IRS Issues VCP Submission Kit for Money Purchase Pension Plans and Target Benefit Pension Plans | Practical Law

IRS Issues VCP Submission Kit for Money Purchase Pension Plans and Target Benefit Pension Plans | Practical Law

The Internal Revenue Service (IRS) issued a Voluntary Correction Program (VCP) submission kit for plan sponsors who failed to make timely required contributions to money purchase pension plans (MPPs) or target benefit pension plans.

IRS Issues VCP Submission Kit for Money Purchase Pension Plans and Target Benefit Pension Plans

by Practical Law Employee Benefits & Executive Compensation
Published on 22 Jun 2015 • USA (National/Federal)
The Internal Revenue Service (IRS) issued a Voluntary Correction Program (VCP) submission kit for plan sponsors who failed to make timely required contributions to money purchase pension plans (MPPs) or target benefit pension plans.
On June 16, 2015, the Internal Revenue Service (IRS) posted to its website a Voluntary Correction Program (VCP) Submission Kit for plan sponsors who failed to make timely required contributions to money purchase pension plans (MPPs) or target benefit pension plans. The kit provides a checklist of items to submit and information on how to correctly complete VCP submissions.

Background

Qualified retirement plans provide several tax advantages to both the plan sponsor and plan participants. However, to enjoy these tax advantages, plan sponsors must comply with plan document and operational compliance requirements set out in the Internal Revenue Code (Code) and accompanying regulations. The complexity of these compliance requirements leads to frequent errors which, if left uncorrected, can jeopardize the tax-qualified status of a retirement plan. As a result, the IRS created EPCRS to help plan sponsors correct errors.
MPPs and target benefit plans are subject to the required minimum funding standards under Code Section 412 (26 U.S.C. § 412 and see Practice Note, Qualified Retirement Plans in Mergers and Acquisitions: Single-employer Defined Benefit Plan Liabilities). If required contributions are not made timely, the plan has an operational failure because the plan has not operated in accordance with its terms. This failure may be corrected under EPCRS. For more information on EPCRS, see Practice Note, Correcting Qualified Plan Errors under EPCRS and Correcting Plan Errors under EPCRS Checklist.

VCP Submission Kit

For plan sponsors using VCP to correct the failure to make timely required contributions to MPPs or target benefit plans, the kit provides plan sponsors with:
  • A checklist of items that should be included in a VCP submission.
  • Information on completing the forms that must be included in a VCP submission.
  • Information on how to calculate the VCP fee.
  • The mailing address for VCP submissions.
  • An overview of the VCP submission process. The kit explains that:
    • plan sponsors should expect to receive the VCP compliance statement within four to six months after mailing the submission; and
    • if the VCP compliance statement is not received after six months, plan sponsors may call to check on the status.
  • FAQs to assist plan sponsors of MPPs or target benefit plans to ensure that the plans are compliant and provide additional resources.

Practical Implications

Plan sponsors of MPPs and target benefit plans that have failed to make timely required contributions should correct the error by using the VCP to fix the operational failure either:
  • To obtain IRS assurance that the correction is acceptable.
  • If the self-correction program is not available.
The submission kit provides important information to plan sponsors looking to correct these errors by VCP.