Closing Agreement percentage

[Anonymoose]

Does anyone have recent information on the percentage of Maximum Payment Amount that IRS is using to determine the sanction amount under the Audit CAP? The plan document was not current upon audit but we have since obtained all amendments, etc. This is the only "problem" discovered by the agent. This plan has fewer than 10 participants, one HCE.

[shERPA]

Look at the fee schedule in RP 2008-50 for Audit CAP non-amenders. We just resolved one that had other issues too, but I think they were going by this schedule for the document failures.

[John Feldt ERPA CPC QPA]

Look at section 14.04 in Revenue Procedure 2008-50, if that's the only issue they find, your fee might be as low as the chart shows, but other factors also matter.

1. Cheapest: issues fixable under SCP.
   
2. Affordable (usually): issues fixed under VCP: see chart in Rev Proc. 2008-50, section 12.02.
   
3. Rather costly: the only issue is a nonamender problem and IRS finds it with your D letter app: see section 14.04 in Revenue Procedure 2008-50.
   
4. Ouch: issue is fixed when IRS finds it upon audit (audit cap): costly - may be higher than #3 above (field agent's choice?).
   

EPCRS states that "the sanction under Audit CAP is a negotiated percentage of the Maximum Payment Amount." and "Sanctions will not be excessive and will bear a reasonable relationship to the nature, extent, and severity of the failures, based on the factors below." Rev Proc 2008-50 goes further to say:

"Factors include:

1. the steps taken by the Plan Sponsor to ensure that the plan had no failures;
   
2. the steps taken to identify failures that may have occurred;
   
3. the extent to which correction had progressed before the examination was initiated, including full correction;
   
4. the number and type of employees affected by the failure;
   
5. the number of nonhighly compensated employees who would be adversely affected if the plan were not treated as qualified or as satisfying the requirements of § 403(b), § 408(k) or § 408(p);
   
6. whether the failure is a failure to satisfy the requirements of § 401(a)(4), § 401(a)(26), or § 410(b), either directly or through § 403(b)(12);
   
7. whether the failure is solely an Employer Eligibility Failure;
   
8. the period over which the failure(s) occurred (for example, the time that has elapsed since the end of the applicable remedial amendment period under § 401(b) for a Plan Document Failure); and
   
9. the reason for the failure(s) (for example, data errors such as errors in transcription of data, the transposition of numbers, or minor arithmetic errors).
   

Factors relating only to Qualified Plans also include:

1. whether the plan is the subject of a Favorable Letter; and
   
2. whether the failure(s) were discovered during the determination letter process.
   

If one of the failures discovered during an Employee Plans examination includes the failure to amend the plan timely for relevant legislation, it is expected that the sanction will be greater than the applicable fee described in section 14.04."