October 18, 2021

Volume XI, Number 291

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October 18, 2021

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October 15, 2021

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IRS Modifies Voluntary Compliance Program Fees for Qualified Retirement Plans

The IRS has announced that it has made substantial modifications to the fee structure applicable to voluntary compliance program (VCP) applications for the correction of compliance defects in tax-qualified retirement plans, such as 401(k), 403(b), 457(b), and defined benefit pension plans.

Prior to 2018, VCP fees were generally based on the number of participants in the filing plan. Filing fees ranged from $500 for plans with 20 or fewer participants to $15,000 for plans with 10,000 or more participants. In addition, plans were able to file streamlined applications with reduced fees for the correction of common compliance issues, such as correction of participant loans and failure to make required minimum distributions on a timely basis.

Beginning in 2018, the IRS has eliminated the reduced fees for streamlined applications and has revised VCP program fees to be based on the amount of assets in the filing plan, as follows:

  • $1,500 filing fee for plans with assets of $500,000 or less;

  • $3,000 filing fee for plans with assets in excess of $500,000 to $10,000,000; and

  • $3,500 for plans with assets over $10 million.

The changes to the fee structure likely will mean an increase in fees for smaller plans, which previously paid as little as $500 for the correction of plan defects. However, the change is a significant reduction in fees for larger plans, which (prior to the change) could have paid up to $15,000 for a VCP application fee. This reduction represents an excellent opportunity for larger qualified retirement plans to clean up any outstanding compliance issues that may be lingering, at a significantly reduced fee. We can assist plan sponsors in identifying and correcting compliance failures associated with qualified retirement plans and successfully navigating the VCP process.

Copyright © by Ballard Spahr LLPNational Law Review, Volume VIII, Number 8
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About this Author

Brian Pinheiro, Ballard Spahr Law Firm, Labor and Employment, Healthcare Law Attorney
Partner

Brian M. Pinheiro is Chair of Ballard Spahr's Business and Finance Department and the Practice Leader of the firm's Employee Benefits and Executive Compensation Group. He is also a member of Ballard Spahr's Elected Board.

He represents for-profit, tax-exempt, church, and government employers on matters relating to executive compensation, including Section 409A and the Section 280G golden parachute rules; tax-qualified retirement plans, including cash balance pension plans; 401(k), 403(b), and 457 plans; and health and welfare benefit plans. 

215-864-8511
Robert Kaplan, Associate
Associate

Robert S. Kaplan advises corporate, nonprofit, and governmental employers on issues related to the design, drafting, implementation, and termination of retirement and health and wellness benefits plans. Rob regularly works with our mergers and acquisitions and securities attorneys to analyze employee benefits and executive compensation components of corporate transactions.

Rob frequently works on the correction of plan defects under Department of Labor and Internal Revenue Service procedures and counsels plan fiduciaries and benefits committees...

215.864.8417
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