Compliance September 27, 2017

IRS Released New Versions of VCP Forms

Plan sponsors of tax favored retirement plans can use these forms to make an IRS Voluntary Correction Program (VCP) submission.
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The Internal Revenue Service (IRS) released new versions of Form 14568, Model VCP Compliance Statement, and Forms 14568-B through 14568-I, Model VCP Schedules.

Plan sponsors of tax favored retirement plans can use these forms to make an IRS Voluntary Correction Program (VCP) submission. The model schedules (Forms 14568- A to 14568-I) contain standardized methods to correct common errors that sponsors may discover in their plans and wish to resolve using VCP.

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Generally, the IRS revised the following forms to make them easier to understand and better work with the Revenue Procedure 2016-51 requirements effective as of January 1, 2017. Revenue Procedure 2016-51 updates the comprehensive system of correction programs for sponsors of retirement plans that are intended to satisfy the requirements of Sections 401(a), 403(a), 403(b), 408(k), or 408(p) of the Internal Revenue Code.

Highlights of other changes to specific forms are available here.

Compliance September 27, 2017

IRS Says 403(b) Plans May Use Effective Date Addendums

Some sponsors that want to use a pre-approved plan have certain provisions that were not in effect for the plan for the entire restatement period or options that have changed during the restatement period.
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Without much fanfare, the Internal Revenue Service (IRS) opened its pre-approved plan program for 403(b) plans by issuing a list of providers of pre-approved plans.

Employers may adopt pre-approved 403(b) retirement plans through March 31, 2020. Though 403(b) plan sponsors had to adopt a written plan by December 31, 2009, under regulations passed in 2007, the IRS announced a remedial amendment period during which they would be able to restate their plans to adopt one of the prototypes. Employers may adopt these plans as restatements to correct any form defects from January 1, 2010, to the end of the remedial amendment period. 

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The IRS notes that this raises an issue for adopting employers that want to use a pre-approved plan with certain provisions that were not in effect for the plan for the entire restatement period (effective date of the pre-approved plan to the adoption date), or options that have changed during the restatement period.

To address this issue, the IRS says an adopting employer’s reliance on a pre-approved 403(b) plan’s opinion or advisory letter is not affected simply because the employer uses an effective date addendum—a list of effective dates for certain plan provisions different from the plan’s general effective date—if the addendum lists dates that accurately reflect the plan operation, and complies with the scope of the plan’s letter.

More information is here.

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