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VCP Submission Kit - Failure to Make Timely Required Contributions to a Money Purchase or Target Benefit Plan

This kit is for plan sponsors who failed to make timely required contributions to money purchase pension plans (MPP) or target benefit pension plans (defined contribution plans).

Background

Money purchase pension plans and target benefit plans are subject to the minimum funding standards of IRC Section 412. Funding of these plans by a plan sponsor is not discretionary. If you did not make the required contributions to these plans in a timely manner, you did not operate the plan in accordance with its written plan document. A failure to operate the plan in accordance with its written terms is an operational failure that may result in the loss of the plan’s favorable tax treatment under the Internal Revenue Code.  

Loss of a plan’s favorable tax status under the Internal Revenue Code (disqualification) can have severe financial consequences to both the plan sponsor and plan participants.

You can restore the tax-favored status of your MPP or target benefit plan by correcting the failure under the Employee Plans Compliance Resolution System (EPCRS). Make a submission and use the Voluntary Correction Program (VCP) to fix the operational failure if you want IRS assurance that your correction proposal is acceptable or if the Self Correction Program (SCP) is not available to you.  If your submission is approved, the IRS will treat the plan as entitled to tax-favored status and the plan participants will continue to build up their retirement savings on a tax-deferred basis.

Items to submit

Your VCP submission should include:

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

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

  3. Form 14568, Model VCP 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. Letter 5265, Acknowledgement Letter. Include a completed copy of this letter if you would like the IRS to confirm that we received your application.

  5. A copy of the plan document (or the relevant portion of the plan document) that was in effect when the failure occurred.

  6. Form 2848, Power of Attorney and Declaration of Representative (Instructions), if you want an attorney or other qualified individual to represent your organization 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 anyone outside your organization. 

  7. 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 $750. See the fee chart if you have 21 or more participants.

Completing Form 8950

Follow the official Instructions as well as the items below.

Item 2: If you want us to contact the plan sponsor directly for additional information, enter the appropriate individual’s contact information. The signer of the form must be an owner of the plan sponsor or an employee authorized to sign documents on behalf of the plan sponsor. If a Form 2848 is included, check the appropriate box.

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

Item 5: Enter “03” in the box if the plan is a money purchase plan or “06” if the plan is a target benefit plan.

Item 6: Check the box for “No.”

Items 7a, 7b, and 7c: Do not mark any response for these items.

Item 8: See Abusive Transactions that Affect Availability of Programs under EPCRS for more information on which transactions are considered abusive.

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.

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

Completing Form 2848 or 8821

  • Form 2848 - Include a completed ad 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 employee named in Item 2 of Form 8950 if any additional information is needed.

  • 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. 2013-12)” under “Description of Matter.” Enter “8950 and 8951” under “Tax Form Number,” and enter “N/A” under “Years or Periods.”

Completing Form 14568

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 this 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 plan number 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.

Section II. Applicant's Description of Failures

On a separate attachment, describe the failure. For example:

“The plan sponsor failed in operation to make timely contributions to the plan as required by the written terms of the plan document.”

Your description should include the following:

  1. State the plan year or years for which contributions were not made
  2. Amount of the deficiency
  3. Number of participants who should have received a contribution
  4. Explain why the failure occurred

In the space provided on the Form, write "see attached pages."  Label your attachment with the related Form section and title. Don't forget to include the plan name, plan number and the applicant's EIN at the top of each attachment page.

Section III. Applicant's Description of the Proposed Method of Correction

On a separate attachment, describe the correction method applicable to each failure listed in Part II. Include the following information:

  1. The amount of the corrective contribution made (or to be made) to the plan. Include an explanation of how this amount was determined.
  2. The date that the late contribution was made
  3. The interest rate used to determine the lost earnings. Include an explanation of how this rate was determined.

The goal in making the correction is to bring the plan back to the position it would have been if the failure had not occurred. In other words, lost earnings must be paid to the plan.

In the space provided on the Form, write "see attached pages."  Label your attachment with the related Form section and title. Don't forget to include the plan name, plan number and the applicant's EIN at the top of each attachment page.

Section IV. Applicant's Proposed Procedures to Locate and Notify Former Employees or Beneficiaries

  • If you have NO affected former employees: In the space provided, write “No former employees or beneficiaries were affected by the failure described in Section II or will be affected by the correction described in Section III.”

  • If you DO have a former employee or beneficiary entitled to missed contributions: On a separate attachment, describe how you will locate your former employee using acceptable methods for locating lost participants. In the space provided on the Form, write "see attached pages."  Label your attachment with the related Form section and title. Don't forget to include the plan name, plan number and the applicant's EIN at the top of each attachment page.

  • Do not leave this section blank.

Section V. Applicant's Proposed Revision to Administrative Procedures

On a separate attachment, indicate what measures will be put in place to make certain that future contributions will be timely made to the plan  (i.e., by the due date of the plan sponsor’s tax return plus extensions if the return was extended). In the space provided on the Form, write "see attached pages."  Label your attachment with the related Form section and title. Don't forget to include the plan name, plan number and the applicant's EIN at the top of each attachment page.

Sections VI. AND VII.

Do not make any marks in Section VI or Section VII.

Figuring your VCP fee

Unless your defined contribution pension plan is a terminating orphan plan, the VCP fee is the general fee determined by the number of participants in your plan. See the VCP Fees.

The number of participants is reported on the Form 5500 series returns. For a MPP or a target benefit plan, this number would be the number of individuals who are currently covered by the plan and any former employee or beneficiary with an account balance under the plan. For Form 5500, see line 6f. Filers of Form 5500-SF or 5500-EZ, see line 5b.

  • 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.

Mailing your VCP submission

First class mail:

Internal Revenue 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 VCP submission will be assigned to a specialist for review. If the specialist has any questions regarding your submission, he or she will contact you or your authorized representative by mail, fax or phone.
  • Once your submission is approved, the Model VCP Compliance Statement you submitted (Form 14568 and incorporated attachments) will be 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 approximately four to six months after mailing 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 signed compliance statement and its attachments 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.

FAQs


Why do I have to make an annual required contribution to a money purchase pension plan or target benefit plan when I am not required to do the same for my profit sharing plan?

MPP plans, target benefit plans and defined benefit plans are subject to the minimum funding standards of IRC Section 412. Funding of these plans by a plan sponsor is not discretionary. A profit sharing plan is not subject to these minimum funding standards.


When is a contribution to a money purchase pension plan or a target benefit plan considered untimely, thus causing the plan to be disqualified?

Contributions to these types of plans must be made by 8 ½ months after the last day of the plan year that ends with or within the employer's tax year. For example, if the 2013 plan year was a calendar year, and the tax year was also the calendar year, then the due date for the 2013 plan year contributions was September 15, 2014.

If a plan is no longer qualified under the Internal Revenue Code, then the employer may lose deductions for contributions paid to the plan, in addition to other consequences. See Tax Consequences of Plan Disqualification


If my MPP plan or target benefit plan is no longer qualified, what can I do to get it qualified again?

In order to bring your MPP Plan or target benefit plan back into compliance with the tax law, you must correct the failure that led to the loss of qualification. You must either self-correct the problem, applying the principles of self correction outlined in the Employee Plans Compliance Resolution System (EPCRS), or make a submission to the Voluntary Correction Program under EPCRS. The specific details of EPCRS can be found in IRS Revenue Procedure 2013-12. You can read general overviews of the Self-Correction Program and the Voluntary Correction Program.


Can I self-correct a failure to make timely required contributions, or must I make a submission under the VCP?

In some cases you may be able to self-correct without contacting the IRS. For more information on which failures may be eligible for self-correction, see the Self-Correction Program FAQs and Retirement Plan Errors Eligible for Self-Correction.


Whom can I call to get  help with my money purchase plan or target benefit plan submission?

If you have any questions, please contact the IRS Employee Plans customer service line at 1-877-829-5500. Our representatives can put you in touch with a VCP specialist.

Additional resources

Page Last Reviewed or Updated: 12-Apr-2017