Rev. Proc. 2006-27

[J. Bringhurst]

Rev. Proc 2006-27 adds new loan failure correction methods, but indicates that the corrections only apply if the failures are submitted under VCP. Since EPCRS usually provides that self-correction is available if the correction methodology specified in the rev. proc. is followed, this seems a bit out of step. Has anyone heard anything different on this issue or received any indication that the IRS may reconsider? We have a loan default in a plan with a large number of participants...seems a shame to have to correct under VCP and pay a huge fee just to correct one loan failure. Hmmm...

[J. Bringhurst]

Just had a conference call with an IRS representative on this very issue, so I thought that I'd follow up with my original post. The IRS is standing firm on their requirement that the loan failures specifically enumerated in Rev. Proc. 2006-27 can only be corrected under VCP. They have said that this is one of those situations where they do not think self-correction should be available, and they want to approve the correction through submission through the program. Although changes are not imminent, they may, in the future, consider some kind of reduced fee schedule for this situation.