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Changes to VCP User Fees Result in Mixed Reactions from Plans

The Internal Revenue Service ("IRS") has issued the annually updated Revenue Procedures for determination letters, letter rulings, advisory letters, and correction request filings under the Employee Plans Compliance Resolution System ("EPCRS"), which includes updated filing fees. This year, Revenue Procedure 2018-4 announced significant changes to the user fee structure for submissions under the EPCRS Voluntary Correction Program ("VCP"). The Revenue Procedure is effective Jan. 2, 2018.

Previously, the VCP filing fees were based on the number of plan participants, with six different fees ranging from $500 for a plan with 20 or fewer participants up to $15,000 for a plan with over 10,000 participants. Additionally, the IRS provided for reduced VCP fees in various situations, such as the failure to satisfy the minimum distribution requirements, certain plan loan failures, and certain non-amender failures.

The new VCP fee structure set forth in Revenue Procedure 2018-4 is as follows:

For plans with assets of

The VCP filing fee is

$500,000 or less

$1,500

Over $500,000 to $10,000,000

$3,000

Over $10,000,000

$3,500

The previous reduced VCP fees for certain required minimum distribution, plan loan, and non-amender failures are no longer available.

While the new fee structure is more simplified, it will result in some significant differences for plans compared to the prior approach. For larger plans, which previously faced filing fees of $5,000 to as much as $15,000, the new fee structure will be more favorable. However, smaller plans, which may have paid as little as $500 or $750 under the prior fee structure, will have to pay at least $1,500 (or more, depending on assets) under the new approach. Of course, with these changes, all plans will lose the ability to take advantage of the failure-specific reduced fees.

For more information, contact Audra Ferguson-Allen , Rob Gauss , Lisa Harrison , Melissa Proffitt , Tara Sciscoe or Chris Sears or the Ice Miller Employee Benefits attorney with whom you work.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.