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So much for business friendly...


austin3515

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https://www.erisapracticecenter.com/2018/01/annual-irs-revenue-procedure-includes-surprising-change-to-user-fees/

They got rid of the reduced VCP filing fees for stupid things like RMD's and loan defaults.  

Schedule of User Fees for VCP submissions, is revised to change the user fees to: $1,500 for plans with assets of $500,000 or less; $3,000 for plans with assets of over $500,000 to $10,000,000; and $3,500 for plans with assets of over $10,000,000.

(4) All other reduced or alternative fees previously set forth in Appendix A, .09, no longer apply.

so the small business which is likely to have loan failures and missed RMD's pays $1,500 or $3,000.  Plans over 10 Million pay just $3,500.  What a nice thing for the mega corporations.

What an awful decision.  I hate to be political but I swear the most important thing for this administration feels like undoing as much as possible from the prior administration.

Austin Powers, CPA, QPA, ERPA

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I just noticed this! 

It stinks. For simple things like a 403(b) failing to have a document, or a 401(k) plan missing a restatement, etc, small plans are out of the loop.

Plus, anything we sent to plans in the last month or two is now wrong! Plus submissions sent in over the last week probably require additional fees! 

I noticed a portion of the fee section isn't effective until February 2, 2018. But the main schedule (on the website) appears to be effective immediately . 

I even went back through my IRS Employee Plans News to see if I missed an announcement. 

It feels like the IRS didn't want plans to know such a big change was coming - or I just missed some announcement, which is possible too. 

I'm a stranger on the internet. Nothing I write is tax or legal advice. 

I'd like a witty saying here, but I don't have any. When in doubt, what does the plan document say?

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Thank you so much for this information - I recently read they changed the fees...but it was being sold as a reduction in most cases in what I read.  I hadn't had an opportunity to review the Rev. Proc. yet.  Does this mean that the recent reduction in loan corrections under VCP where the only issue is loans ...e.g., fewer than 25% of affected participants...13 or fewer - $300, etc., is no longer in effect?

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5 minutes ago, Madison71 said:

Thank you so much for this information - I recently read they changed the fees...but it was being sold as a reduction in most cases in what I read.  I hadn't had an opportunity to review the Rev. Proc. yet.  Does this mean that the recent reduction in loan corrections under VCP where the only issue is loans ...e.g., fewer than 25% of affected participants...13 or fewer - $300, etc., is no longer in effect?

Madison71, yes, that's exactly what that means. Full fees apply except in very narrow circumstances (such as an orphan plan that is terminating). 

I'm a stranger on the internet. Nothing I write is tax or legal advice. 

I'd like a witty saying here, but I don't have any. When in doubt, what does the plan document say?

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That is such a dirty trick.  Sadly what it means is no one will file for these anymore.  For loan defaults, the participant will just have to be out of luck.  Maybe if the participant is lucky, the employer will pay their taxes.

And RMD people, wll, the participant will be stuck paying the excise tax in some situations.  Nicely played.

Austin Powers, CPA, QPA, ERPA

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I was catching on on last week's news this morning, and can't believe what I am reading.  I have a missed RMD application ready to submit for a single participant failure in a plan of between 50 and 100 participants.  Huge fee increase!!  Now I have to go back to client and see if they still want to file or it they will self correct the plan and leave the participant on her own to try to get a waiver by filing a 5329.  I seriously doubt the plan will want to file for the benefit of the participant.  

 

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1 hour ago, RatherBeGolfing said:

Can we maybe hope that this will lead to a self correction option without the need for VCP at least for loan corrections?  I would imagine that  ARA would push this very hard since it will hit small plans/employers pretty hard.  @Larry Starr have you heard anything from GAC on this?

Well RBG, I can almost guarantee you that there will be a lot more self-corrections of loan issues - whether the option officially exists or not.  We had a handful of loan VCPs in progress (not yet filed) when this came out and half of them are now rethinking the issue....

I'd never recommend playing the audit lottery - but many seem willing to do so on some issues....

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21 hours ago, MoJo said:

 

Well RBG, I can almost guarantee you that there will be a lot more self-corrections of loan issues - whether the option officially exists or not.  We had a handful of loan VCPs in progress (not yet filed) when this came out and half of them are now rethinking the issue....

I'd never recommend playing the audit lottery - but many seem willing to do so on some issues....

Yea many already do and this just makes it harder to successfully advocate doing the right thing

 

 

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  • 3 weeks later...

ASPPA/ARA filed a comment letter today on the VCP fee changes.  The link to the comment letter should work even if you are not an ASPPA/ARA member, but if it doesn't just let me know.   Since we might have lurkers who don't get ASPPA or ARA Newsletters, here is the article in todays ASPPA Connect

Quote

ARA Pushes Back on New VCP User Fee Approach by IRS

 
By Nevin Adams • January 31, 2018 • 0 Comments

The American Retirement Association has taken issue with the new VCP fee structure and approach taken by the IRS, stressing that it is “unfair to small employers, and will have an adverse impact on plan participants.”

The comment letter, addressed to David J. Kautter, Acting Commissioner of the IRS, also notes that the approach is in “direct conflict with Congress’ directive to the Treasury Department to “[take] into account special concerns and circumstances that small employers face with respect to compliance and correction of compliance failures,” and a “complete departure” from the previous VCP user fee approach that was based on participant counts with lower fees for smaller plans.

The change was announced on Jan. 2 in Revenue Procedure (Rev. Proc.) 2018-4 “with no advance warning, no discussion, and no grace period to allow plan sponsors the opportunity to make their VCP submissions prior to the new fees taking effect,” the ARA letter points out.

While acknowledging that the IRS must balance numerous competing compliance and enforcement concerns, and that resource limitations may, in some instances, not allow for the luxury of extended research, analysis, and debate, the ARA letter explains that ensuring the operational compliance of their retirement plans is particularly burdensome for small employers due to the complexities of today’s myriad statutory and regulatory requirements for plan administration.

The ARA points out that the true beneficiaries of the new VCP user fees are large plan sponsors with plans that cover more than 100, more than 1,000, and more than 10,000 participants. While ARA agrees that the VCP change is likely to encourage large plans (the common term for plans over 100 participants) to utilize VCP, this new fee schedule triples, quadruples, or even sextuples the VCP fee for small plans. “This unfair impact on small plans runs contrary to both the PPA mandate and general public policy.”

Worse, the ARA letter points out that the new VCP user fee schedule eliminates entirely the special reduced VCP user fees that were previously available to all plan sponsors that wished to voluntarily correct such common compliance failures as missed required minimum distributions, participant loan failures, and certain late amendment or nonamender failures. “These special reduced fees were beneficial to all sponsors”, explains the ARA letter, but especially for small employers who do not have the financial resources of larger employers. “Further, the reduced fees for required minimum distribution and loan failures provided an incentive to employers to make corrections that were more favorable from a tax perspective) to participants than merely self-correcting the defect”.

In response, the ARA recommends that the IRS immediately amend Rev. Proc. 2018-4 to:

1. Provide that the applicable general VCP user fee is the lesser of the general VCP user fee in effect on January 2, 2018, or the general VCP user fee in effect immediately prior to Jan. 2, 2018, pursuant to Revenue Procedure 2017-4; and
2. Reinstate the special reduced VCP user fees in effect immediately prior to Jan. 2, 2018, pursuant to Revenue Procedure 2017-4.

“While plan assets are necessarily involved in these qualification failures, either directly or indirectly, the more meaningful relationship to the cost of processing the submission is the number of participants and beneficiaries affected by such failures,” the ARA notes.

 
 

 

 

 

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  • 1 month later...

...Based on our most recent analysis, we decided to increase the VCP user fees for small plans to more accurately reflect the average time spent on these cases and to reduce the fees for larger plans to reflect the average time it takes to do these cases. 

 

To attempt to be objective, it may well be true. I have no data on the average time spent on relatively small cases vs. large cases. I'm giving them a partial "benefit of the doubt" until someone publishes/uncovers some real data/statistics. Which will probably never happen.

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I think they would go overboard on their review of loan defaults for example.  It should have been just a penalty for X# of loans, no documentation required.  Why bother reviewing documentation for crying out loud??

As an alternative, add loans and RMD's to the list of self-correction items within certain parameters.  People make mistakes and there should be non--armageddon solutions here when they do.  Loans and RMDs seem to be the most common and least egregious offenses IF THEY ARE ISOLATED, or at least if they do not recur in the future.

My suggestion of course addresses both the communities need for solutions and their need not to be underpaid for work they were needlessly required to perform.

I assume the Self Correction model has born out to be effective and capable of being policed through the IRS audit process.  Why not?? (I get it, there are tax consenquences here, I'm sure that is the difference, but still, either self correction is reliable or it is not).

 

Austin Powers, CPA, QPA, ERPA

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53 minutes ago, Belgarath said:

...Based on our most recent analysis, we decided to increase the VCP user fees for small plans to more accurately reflect the average time spent on these cases and to reduce the fees for larger plans to reflect the average time it takes to do these cases. 

 

To attempt to be objective, it may well be true. I have no data on the average time spent on relatively small cases vs. large cases. I'm giving them a partial "benefit of the doubt" until someone publishes/uncovers some real data/statistics. Which will probably never happen.

I can't speak for how much time the IRS spends on small plan/issues vs. large plan/issues, but I can assure you I generally spend a lot more time in dealing with large plan issues and in preparing VCP filings for them, than I do for small plan issues and loan and RMD issues.  The difference is in the amount of data that needs to be collected, analyzed, formatted and submitted.  A small plan issue that affects 25 people is easier to document than a large plan issue that affects 2500 people - and either way, often the documentation we have to submit - and the IRS is ostensibly reviewing, is more voluminous, generally, for large plans.

 

Just sayin....

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