IRS Clarifies Important Point Regarding the Voluntary Correction Program
The Voluntary Correction Program (“VCP”) is a process by which the IRS and plan sponsors reach an agreement to correct specific plan failures without harsh penalties. Once an agreement is reached through the VCP, the IRS issues a compliance statement which details the plan’s errors and requires specific changes to be made within an established time frame, generally 150 days. The IRS recently issued guidance about what happens if a plan sponsor is unable to make the necessary changes within 150 days. If a sponsor is not going to meet the deadline, it needs to contact the VCP specialist assigned to its plan and request an extension. The plan sponsor must provide reasons why an extension is necessary. If a plan sponsor does not apply for an extension and misses the 150 day deadline, it will need to complete an entirely new VCP submission, including a new submission fee and information about why the changes were not made.