The Internal Revenue Service is streamlining its system of voluntary correction programs to help retirement plan sponsors and administrators retain the favorable tax status of their plans. The new procedures are aimed especially at small businesses that may have difficulty navigating the complex rules of qualified retirement plans.
The three elements of the simplified Employee Plans Compliance Resolution System (EPCRS) are the self correction program (SCP), which allows employers or plan administrators to identify and correct problems without the requirement to notify IRS; the voluntary correction program (VCP), which allows employers to submit proposed corrections for IRS approval; and the Audit Closing Agreement Program (Audit CAP), which allows for IRS approval for corrections while the plan is under audit. Changes to the system include:
- Expanding EPCRS to cover additional types of plans available to small businesses, such as SIMPLE IRA Plans;
- Adding correction methods and reporting instructions for plans of small business (SEPs and SIMPLE IRA plans);
- Providing sample formats for voluntary correction submissions;
- Streamlining the VCP portion of EPCRS by consolidating all seven of the prior subcategories of voluntary correction procedures into a single voluntary correction program;
- Providing a fixed fee schedule for all voluntary submissions, based on the nature and complexity of the problem being brought into correction; and
- Simplifying the amount of plan information a plan sponsor is required to include in a submission.