VCP During Provider Transition

[Guest Inhouse ERISA]

Has IRS or DOL provided any guidance about VCP or VFCP corrections amid a service provider transition? We have an incoming client that has discovered some Qualification Errors in past years. Their independent auditor is recommended that they not move forward with the service provider transition until the errors are cleaned up through VCP filing.

Has anyone been involved in a transfer whilst an error is being corrected? What types of issues were encountered?

[ESOP Guy]

Yes we have been involved with a VCP while a transfer is going on. In fact in several cases the error that was at the heart of the VCP was the reason there was a transfer of service providers.

The tension that happens is you need the cooperation of the old provider (TPA) in this case to get all the records needed to make sure a good correction happens and allow for the VCP filing.

In one case the prior TPA had to rework 6 years of annual allocation work and the client wanted us to review their work. That can be a little uncomfortable.

I see no reason why a transition can't happen. If the old provider doesn't give up the records needed they need to be informed this issue will given over to lawyers to settle.

I have never seen it go that far but I have seen reach the point where the prior TPA insisted that everything they send out or received go through their attorney as they feared that large of an EO claim.

[Kevin C]

Corrections are not uncommon with takeovers of existing plans. In a couple of cases, the prior TPA offered to fix the issues. In most cases, especially the with the larger firms, they don't do corrections, so we take care of it. I even had the owner of one TPA firm threaten to sue me for pointing out their mistakes.

You refer to multiple qualification errors over multiple years. Does the auditor really think the service provider(s) who created the problems have the expertise needed to correct them?