Effective Jan. 2, 2018, the Internal Revenue Service (IRS) simplified the fee structure for its Voluntary Compliance Program. Fees will now be based on the total amount of net plan assets rather than the number of plan participants.
If a retirement plan does not follow the rules to maintain its tax-qualified status, the IRS offers a program for correcting the failure without facing plan disqualification called the Voluntary Compliance Program. The fee for a Voluntary Compliance Program application previously was based on the number of plan participants and ranged from $500 to $15,000. The IRS also offered reduced fees for some common mistakes, such as plan loan failures.
The new fee structure is based instead on plan assets and is capped at $3,500. For most plans, this will result in a reduced fee. However, the alternative and reduced fee structures for certain failures no longer apply. The tables below compare the two fee structures.
In most cases, a plan sponsor will determine the amount of the plan’s net assets from its most recently filed Form 5500.
The new fee schedule does not apply to Group Voluntary Compliance Program submissions or submissions for orphan plans or 457(b) plans. The new fee structure will not apply to submissions made prior to Jan. 2, 2018. And the IRS will not issue refunds for submissions made before Jan. 2, 2018, that are withdrawn and resubmitted under the new fee schedule.