In January, the IRS announced changes to the fees required for filing under the Voluntary Correction Program (VCP) of the Employee Plans Compliance Resolution System (EPCRS).  The VCP program allows employers to voluntarily bring errors in plan documentation or operation to the attention of the IRS, and propose a correction method, and receive a compliance statement from the IRS stating if the corrections are made within 150 days, then the IRS will not disqualify the plan because of the error.

Filing a VCP submission with the IRS requires the payment of a user fee to the IRS to consider the filing.  In the past, the user fees have been based on the number of participants in the plan.  Prior to the change, the user fee was as low as $500 for a plan with 20 or fewer participants with a high of $15,000 for a plan with over 10,000 participants.  The breakdown of all the former user fees is in the chart below:




20 or less

21 to 50

51 to 100

101 to 1,000

1,001 to 10,000

More than 10,000









Additionally, there were special lower user fees for failing to adopt interim amendments, errors involving participant loans, and minimum distribution requirement failures.

In January of this year, the IRS announced that for submissions filed after 2017 the user fees would be based on the net plan assets in the plan, under the following schedule:



User Fee

$0 to $500,000

Over $500,000 to $10,000,000

Over $10,000,000






While touted as a lowering of the user fees by many reports, because the highest fee now paid is $3,500 rather than $15,000, for most plans the user fees are likely to increase.  A small plan with under 100 participants now has to pay $1,500 as a minimum.  Under the old schedule, such a plan would only pay $500 if it had 20 or fewer participants, or $750 from 21 to 50 participants.  Plans with over $500,000 in assets and more than 100 participants will benefit the most under the new schedule as their user fee drops to $3,000 from $5,000, or more.  And the user fee remains $3,000 until a plan has over $10 million in net assets, at which time it only increases $500.

It is unfortunate that the increase in user fees for smaller plans may have a chilling effect on those plans seeking compliance statements under the VCP.  Smaller plans are most likely to experience an error that needs to be corrected under VCP.  However, the increased cost might cause the plan sponsor to self-correct the plan and “bear the risk.”  I almost always recommend against this approach because without receiving a compliance statement from the IRS, the plan sponsor has no reliance that the IRS will agree with the self-correction. If the IRS doesn’t agree, it will threaten to disqualify the plan and seek a higher employer penalty under the audit closing agreement program of EPCRS based on the amount of tax the government would receive if it disqualified the plan from denied employer deductions, employee income, and the plan’s investments becoming taxable.