Multiemployer VCP for Operational Failures

[Guest SoFlaEsq]

New to this forum, and need some serious direction and guidance.

I have a set of multiemployer, jointly-trusteed employee benefit plans as clients, with the Boards of Trustees being appointed in equal number by the sponsoring union and employer association. The Board for the DB pension plan (the plan administrators as such term is defined within the trust agreement and plan document) have discovered through a recent change in its counsel (me) and actuaries, that the calculations for retirement benefit options previously provided to plan participants nearing retirement, were based upon incorrect conversion factors and actuarial equivalence calculations. Additionally, prior plan professionals did not include language for relative values and financial effects in notices to participants. Undoubtedly corrections are required, indeed even perhaps provision of new benefit election option notices to participants who have retired making prior elections based upon faulty information.

I explained to the Board, as plan administrator, that the plan (through its sponsors - union and association) needs to proceed with corrections for these apparent operational failures through a VCP filing. Unfortunately, the Board is unable to reach agreement that it will directly pay the filing fee, the professional fees to be incurred, nor the sanctions that may be assessed by the IRS in connection with the desired compliance statement. Additionally, the Board will not present this issue to their appointing authorities, the union and the association, as the plan sponsors, for their possible agreement to pay all applicable fees, sanctions and costs.

The plan has an errors and omissions policy, and the board members are covered by a waiver of recourse rider to the policy. The premiums for the rider have not been paid improperly with plan assets, but rather directly by the plan sponsors on behalf of their respective appointees to the Board.

Is there any way that I, or outside counsel on behalf of the plan, can pursue relief through the IRS' VCP process with payments made by the plan itself, in order to protect and preserve the tax qualification status of the plan, and therefore, in the direct interest of the plan participants and beneficiaries?

Guidance is appreciated, as this has to be addressed shortly, and resolution of the funding issue achieved so that a VCP submission can be drafted and remitted to the IRS for the protection of the plan's participants and beneficiaries.