Rev. Proc. 2018-52 Modifies EPCRS By Requiring Use of Pay.gov for VCP Submissions and Fee Payments

Practical Law Legal Update w-016-8409 (Approx. 7 pages)

Rev. Proc. 2018-52 Modifies EPCRS By Requiring Use of Pay.gov for VCP Submissions and Fee Payments

by Practical Law Employee Benefits & Executive Compensation

EPCRS

EPCRS was established by the IRS to help sponsors of qualified retirement plans correct errors that could adversely affect the tax qualification of a plan (qualification failures). There are three programs within EPCRS that allow plan sponsors to correct errors:

Self-Correction Program (SCP). This program allows an eligible plan sponsor to correct certain operational failures without any IRS involvement.
VCP. This program allows the plan sponsor to correct qualification failures.
Audit Closing Agreement Program (Audit CAP). This program allows the plan sponsor to correct qualification failures found during an IRS examination that have not been previously corrected under SCP or VCP.

To learn more about EPCRS, see:

The last comprehensive update to EPCRS was made in Rev. Proc. 2016-51 (see Legal Update, IRS Revenue Procedure 2016-51 Updates EPCRS to Consolidate Prior Guidance and Incorporate Changes to Determination Letter Program).

Revenue Procedure 2018-52: Changes to EPCRS

Rev. Proc. 2018-52 provides an overview of EPCRS. It includes two appendices that provide guidelines and examples of operational failures, permissible correction methods, and methods of determining earnings adjustments that should be reflected in corrective allocations and distributions.

Rev. Proc. 2018-52 also includes numerous changes to the VCP.

VCP Submission Procedures

As Rev. Proc. 2018-52 explains, beginning April 1, 2019, qualified retirement plan sponsors must use www.pay.gov when filing a VCP submission with the IRS and paying applicable user fees. During a transition period lasting from January 1, 2019, through March 31, 2019, plan sponsors may file VCP submissions with the IRS either by:

Using www.pay.gov as provided in Sections 10 and 11 of Rev. Proc. 2018-52.
Filing paper VCP submissions according to the procedures in Sections 10 and 11 of Rev. Proc. 2016-51.

The IRS will not accept paper VCP submissions postmarked on or after April 1, 2019.

To implement these changes, including the new requirement to use www.pay.gov, Rev. Proc. 2018-52 made several modifications to Sections 10 and 11 of EPCRS.

Rev. Proc. 2018-52 includes a revised Section 10.01 that modifies and clarifies the requirements for satisfying the VCP procedures. Section 10.01 provides that the requirements of the VCP are satisfied if a plan sponsor:

Uses the www.pay.gov website to file a VCP submission and pays the applicable user fee listed in Appendix A of Rev. Proc. 2018-4 and its annual successors (see Legal Update, IRS Rev. Proc. 2018-4 Updates the Determination Letter Program and VCP Fees), according to the requirements of Sections 10 and 11 of Rev. Proc. 2018-52.
Implements the corrective actions and other requirements in the compliance statement described in Section 10.07 of Rev. Proc. 2018-52.

Rev. Proc. 2018-52 also includes a revised Section 11, which covers filing procedures for VCP submissions. Those procedures has been revised to account for the electronic filing of VCP submissions and payment of user fees using www.pay.gov.

From January 1, 2019, through March 31, 2019, applicants may file a VCP submission through the www.pay.gov website or by filing a paper VCP submission as discussed in Sections 10 and 11 of Rev. Proc. 2016-51. Beginning April 1, 2019, all VCP submissions to the IRS must be filed using www.pay.gov, as discussed in Section 11.03 of Rev. Proc. 2018-52; all plan sponsors or their authorized representatives will file VCP submissions and pay applicable user fees online. Paper VCP submissions postmarked after March 31, 2019, will be returned to the applicant.

Rev. Proc. 2018-52 identifies four ways in which the electronic VCP submissions differ procedurally from the paper VCP submissions:

Applicants must create a pay.gov account to file VCP submissions and pay applicable user fees on that website.
After establishing a pay.gov account, applicants must use that website to submit IRS Form 8950, Application for Voluntary Correction Program (VCP) Submission Under the Employee Plans Compliance Resolution System. VCP applicants will not be permitted to submit a paper version of Form 8950 beginning April 1, 2019.
IRS Form 14568, Model VCP Compliance Statement, as well as Schedules 1 through 9 of Form 14568, and any other applicable items (as provided in Section 11.04 of Rev. Proc. 2018-52) for a VCP submission generally must be converted into a single PDF document and then uploaded onto the www.pay.gov website.
Plan sponsors and their representatives who submit VCP applications using www.pay.gov will no longer receive acknowledgment letters from the IRS, but a unique Pay.gov Tracking ID on the payment confirmation will be generated after the VCP submission is filed and the user fee is paid.

A plan sponsor may designate an authorized representative to file the VCP submission if certain requirements are satisfied, including the requirements of Section 11.08, which provides instructions on how to designate an authorized representative using the Form 2848, Power of Attorney and Declaration of Representation.

Other Modifications to EPCRS

Rev. Proc. 2018-52 includes other modifications to Rev. Proc. 2016-51, including revisions to:

Section 4.03 to clarify that Internal Revenue Code (Code) Section 403(b) plans that meet the requirements for having a favorable letter under Section 6.10(2) may use the SCP for significant operational failures. Section 6.05(2), on corrective amendments to pre-approved plans, now applies to 403(b) plans, as well. (See Practice Note, Code Section 403(b) Plans: Overview.)
Section 4.09 to clarify that EPCRS applicants that want to correct Code Section 457(b) plans must use www.pay.gov.
The definition of the term "Favorable Letter" in Sections 5.01 and 5.02 to reflect modifications made to the IRS's pre-approved plan program.
Section 10.06(2) to:
- clarify that, in certain cases, the IRS reserves the right to not issue a compliance statement; and
- to set forth the circumstances under which a user fee may or may not be refunded.
Section 10.06(3) to clarify that when the IRS agrees with a proposed correction method, a compliance statement may be issued without the IRS contacting the plan sponsor or its authorized representative.
Section 10.06(8)(c) to clarify procedures for including a penalty of perjury statement in a submission.
The procedural requirements for anonymous submissions in Section 10.09 to discuss submissions using www.pay.gov.
The special rules for group submissions in Section 10.10 to reflect changes to the IRS pre-approved plan programs.
Section 10.11 to:
- remove former paragraph (2) relating to calculating the user fee for a multiemployer plan or multiple employer plan; and
- clarify that the plan administrator or an authorized representative of a multiemployer or multiple employer plan must file the VCP submission with respect to any plan failures, using the www.pay.gov website as described in Section 11.08.
Section 12 to reflect that changes to the VCP user fees are included in annual revenue procedures issued by the IRS.
Section 13.02 to clarify that the Audit CAP sanction may be paid through www.pay.gov.
Section 14.04 to reflect that changes to the VCP user fees, on which certain Audit CAP sanctions are based, are included in annual IRS revenue procedures.

Future Changes

The IRS and Treasury Department invite comments on how to continue to improve EPCRS. Section 17 of Rev. Proc. 2018-52 provides instructions on submitting comments.

Rev. Proc. 2018-52 indicates that the IRS and Treasury Department are reviewing public comments on:

Potential changes to the EPCRS relating to the recoupment of overpayments (comments were requested in Rev. Proc. 2015-27 (see Legal Update, IRS Revenue Procedure 2015-27 Modifies EPCRS)). The IRS and Treasury Department are developing changes to the EPCRS rules on correction of overpayments.
Expanding the SCP, and are considering changes to the program based on those comments.

Practical Implications

Rev. Proc. 2018-52 takes effect on January 1, 2019. Plan sponsors and service providers should familiarize themselves with the new procedures in Rev. Proc. 2018-52 for using www.pay.gov for VCP submissions and user fees. Starting April 1, 2019, VCP submissions and user fee payments must be transmitted to the IRS electronically. Plan sponsors and service providers should also look for additional guidance on overpayment corrections under EPCRS from the IRS and Treasury Department in the near future.

Rev. Proc. 2018-52 Modifies EPCRS By Requiring Use of Pay.gov for VCP Submissions and Fee Payments | Practical Law