Qualified Plan Corrections
Have you ever experienced a qualified plan compliance violation? You are not alone! The rules surrounding qualified plans are extremely complex, and not necessarily intuitive. How are plan sponsors supposed to understand how to navigate the complex rules and correction programs of the Internal Revenue Service and the Department of Labor? Our team of qualified plan experts can assist you in navigating the different correction programs and required corrections, bringing your plan back into compliance.
The Department of Labor
The focus of the Department of Labor (“DOL”) is to protect plan participants, enforce plan fiduciary responsibilities, and ensure accurate plan reporting. The most common errors in this area are late remittances of employee contributions to the plan, other prohibited transactions and failure to report plan activity on the annual Form 5500. To help plan sponsors get back into compliance, the DOL has created two correction programs - the Voluntary Fiduciary Correction Program (“VFCP”) and the Delinquent Filer Voluntary Compliance Program (“DFVCP”). The VFCP is used to correct possible violations of Title I of the Employee Retirement Income Security Act (ERISA), a law that covers most private sector employee benefit plans. The DFVCP is used to assist in the filing of overdue annual reports to the DOL. The use of this program lowers civil penalties under the Employee Benefit Security Administration (EBSA) programs.
The Internal Revenue Service
The focus of the Internal Revenue Service (“IRS”) is to ensure that plans are operating in accordance with the plan terms as spelled out in the plan document, as well as the rules of the Internal Revenue Code. Some common errors in this area include failure to follow the definition of compensation, failure to implement employee deferral elections and failure to timely update the plan documents. To help plan sponsors get back into compliance, the IRS has created the Employee Plans Compliance Resolutions System (“EPCRS”) which provides guidance for correcting operational errors in their retirement plans. It consists of three basic correction programs: The Self-Correction Program (“SCP” – or self-correction), the Voluntary Correction Program (“VCP”– correction with IRS approval), and the Correction on Audit Program (Audit CAP – correction when “caught”). The appropriate correction method and program will be determined by the type of employer, plan, and failure.
How we can help.
We can assist first by identifying the full extent of the error and based on the error, by calculating any corrections required. Additionally, we can complete all required filings with the DOL or IRS, which could include the Model Application Forms, the Form 5500, Form 5330, and any other supporting documentation required. We will coordinate all filings directly with the DOL or IRS agent and will provide any additional information requested throughout the process.