Voluntary Correction Program (VCP) Fees

 

Most submissions made under VCP are subject to a user fee and such fees fall under IRC section 7528. User fees for VCP submissions are based solely upon the amount of total net assets in the retirement plan (including SEPs/SARSEPS/SIMPLE IRAs). Refer to Revenue Procedure 2021-4 for additional information and Appendix A.09 for specific user fee amounts. The user fee will be paid via the Pay.gov website as part of making a VCP submission to the IRS.

VCP fees* based on net plan assets (effective for submissions made on or after January 1, 2020)

Plan Assets Fee
$0 to $500,000
 
$1,500
Over $500,000 to $10,000,000
 
$3,000
 
Over $10,000,000
 
$3,500
 

* The IRS reserves the right to issue a special closing agreement in lieu of a compliance statement order in order to impose a sanction that may be larger than the VCP user fee in the following circumstances:

  • A correction methodology that permits excess amounts to remain in affected SEP/SARSEP/SIMPLE IRAs 
  • Any submission where the failures are egregious or intentional 
  • An additional amount that a Plan Sponsor may pay as a condition for the IRS to not pursue some or all of the 10% additional tax under section 72(t)
  • See Rev. Proc. 2019-19, sections 4.10(3), 6.09(6), 6.11(5) & 11.07.

Determining net plan assets

The amount of net plan assets is determined from the most recently filed Form 5500-series return. If your plan isn’t required to file a Form 5500-series return, use the total amount of plan assets as of the last day of the most recently ended plan year. If the information is not available when mailing the VCP submission to the IRS, you may use the most recently ended plan year for which the amount of total plan assets is available. This exception doesn’t apply for VCP submission mailed to the IRS more than seven months after the close of the most recently ended plan year. For SEP/SARSEP/SIMPLE IRAs, the amount of plan assets is the total value of all plan participants’ IRA account balances associated with the plan.

Exceptions to Asset Based VCP fee

Facts Exception

Orphan plans

If a written request is included with the VCP submission, the IRS has discretion to waive the fee in appropriate cases if the plan is a terminating orphan plan. See Rev. Proc. 2019–19, sections 4.08 & 11.04(14).

Fee may be waived.

Group Submissions

Special type of VCP submission authorized per Rev. Proc. 2019-19, section 10.10.

The initial fee is $10,000. An additional fee is due equal to $250 for each plan affected in excess of 20 plans. Maximum compliance fee for a group submission is $50,000.

457(b)

These plans are resolved outside of VCP and are not subject to VCP User Fees

Subject to a negotiated closing agreement sanction. No upfront payment required.

Note: Rev. Proc. 2019-19 made no changes to the VCP Submission Process.

Avoid user fee submission issues

To avoid problems with user fee submissions, please review the list of reminders below for plan sponsors and their representatives:

  • Properly complete Form 8950, Application for Voluntary Correction Program (VCP), located on Pay.gov. The Pay.gov form automatically computes the user fee while the user is completing the application. However, if the form is not completed correctly it may not calculate the correct fee.
     
  • Make sure the correct plan asset value is entered, the correct type of submission is chosen and the correct plan type is selected. Don’t check “YES” to question 6 unless the plan is an actual Orphan Plan. Refer to Form 8950 Instructions PDF and Rev. Proc. 2019-19 for more information on Orphan Plans and the information required to be submitted with regard to “Eligible Party.”
     
  • If the initial submitted user fee payment is declined by the applicant’s bank and classified as “retired” by pay.gov, don’t submit another Form 8950 application. Instead use the Pay.gov Form 8951, Additional User Fee Payment for Open Application for Voluntary Correction Program (VCP), to make a new user fee payment for the existing VCP submission. This item only applies to Automated Clearing House (ACH) payments that come directly from a checking or savings account.

Additional resources