What may we now do with self-corrections?

[Peter Gulia]

BenefitsLink helpfully posted the IRS’s prepublication release of Notice 2023-43 https://www.irs.gov/pub/irs-drop/n-23-43.pdf.

Here are my open questions for BenefitsLink neighbors’ observations:

1.    What does this IRS guidance let us do tomorrow that we couldn’t do before December 29, 2022?

2.    What were you hoping for that the IRS isn’t yet allowing?

3.    If an Eligible Inadvertent Failure is one that may be self-corrected, under what circumstances might one prefer to submit a VCP application?

[Peter Gulia]

I’ll start with two answers to my question 3:

Some prefer VCP over self-correction if the plan’s sponsor is a business organization that anticipates a sale of its shares, member interests, or partner interests (rather than a sale of the business’s assets). In mergers-and-acquisitions due diligence and negotiations, producing an IRS letter is simpler, quicker, and less expensive than writing a law firm’s or accounting firm’s opinion letter.

Some prefer VCP over self-correction if one doubts a self-correction memo will persuade an independent qualified public accountant that the correction is enough that the auditor may accept the plan administrator’s representation that the plan is tax-qualified.