The IRS offers a formal opportunity to correct certain types of plan qualification failures through its Voluntary Correction Program ("VCP"), one of the retirement plan correction programs under the IRS's Employee Plans Compliance Resolution System. The IRS recently updated its webpage listing out the most common mistakes with taxpayer's VCP submissions.

These top mistakes include:

  • Online submission issues:
    • Failure to combine PDF documents into a single PDF file that is less than 15 MB,
    • Incorrect completion of the Form 8950,
    • Failure to pay the correct user fee, and
    • Making multiple submissions when an issue is discovered after submission.
  • Data contained in the submission did not line up with other documents submitted (such as the plan sponsor or plan name).
  • The submission did not include the plan name, employer identification number, and plan number on every page submitted.
  • The operational failure description did not specify the plan section that was not followed or the number of affected participants.
  • The submission did not state a plan qualification failure. The IRS will not review the submission to identify the plan failure for the plan sponsor.
  • Calculations of corrective contributions were not sufficiently detailed.
  • For submissions involving participant loans,
    • The submission did not include the loan policy or loan agreement entered into with the participant, or
    • The reamortized loan exceeded the 5-year period that applied to the original loan.

To ensure a smooth and timely review by the IRS, plan sponsors should consult with a member of their BCLP team to ensure any VCP submission is carefully reviewed and these top mistakes are avoided.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.