Qualified pension and retirement plans including 401(k) plans must satisfy certain criteria in order to be compliant with standards set forth by the Internal Revenue Service, as well as the Department of Labor. In the event that a plan fails to satisfy the required criteria, the plan sponsor could seek relief from fines and penalties by correcting the error. For several years, the IRS has maintained the Employee Plans Compliance Resolution System (EPCRS). Part of this system includes a Voluntary Correction Program (“VCP”) whereby plan sponsors can make application to the IRS for purposes of correcting qualification failures relating to plan documentation, an operational failure, a demographic failure or employer eligibility failure. The IRS has recently updated two forms used in the VCP process; they are:
The IRS maintains a webpage relating to its Voluntary Correction Program including steps to follow for correcting plan errors. If a voluntary correction is a possibility, it is certainly prudent to pursue it.
The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.
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