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VCP Submission Kit - For 403(b) Plan Sponsors who Missed the December 31, 2009 Deadline to Adopt a Written Plan

This kit is for 403(b) Plan Sponsors who missed the December 31, 2009 deadline to adopt a written plan.

Background

If your organization did not adopt a written plan that complies with the requirements imposed by federal tax law and the IRS by December 31, 2009, your organization’s 403(b) retirement plan is no longer entitled to tax-favored treatment. The loss of tax-favored treatment reduces your employees’ ability to accumulate retirement savings and increases their current income tax liability.

Your organization can restore the tax-favored status of its 403(b) retirement plan by adopting a written plan 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 and the plan participants will continue to build up their retirement savings on a tax- deferred basis. A copy of the VCP compliance statement, signed on behalf of the IRS, will be returned to you. Keep it with the signed written 403(b) plan.

This kit was created to guide you through the steps in filing a submission for a VCP compliance statement. It includes detailed instructions and sample entries for some specific items related to the completion of model VCP documents currently available on IRS forms. Eligible organizations that sponsor a 403(b) retirement plan but failed to adopt written plan document(s) for the plan by December 31, 2009, as required will use this kit to resolve this problem through the use of the IRS’s VCP correction program.

IRS approval of a submission filed in accordance with this kit is not enough to restore the tax-favored status of your organization’s 403(b) retirement plan if there were other failures in addition to the failure to timely adopt a written plan.

Other failures could include contributing the wrong amounts to the plan, failing to make a deferral election available to all eligible employees, or failing to satisfy the nondiscrimination requirements that apply to the plan. You will need to take additional steps to correct any other failures. The Correcting Plan Errors website has resources to help you correct other errors with your organization’s 403(b) plan.

Generally, only charities who are 501(c)(3) organizations and public schools are eligible to sponsor a 403(b) plan. For more information on the types of employers eligible to sponsor a 403(b) plan, see Income Tax Regulation 1.403(b)-2(b)(8). If your organization is not eligible to sponsor a 403(b) retirement plan, you should complete and file Form 14568-F, Schedule 6 in addition to the Form 14568, Model VCP Compliance Statement and Form 14568-B, Schedule 2, described below.

A church plan is not subject to the written plan requirement unless the plan includes retirement income accounts. Consult your 403(b) plan provider or benefits adviser if necessary.

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. Form 14568-B, Model VCP Compliance Statement - Schedule 2: Other Nonamender Failures 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.

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

  6. A copy of the written 403(b) plan your organization adopted to comply with the final 403(b) income tax regulations.

  7. 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 simply 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 Form 8951. If your plan has 20 or fewer participants, the fee is $500. See the fee chart if you have 21 or more participants.

  9. Required statements for 403(b) plans.

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 organization 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 officer of the plan 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: Enter “07” in the box.

Item 6: Check the box for “Yes” and the box for “Form 14568-B, Schedule 2.”

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

Items 8 through 12: Answer all of these questions. Include any requested attachments.

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. If using the September 2015 version of Form 8951, ignore the outdated fee amounts on Item 7 and simply include the correct fee.

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

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 8951 or 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 organization that sponsors the 403(b) plan 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 403(b) plan and Forms 8950 and 8951.

Section II. Applicant's Description of Failures

In the empty space provided in Section II of the Model VCP Compliance Statement, enter the following: “See Schedule 2.”

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

In the empty space provided in Section III of the Model VCP Compliance Statement, enter the following: “See Schedule 2.”

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

In the empty space provided in Section IV of the Model VCP Compliance Statement, enter the following: “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.

Section V. Applicant’s Proposed Revision to Administrative Procedures

In the empty space provided in Section V of the Model VCP Compliance Statement, enter the following:  “See Schedule 2.”

Sections VI. and VII.

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

Completing Form 14568-B

Section I (Identification of Failures)

Go to Item B, 403(b) Plan, at the end of Section I. Check the box next to the failure description “The Plan Sponsor did not timely adopt a written plan as required by the final 403(b) regulations and Notice 2009-3.”

Section II Description of Proposed Method of Correction

Check the box for “B. 403(b) Plan.” By checking this box you are indicating that your organization has adopted a written 403(b) plan that by its terms is effective as of the later of:

  • January 1, 2009, or

  • the date the 403(b) plan began to operate.

Section III Change in Administrative Procedures

Enter a brief description of the changes in your organization’s procedures for running the plan that have been implemented or will be implemented 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 written 403(b) plan is acceptable and being followed in operation.

Required Statements for 403(b) Plans

Create a document that includes the sponsor’s name, the plan number, and the sponsor’s EIN at the top of the page. Title the document “Required Statements for a VCP Submission on behalf of a 403(b) Plan.”

In the body of the document, include these statements:

  1. “The Plan Sponsor is a ” (Enter the type of employer. For example, “local public school district”, “public university”, or “charitable organization exempt from tax under Section 501(c)(3).” )

  2. “The Plan Sponsor has contacted all other entities involved with the plan and has been assured of their cooperation to the extent necessary to implement the adoption of the written plan.”

Figuring your VCP fee

Determine the fee using the number of plan participants. Plan participants are employees eligible to make elective deferrals to the plan. 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. Fees associated with VCP are now considered user fees subject to Code section 7528. Beginning February 1, 2016, taxpayers need to look to Rev. Proc. 2016-8 (and then each subsequent annual update) to determine specific fee amounts and the current version of the EPCRS revenue procedure for additional information pertaining to special definitions and conditions.

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 the submission, he or she will contact you (and your authorized representative, if applicable) 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 the 403(b) plan, the compliance statement will show that the failure you identified was corrected through the Voluntary Correction Program. A financial institution or life insurance company holding plan assets may also ask to see a copy of the compliance statement before it will make requested distributions.

Additional resources

403(b) Plans:

IRC 403(b) Tax-Sheltered Annuity Plans
The IRS homepage for 403(b) plan information

403(b) Fix -It Guide
How to find, fix and avoid errors in 403(b) plans

Finding and Fixing Retirement Plan Errors:

Find Plan Errors
A Guide to Common Qualified Plan Requirements and other resources

Fix Plan Errors
Summary of plan correction programs, articles and videos

Using the Voluntary Correction Program (VCP):

VCP Fillable Forms
Use these fillable files to complete your VCP application

Voluntary Correction Program (VCP) Fees

Annual User Fee Revenue Procedure

Revenue Procedure 2013-12
Read the official guidance for the Employee Plans Compliance Resolution System

Other IRS Retirement Plan Correction Programs:

FAQs regarding the Self -Correction Program (SCP)
Frequently asked questions and answers about how to self-correct plan errors without contacting the IRS and without paying any fee

FAQs regarding the Audit Closing Agreement Program
What happens if a plan failure is first discovered during an IRS audit

Other Resources:

Online Application for an Employer Identification Number
No need to file Form SS-4. After validations are done you will get your EIN immediately and may download and print your confirmation notice.

Page Last Reviewed or Updated: 14-Mar-2017