New IRS Guidance Alters Voluntary Correction Program Application Fee:


On January 2, 2018, the IRS published Revenue Procedure 2018-4. This is the IRS’s annual guidance setting forth application fees under various IRS approval programs for retirement plans (e.g., approval of an applicant’s plan document language; approval of an applicant’s compliance issue correction method). In particular, this new guidance makes significant changes to the application fee under the Voluntary Correction Program (“VCP”). Under the VCP, plan sponsors can submit a detailed application, with applicable attachments, to the IRS and thereby obtain approval for correction methods involving a wide array of compliance issues. The VCP application fee typically pales in comparison to penalties the IRS could assess if it were to discover on its own the issues addressed in a VCP application.

Per previous IRS guidance, the VCP application fee was generally based on the number of participants in the plan, up to a maximum fee of $15,000. As some examples:

  • For a plan with 51 to 100 participants, the VCP application fee equaled $1,500.00.
  • For a plan with 101 to 1,000 participants, the VCP application fee equaled $5,000.00.
  • For a plan with 1,001 to 10,000 participants, the VCP application fee equaled $10,000.00.

In addition, previous IRS guidance provided for markedly reduced VCP application fees if only certain issues were addressed in the application, such as participant loan issues.

Under Revenue Procedure 2018-4, the VCP fee structure is based on the amount of plan assets, rather than on the number of participants, and the maximum fee is $3,500. The fee structure is as follows, effective as of January 2, 2018:

  • For a plan with assets of $500,000 or less, the VCP application fee equals $1,500.
  • For a plan with assets of over $500,000 to $10,000,000, the VCP application fee equals $3,000.
  • For a plan with assets of over $10,000,000, the VCP application fee equals $3,500.

Unfortunately, some plans will be worse off under this new guidance. Specifically, small plans with fewer than 101 participants generally paid between $500 and $1,500 under the previous IRS guidance, but they will pay at least $3,000 under this new guidance if their plan assets exceed $500,000. Also unfortunate is the fact that under the new guidance, reduced fees no longer apply to applications addressing only certain issues (e.g., participant loan issues).

However, for many plans, the new fee schedule will be more favorable than the previous schedule. Additional good news is the fact that the VCP fee still does not vary based on the number of issues submitted for approval. Plan sponsors should discuss with experienced ERISA counsel what compliance issues their plans have, as well as whether it would be advisable to file a VCP application under the new fee schedule.

You can access Revenue Procedure 2018-4 via the following link: