. Use attachments to this form to explain what the failure was, how it will be corrected, and what steps will be taken to make certain the error will not occur again.

  4. Form 8951, Compliance Fee for Application for Voluntary Correction Program (VCP) Under the Employee Plans Compliance Resolution System (EPCRS)

  5. Form 14568-B, Schedule 2, Nonamender Failures (other than those to which Schedule 1 applies) and Failure to Adopt a 403(b) Plan Timely. Several other model VCP schedules are part of the Form 14568 series. You should only submit the schedules that apply to your particular error.

  6. Letter 5265, Acknowledgement Letter. Include a completed copy of this letter if you would like the IRS to confirm that we received your application.

  7. A signed and dated Form 2848, Power of Attorney and Declaration of Representative (Instructions), if you want an attorney or other qualified individual to represent you with regard to this VCP submission. Include a signed and dated Form 8821, Tax Information Authorization, if you want the IRS to mail copies of any correspondence regarding this VCP submission to any other individual.

  8. A check made payable to the United States Treasury for the appropriate fee, plus a photocopy of the check. Attach both to the Form 8951. If your plan has 20 or fewer participants, the fee is $500. See fee chart if you have 21 or more participants.

  9. A signed copy of the EGTRRA plan document (or adoption agreement, if applicable) and a copy of the IRS opinion/advisory letter for the plan that you have adopted.

  10. A signed copy of your pre-EGTRRA plan document (or adoption agreement, if applicable) in effect prior to the EGTRRA restatement and a copy of the IRS opinion/advisory letter for this older plan document.

Completing Form 8950

Follow the official Instructions as well as the items below.

Item 1: Do not forget to include the NAICS Business Code. Select the applicable code for your type of business from the list in the Form 8950 instructions.

Item 2:  If you are completing and signing the form, but want us to contact a different employee of the plan sponsor directly 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.

Signature block: The signer must be an owner of the sponsor or an employee authorized to sign documents on behalf of the plan sponsor. See Instructions for Form 8950 for more information on “Who Must Sign”.

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

Item 4: Enter the name of the plan, the three-digit plan number, the month the plan year ends, and amount of plan assets.

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

Item 6: Check the box for “Yes” and the box for “Schedule 2.”

Item 7a: Check the box for “Yes.”

Item 7b: Do not check any box. Leave this item blank. Ignore form instructions for this item.

Item 7c:  Do not complete. Leave this item blank. Ignore form instructions for this item.

Items 8 through 10 and Item 12: Answer all of these 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.

Item 11: Do not check any box. Leave this item blank. Ignore form instructions for this item.

Explanation for Item 7B on Form 8950 - Do not submit any narrative attachment for Item B.

Completing Form 8951

Official instructions are part of the form and provide information on how to complete it.

  • Attach the compliance fee check and a photocopy of it to this form. The required fee is based on the number of participants in the plan. See the VCP Fee Schedule.

Completing 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 does not include a Form 2848, the IRS will contact the individual who signed Form 8950 or the employee named in Item 2 of Form 8950 provided 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. 2016-51)” under “Description of Matter.” Enter “8950 and 8951” under “Tax Form Number,” and enter “N/A” under “Years or Periods.”

Completing Form 14568

Part I, Section I. Plan Information

Item 1: Enter the name of the plan sponsor. This should match the name reported on Forms 8950 and 8951 that are part of this VCP submission.

Item 2: Enter the Employer Identification Number of the plan sponsor. Do not enter a Social Security Number. If the sponsor doesn’t have an EIN, you can obtain one instantly on the IRS website. This should match the EIN reported on Forms 8950 and 8951.

Item 3: Enter the three-digit plan number chosen by the plan sponsor. If the sponsor has only one retirement plan, this number will usually be 001. This should match the plan number reported on Forms 8950 and 8951.

Item 4: Enter the full name of the plan, as shown on the written plan documents and Forms 8950 and 8951.

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 failure described in Section II or will be affected by the correction.” 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: Do not change the language or formatting of the Form.

Form 14568-B, Section I. Identification of Failures

Item A, Qualified Plans - Check the boxes next to:

  • “The changes required by the Cumulative List for the plan’s last on-cycle year,” and

  • “The changes required by the 2006 Cumulative List.”

Form 14568-B, Section II. Description of Proposed Methods 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 in your organization’s procedures for operating the plan that the plan sponsor implemented or will implement to prevent similar failures from happening in the future. Do not leave this section blank.

The 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”), or hiring external legal counsel or other professionals to assist in making sure that the plan is updated as necessary.

Figuring Your Fee

The applicable user fee is determined using the number of participants in your plan. See the VCP Fee Schedule.

  • Your check should be made payable to the United States Treasury.

  • Attach the check and a photocopy of the check to your completed Form 8951.

Mail Your Submission

First class mail:

Internal RevenuRevenue Service
P.O. Box 12192
Covington, KY 41012-0192

Express mail or private delivery service:

Internal Revenue Service
201 West Rivercenter Blvd. Attn: Extracting Stop 312
Covington, KY 41011

What Happens Next?

  • The IRS reviews the VCP submission for completeness. If anything is missing, and your submission is substantially incomplete the IRS may return it to you.

  • The IRS assigns the VCP submission to a specialist for review. If the specialist has any questions regarding your submission, he or she will contact you (and your authorized representative, if applicable) by mail or by phone.

  • Upon approval, the Model Compliance Statement you submitted (Form 14568 and incorporated attachments) is signed on behalf of the IRS and mailed to you. This document is your VCP compliance statement.

  • You can expect to receive your compliance statement four to six months after you mail your submission to the IRS. If you haven’t received your compliance statement 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 will show that the failure you identified was corrected through the Voluntary Correction Program. A financial institution holding plan assets may also ask to see a copy of the compliance statement before it will make requested distributions.

Additional resources

Correcting Plan Errors
Home page on the Web for the IRS Retirement Plan correction programs

Tips to Avoid Processing Delays with Your VCP Submission

Page Last Reviewed or Updated: 12-Jan-2017