IRS Compliance Statement Info Updated

The IRS has updated the information concerning compliance statements it issues to plan sponsors after they reach an agreement with the IRS on correction of plan failures disclosed in voluntary correction program (VCP) submissions. The IRS mails the final compliance statement to the applicant that made the VCP submission, as well as the plan representative, if applicable.

Correcting Failures

Plan errors must be completely corrected by following the compliance statement and proposed corrections it lists. In addition, action it outlines must be taken to locate former employees and beneficiaries and revise any administrative procedures.

The compliance statement is conditioned on the plan sponsor correcting the failures before the end of the correction period. In most cases is 150 days after the VCP Manager signs the compliance statement; however, there is a longer correction period for group submissions.

Requesting an Extension

There is an option if an applicant is near the 150-day expiration date or knows it can’t meet the deadline. The applicant can send the voluntary correction specialist, whose contact information is on the closing letter issued with the compliance statement, a letter to request an extension of the correction period and explain why one is necessary.

The specialist may extend the correction period if the request is sent before the 150-day correction period expires. If the IRS grants an extension, it will mail a letter to the applicant and plan representative, confirming the extended due date. The IRS suggests that the letter be kept with the original compliance statement.

Failing to Meet the Deadline

The compliance statement is not valid if the plan sponsor does not fully correct according to the terms in the compliance statement by the end of the correction period or by the approved extension date.
To correct the plan failures, the plan sponsor must submit:

• a new VCP submission;

• a new fee;

• the previously issued compliance statement; and

• an explanation regarding why the correction was not completed.

Modifying Compliance Statements

Generally, compliance statements cannot be modified after the IRS issues them — so to make a modification, a new VCP submission must be submitted.

That is not necessary, however, if a modification is minor. For example, if the compliance statement says there are 200 affected participants but after a recalculation it turns out that there really are 225, and the applicant sends a request for a modification, the IRS will consider the request.

To request a minor modification:

• include all items listed in Section 10-07(1) of Revenue Procedure (Rev. Proc.) 2013-12;

• send the request to the address listed in Section 11.12 of Rev. Proc. 2013-12; and

• pay the applicable fee, which is the lesser of: one-half of the original fee paid or $1,500.

If the IRS accepts the minor modification, it will send a letter to the applicant and the plan representative reflecting the change as well as a revised compliance statement.

Keep the Compliance Statement and Correction Records

The IRS recommends keeping the compliance statement, evidence of corrections and any follow up letters, such as an extension letter, minor modification letter and revised compliance statement.