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Improving the Employee Plans Compliance Resolution System: A Roadmap For Greater Compliancecollective bargaining agreement. Under the ACT’s proposed changes forcorrective amendments, the Plan Sponsor is permitted to adopt anamendment in 2008 with a retroactive effective date, providing that unionemployees are eligible to participate in the plan during the period from2006 forward. 59Because VCP correction remains available to SCP candidates, an employer desiringassurance regarding a proposed corrective amendment could pursue VCP rather thanthe SCP alternative. Nonetheless, we recommend that the SCP amendment alternativebe made available for a broader range of Operational Failures.B. Recommendations to Improve the Voluntary Correction ProgramThe ACT’s recommendations regarding VCP fall into two basic areas: administrativeimprovements and a broadened range of substantive matters covered by the VCP.1. Suggested Administrative Improvementsa. Pre-Submission Notice ProtectionMany Plan Sponsors are concerned that they will receive notice of an examination bythe Service while they are completing the complex and time-consuming VCPsubmission process. This often leads to “sloppy” or incomplete submissions, as well asextensive discussions with the Service if such a notice is received in the interim.Accordingly, the ACT is recommending a Pre-Submission Notice that would have thesame impact as an actual VCP filing for a limited period of time in order to give the PlanSponsor the time to file a complete VCP without the concern of an interim audit.A VCP filing is lengthy and requires obtaining and compiling a significant amount ofinformation as to the extent of Operational Failures, their economic impact, and thepotential correction methods. The VCP process often requires searching of old, oftenunavailable or difficult to locate, records, seeking information from no-longer-utilizedvendors and third-party administrators, and prior Plan Sponsors, and performingcalculations covering a lengthy period of time for a significant number of participants orformer participants. As a result of the foregoing, it often takes several months to gatherthe information and prepare the submission or to make the correction once the PlanFailure is initially identified.A Pre-Submission Notice will encourage Plan Sponsors to act diligently and relievethem of audit concerns by assuring that no audit will commence with regard to thesubmitted issues while they are trying to correct their mistakes and voluntarily bring theirplans into compliance. This will also assist the Service in limiting the administrativeburden of “sloppy” and incomplete submissions and the long discussions that occur if an59 This example is based on an example in ASPPA’s proposal to the IRS regarding amending EPCRS to permit the correction ofdrafting errors.ADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 24
Improving the Employee Plans Compliance Resolution System: A Roadmap For Greater Complianceaudit notice is received. The ACT recognizes that, under current procedures, even if anaudit begins during the VCP process, in the audit and any closing agreement, theService will take into consideration any admitted failures and the steps taken to rectifythem. 60 However, this is an informal administrative practice and requires application ofjudgment by the field examiner as to the degree of disclosure and correction that existsand how to treat it. A formal, written procedure is needed.The ACT recognizes that Plan Sponsors should not be permitted to avoid auditpenalties by simply filing a notice and then not taking the necessary steps to completethe VCP correction process in a timely manner. Because limits on the utilization of anysuch notice procedure are needed, the ACT suggests the following program: a PlanSponsor will file with the Service a simple one-page notice identifying the plan, the PlanFailure, and the time period involved (the “Notice of Intent to File VCP Application”).Two copies of the Notice would be filed, one for the VCP unit and one for EPCU. Asample Notice of Intent to File VCP Application is attached as Exhibit C. The PlanFailures will have to be described in detail and the description will be treated narrowly.The Plan Sponsor will then be required to file the VCP filing within 180 days of the dateof filing the Notice.Modifications to the Notice would be permitted to add additional discovered PlanFailures or additional plan years affected by filing an amended Notice. The amendedNotice would not extend the 180-day audit protection period and would not create a newprotection period or VCP filing deadline for the newly discovered Plan Failures. Therecould only be one Notice in effect for a plan at any time.If the VCP submission is not completed and filed by the VCP filing deadline, theprotection of the Notice will be lost. Such protection could only be afforded upon filingthe full VCP submission or authorization by the Service for good cause (which the ACTcontemplates would be granted only in highly limited circumstances, such as naturaldisaster, terrorism or similar events outside of the Plan Sponsor’s control). In addition,the Service would be entitled to audit plans as a result of the Notice if the VCP filing isnot timely made. To avoid shortening the time period during which the Service wouldhave to audit a Plan before the end of the statute of limitations period, the Plan Sponsorwould be required to attach to the Notice an agreement for a six-month extension of thestatute of limitations with regard to any Plan Year impacted by the contemplated VCPfiling.b. Standardized and Simplified VCP Application FormSection 11 of Rev. Proc. 2006-27 sets forth the procedures for obtaining a compliancestatement from the Service under the VCP. The procedures generally require a letterfrom the Plan Sponsor (or the Plan Sponsor’s representative) that contains a descriptionof the Plan Failures, a description of the proposed correction method, procedural itemssuch as a penalty of perjury statement and checklist, together with supporting60 See, Rev. Proc. 2006-27, § 14.02(3).ADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 25
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The Streamlined Closing Agreement F
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ADVISORY COMMITTEE ONTAX EXEMPT AND
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PROTECTING PLAN BENEFITS:IMPROVING
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Tax Treatment Of Cellular Telephone
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IRC, 2007-CODE-VOL, SEC. 280F. LIMI
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PENIRC S 274 Page 1 of 12IIRC, 2007
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PENIRC S 274 Page 3 of 12relationsh
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Employee Cell Phones Page 1 of 1Emp
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15. Special Rules for Various Types
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Withholding RequirementsACCOUNTING
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Governmental Relationship and Commu
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