IRS Highlights Top Mistakes in Retirement Plan Correction Submission Filings

The IRS has updated its Top Mistakes in Voluntary Correction Program (VCP) Submissions webpage to ensure submissions by plans sponsors or their representatives are free of errors that could result in a delay of the IRS’ review of the submission as well as a holdup in issuing the compliance statement.

The updated list includes new items concerning the electronic submission of VCP applications via Pay.gov, which became a requirement in April 2019, as well as other submission mistakes that have previously been reported. Highlights include:

Online VCP Submissions via Pay.gov – The IRS noted several mistakes made in not correctly following Revenue Procedure 2019-19, including failure to convert VCP documents into a single PDF file of the required size; improperly uploading the PDF file with the submission document; incorrect completion of Form 8950; and failure to pay the correct user fee. In addition, the IRS notes that multiple submissions of the same VCP application are being made in error and encourages users not to make multiple submissions. Instead, users are urged to call the VCP status line to discuss how to resolve issues. 

Form 8950 Errors – Form 8950 errors include plan sponsor identification errors; incorrect VCP submission types; inaccurate participant count and plan asset information that could lead to an incorrect user fee calculation; and incorrectly checking the “Yes” box for the termination of an orphan plan.

Form 14568 Errors — Form 14568 errors include not checking the correct boxes; not including the plan name, EIN, and plan number in the header of every page submitted; signing the form in the wrong place, deleting items on Form 14568; selecting inapplicable tax relief check boxes; and failing to provide justification for requested special tax relief.

Details of Plan Failures and the Correction Methods – These include descriptions of failures that were not detailed enough or easily understood; descriptions of operational failures do not specify the plan sections not followed or the number of participants affected; the method used to determine the earnings to correct contributions or distributions is unclear; the submission does not state a plan qualification failure; and the failure to include specific proposed changes to administrative procedures, or the proposed changes didn’t address how they would prevent the failure from happening again.

Late Plan Amendments – Plan amendment errors include failure to specify the particular tax law items that were not timely reflected in the plan or the plan section that includes the amendment not timely adopted; incorrectly listing the failure to adopt a plan amendment that the plan was not required to adopt; and failure to report late amendments on the correct form.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 678-439-6236.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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