The Internal Revenue Service has released new guidelines for fixing employee benefit plan problems.
The new guidance, which appears in IRS Revenue Procedure 2008-50, affects plan sponsors and others that want to use the IRS Employee Plans Compliance Resolution System.
The system permits employers to fix some errors themselves, without telling the IRS, through a Self-Correction Program; offers a Voluntary Correction Program for correcting more serious errors detected before an IRS audit; and offers an Audit Closing Agreement Program for plans that agree to fix problems discovered during an audit.
Users of the Voluntary Correction Program must pay small fees and get IRS approval, and users of the Audit CAP system have to get IRS approval and “pay a sanction based on the nature, extent and severity of the failure being corrected,” officials say.
The guidance will expand the Self-Correction Program, to open it to employers that discover during an IRS examination that operational errors have been only partially corrected, officials say.
The guidance also establishes new Voluntary Correction Program application procedures, in an effort to streamline use of the system for plans affected by loan problems, failures to make minimum distributions to participants, excessive elective deferrals, failures to incorporate law changes, and other problems, officials say.
Another section of the guidance makes it easier to correct loan failures under the Voluntary Correction Program. In some cases, the fee for correcting loan failures would be reduced by 50%.