The IRS has announced that it has made substantial modifications to the fee structure applicable to voluntary compliance program (VCP) applications for the correction of compliance defects in tax-qualified retirement plans, such as 401(k), 403(b), 457(b), and defined benefit pension plans.

Prior to 2018, VCP fees were generally based on the number of participants in the filing plan. Filing fees ranged from $500 for plans with 20 or fewer participants to $15,000 for plans with 10,000 or more participants. In addition, plans were able to file streamlined applications with reduced fees for the correction of common compliance issues, such as correction of participant loans and failure to make required minimum distributions on a timely basis.

Beginning in 2018, the IRS has eliminated the reduced fees for streamlined applications and has revised VCP program fees to be based on the amount of assets in the filing plan, as follows:

  • $1,500 filing fee for plans with assets of $500,000 or less;

  • $3,000 filing fee for plans with assets in excess of $500,000 to $10,000,000; and

  • $3,500 for plans with assets over $10 million.

The changes to the fee structure likely will mean an increase in fees for smaller plans, which previously paid as little as $500 for the correction of plan defects. However, the change is a significant reduction in fees for larger plans, which (prior to the change) could have paid up to $15,000 for a VCP application fee. This reduction represents an excellent opportunity for larger qualified retirement plans to clean up any outstanding compliance issues that may be lingering, at a significantly reduced fee. We can assist plan sponsors in identifying and correcting compliance failures associated with qualified retirement plans and successfully navigating the VCP process.

Attorneys in Ballard Spahr’s Employee Benefits and Executive Compensation Group help clients design and implement compensation and benefits packages that comply with today's complex regulatory requirements, attract and retain a quality workforce, and maintain fiscal and fiduciary responsibility.


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