Anyone maintaining a retirement plan, such as a 401(k), 403(b) and/or pension plan) is aware of the near impossibility of keeping the plan perfectly qualified (i.e., no testing/demographic failure, no operational/”failure to follow the plan’s terms” failures and no document failures). Rather, the IRS has over time become more and more in tune with the many minor (to major) errors that are inevitably going to occur when maintaining a plan that is intended to be tax qualified. To that end, the IRS maintains a correction program (called the “Employee Plans Compliance Resolution System” or “EPCRS”) that permits any size business or organization that sponsors a retirement plan (including not only those plans listed above but others, including SEP and SIMPLE IRA plans) to identify and correct problems associated with such plans. The current EPCRS program is outlined in Revenue Procedure 2018-52.
While the EPCRS has a self-correction program (or “SCP”) arm and an audit-related arm (called “Audit CAP”) perhaps the portion of the program that derives the most questions is the voluntary correction program arm (also called “VCP”). The VCP is available for plans that are not currently being audited by the IRS, but have self-identified mistakes with either the language in the plan document or how the plan has been operated. In availing itself of the VCP, the plan sponsor prepares and sends a written submission to the IRS and pays the user fee charged for VCP applications. The IRS then reviews and, as appropriate, approves the proposed correction methods for either the plan document or operational errors that, if not corrected, could result in the plan losing its tax-favored status.
Historically, a VCP application filing was done by mailing a paper application and user fee check to the IRS. The IRS has announced, however, that effective April 1, 2019, all VCP applications must be filed and user fees paid online (using pay.gov). Pay.gov is “The secure way to pay U.S. Federal Government Agencies”. When visiting the pay.gov website, the applicable agency (here “Treasury (UST): Internal Revenue Service (IRS)” is the correct agency). To navigate directly to the IRS component of pay.gov, click here. Alternatively, you can reach the right place by clicking the “Find an Agency” link on pay.gov and then clicking “Treasury (UST): Internal Revenue Service (IRS)” and finally “Application for Voluntary Correction Program”. Filings postmarked after March 31, 2019 that are not submitted through pay.gov will be returned.