Problem #1(cont): Missed amendments and restatements

If an employer realizes that they failed to sign a required amendment or restatement, the employer’s best course of action is to promptly file a VCP application with the IRS. The IRS does not provide for self-correction of plan document failures. For many plan document failures, the IRS allows plan sponsors to do a streamlined filing which generally reduces the professional fees associated with preparing the filing. Additionally, the IRS’s turnaround time on streamlined filings is pretty quick. The IRS VCP fee associated with a plan document failure depends on the type of failure and when the failure is corrected. The starting point is the general IRS VCP fee in Rev. Proc. 2008-50, which depends on the number of participants.

# of Participants                           Fee

20 or fewer                                  $750

21 to 50                                   $1,000

51 to 100                                 $2,500

101 to 500                               $5,000

501 to 1000                              $8,000

1001 to 5000                            $15,000

5001 to 10,000                         $20,000

More than 10,000                      $25,000

However, there are two common reductions to general VCP fee schedule. First, if a failure is solely due to failing to adopt an interim amendment or optional amendment, the fee is $375. Second, if the failure is corrected within one year, the penalty is reduced by 50%.