Just in time for the holidays, the IRS put a little something in the stockings for retirement plan administrators and benefits professionals. In October 2018, the IRS issued Revenue Procedure (Rev. Proc.) 2018-52, the latest official guidance consolidating the rules and procedures that govern the Employee Plans Compliance Resolution System (“EPCRS”).
- The most significant change is a shift from paper filing to mandatory electronic filing for all voluntary correction program (“VCP”) submissions.
- Effective as of January 1, 2019, plan sponsors have the option of filing VCP submissions either by paper, under the prior version of EPCRS, or by using the new pay.gov website.
- Effective on or after April 1, 2019, electronic filing (including payment of user fees) via the www.pay.gov website will be mandatory.
Welcome to the Digital Age
Changes to the VCP mainly affect the procedure by which the submissions are filed, as opposed to the contents of the filings themselves. Generally stated, the new filing procedure is as follows:
- Applicants will first need to create a www.pay.gov account that will be used both to file the VCP submission and to pay the applicable user fee.
- Applicants are required to electronically complete Form 8950, Application for VCP Submission under EPCRS, directly through the pay.gov website.
- Other components of the VCP submission must be compiled and uploaded in a single PDF file to the pay.gov website.*
- In a major departure, and as a matter of course, the IRS will no longer issue paper acknowledgment letters for submissions. Instead, receipt of a submission will be acknowledged through a tracking ID issued by www.pay.gov after the VCP submission is filed and the user fee has been paid.
- may designate an authorized representative to file a VCP submission by filing a Form 2848, Power of Attorney and Declaration of Representative, submitted electronically in accordance with specific instructions; and
- must also electronically submit a penalty of perjury statement confirming that, to the best of the plan sponsor’s knowledge, the submission is complete and accurate.
Disturbingly, should the IRS agree with the proposed correction method(s), the IRS may issue a compliance statement without directly contacting the plan sponsor or its authorized representative. Instead, filers will use a “VCP Status Inquiry Line” listed in the guidance if, for example, they should wish to modify or supplement a submission that has already been made, or otherwise check on the status of a submission.
Finally, the new Rev. Proc. reflects the revised fee structure that has been in place since earlier this year (2018). The new structure is based on the amount of plan assets as opposed to the number of plan participants.
In addition to requiring electronic VCP filing, Rev. Proc. 2018-52 makes other minor changes to EPCRS, most of which are simply updating or conforming in nature, or else do not apply directly to single employer 401(k) plans. Please contact us or your ERISA attorney or adviser with specific questions.
The IRS has provided more general information on its website.
*Notably, there is a 15 megabyte size limit –which could pose a problem for complex VCP submissions, or submissions covering multiple plan defects. Although special procedures are in place for faxing additional materials, this could prove to be a very cumbersome process.