Inside Retirement 1Q2018 Recap

Inside Retirement 1Q2018 Recap

| May 02, 2018
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DOL Update: Increased Civil Penalties

In January, the DOL announced further increases to several civil monetary penalties that can be assessed against employers for not complying with the DOL rules. These increases are applicable for penalties assessed by the DOL on or after January 2, 2018. Here are a few of the most common violations.


IRS UPDATE : Changes to VCP Fees Under Employee Plans Compliance Resolution System

Like the DOL, the IRS is aware that mistakes can and do happen when operating a retirement plan. That’s why the IRS has a corrections system that lets plan sponsors bring their plans back into compliance without losing the tax benefits provided to qualified retirement plans. This system is referred to as the Employee Plans Compliance Resolution System (EPCRS). EPCRS is designed to improve overall plan compliance by promoting voluntary corrections after a plan sponsor discovers an error on their own. Oftentimes the financial impact to the plan sponsor who self-corrects the plan defect is much smaller than it would be had the defect been discovered during an IRS audit.

EPCRS consists of three subcomponents:    

  • The Self-Correction Program or SCP permits plan sponsors to self-correct at any time an insignificant operational problem such as not following the terms of the plan. There is no IRS application form and no fee for self-correcting under SCP. Even when the problem is significant, a plan sponsor who discovers the problem within two years of the year in which the problem occurred can correct it under SCP and pay no fee.
  • If a plan experiences a qualification failure, such as failure to timely amend a plan document, the plan sponsor may use the Voluntary Correction Program or VCP to correct the error if they discover the problem before the plan comes under IRS examination. Under VCP, the plan submits a correction application with the IRS and pays a fee based on the size of the plan. The fee is much smaller than the amount that would typically be assessed following a plan audit.
  • The Audit CAP program is used if a failure is discovered during a plan audit by the IRS. There is a much higher sanction involved based on the extent and severity of the failure.

In January, the IRS published a notice of updates to its procedures for requesting rulings and determinations, as well as its fees for determinations and for submitting under the VCP. The IRS is changing how it structures VCP fees, beginning in 2018. These changes result in a significant fee reduction for large plans, but a big increase in fees for smaller plans.

Prior to 2018, the VCP fee was based on the number of participants in the plan. Beginning in 2018, the fee is based not on the number of participants but on the amount of plan assets.

Also, the largest fee possible has been reduced from $15,000 to $3,500. However, based on the new fee structure, this fee decrease applies to plans with more than $10 million in assets. The fees that apply now for smaller plans are bigger than they were in 2017.


For example, the smallest fee available was $500 for plans with 20 or fewer participants. Now the smallest fee is $1,500, and it applies to plans with assets between $0-$500,000 – most likely a $1,000 increase for the small plans.

The IRS also eliminated most of the alternative or reduced fee options for certain types of plan errors. For example, the streamlined fees for correcting plan loan and required minimum distribution (RMD) errors, which were as low as $300, are no longer available.


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ContactJoe Trybula CFP®, CPFA® today at  800.307.0376 or joe@printers401k.com to learn more about the Printers401k® program, or request afree Plan Analysis Report which  provides you with a snapshot of your plan investments, costs and plan operations compared to other plans in the industry. This analysis can reveal strengths and areas of concern along with solutions to improve your retirement plan.

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