December 5, 2018
For HR offices, December is typically a time to recover from open enrollment, tie up loose ends, and look forward to 2019. Lost in the busyness of the last few months may have been some retirement plan guidance from the Internal Revenue Service regarding its Employee Plans Compliance Resolutions System (EPCRS). In Revenue Procedure 2018-52 (September 28, 2018), the IRS has outlined new filing requirements for its Voluntary Correction Program. This guidance essentially amends and restates Rev. Proc. 2016-51, which, as described below, will have limited applicability after December 31, 2018.
Most importantly, the IRS announced that it is moving towards electronic filings of its Voluntary Correction Program applications. Effective April 1, 2019, electronic filing of VCP submissions will be mandatory. From January 1, 2019, through March 31, 2019, VCP applications may be made either on paper or electronically using the new procedures. During this interim period, paper filers must rely on Rev. Proc. 2016-51, while electronic filers must rely on Rev. Proc. 2018-52. The IRS also has published different forms, depending on whether the applicant is using paper or electronic filings.
While these filing changes are largely procedural in nature, note that filers may have significant motivation to favor one method over the other. For example, files larger than 15MB cannot be processed by the IRS’ electronic system, so a portion of the documentation for larger submissions must be provided by fax. This limitation could lead to significant difficulty and confusion for larger, more complex applications. Additionally, note that while authorized representatives will be able to file applications directly, direct filing will now require new forms, including a special penalty of perjury statement signed by the plan sponsor, as well as new payment procedures.
The guidance also provides some limited direction regarding modifications to existing submissions. A filer seeking to amend or modify a filing will need to call the VCP information line to discuss how the additional or revised documents should be sent. Additionally, the new guidance makes clear that an agent may approve a submission without any direct contact with the person who made the submission. In this case, any modifications would have to be submitted as a new filing, incurring an additional fee.
On December 12, 2018, we will dive into these issues in greater depth in Charleston, at a breakfast briefing and roundtable discussion hosted by Nexsen Pruet. In addition to this new guidance, we will be discussing retirement plan best practices for correcting errors, as well as self-auditing techniques. You will find the invitation here.
Our Insights are published as a service to clients and friends. They are intended to be informational and do not constitute legal advice regarding any specific situation.