User Fee Avoidance

[Below Ground]

As I understand, if I want to make a VCP Filing for late deferral deposits, Form 8950 is used when filing with the IRS and a User Fee applies.  Is it true that filing this same VCP Filing with the DOL has no User Fee and Form 8950 does not apply, if filed with the DOL?

[Kristina]

I think you are talking about the Voluntary Fiduciary Correction Program (VFCP) and you can file with the DOL using the EBSA Application and Checklist.  A lot more documentation is required than what is required for the 5330 filing.  DOL does say that the penalty can be avoided under certain circumstances, but there no guarantees.  

I would advise you to go to www.dol.gov/EBSA and search for VFCP

[Below Ground]

Thanks for the reply Kristina.  I was not actually discussing the Form 5330 Filing, which is what we normally do under SCP of EPCRS.  While your comments are helpful, I was actually talking about the filing you can do for a "No Action Letter" when you have late deposits.  The IRS program has a User Fee that is paid using Form 8950, and is described at https://www.irs.gov/retirement-plans/voluntary-correction-program-fees.  Conversely, the DOL's version of this program (https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/vfcp.pdf) appears to have no fee.  My question is am I correct in the statement of the IRS Filing has a fee, while there is no fee with the DOL Filing?

[RatherBeGolfing]

On 7/19/2019 at 1:15 PM, Below Ground said:

My question is am I correct in the statement of the IRS Filing has a fee, while there is no fee with the DOL Filing?

Yes, but...

It is more accurate to say that there is no additional filing fee.  If you want a DOL no action letter for your late deposits you need to go through the IRS (VCP) first.  It's not an IRS or DOL choice, it's IRS then DOL.

This is why some will opt to forego the new SCP option in Rev Proc 2019-19.  Without VCP there is no "no action letter".

[Below Ground]

Thanks Rather Be Golfing!  I just couldn't see how that it be, with the IRS charging a fee and no fee by the DOL.  This came about from a client plan that we had provided correction as defined for SCP, including filing of Form 5330 and payment of the tax.  Subsequently, the DOL sent a letter to the client saying they can do a VCP Filing; which was a service we had offered (and the client rejected) for a service charge plus the User Fee.  The client supposedly contacted the DOL about doing a filing, which the client is doing outside of our service, and the DOL told the client they can file directly with the DOL without a User Fee.  I am finding that a bit fishy, but wanted to see if anyone else had heard of doing the submission directly to the DOL without User Fee.  Again, thanks!

[RatherBeGolfing]

@Below Ground, I'm going to have to blame my last post on jet lag...

The VCP requirement for a no action letter is for the correction of loan failures, not late deferral deposits. 

What I suspect happened in your case was that you had late deferrals (an operational failure) that you fixed through SCP and paid the excise tax.  The DOL then sent one of their "invitation letters" to go through VFCP (not VCP) to correct the prohibited transaction and get a "no action letter".  The DOL VFCP (no user fee) and the IRS VCP (user fee) sometimes work together but are different programs correcting.

[Below Ground]

So the DOL does indeed have a version of VCP for late deferrals that has no User Fee!  Since the DOL and IRS are supposed to (but not required) coordinate on this issue, it sounds like you can avoid the IRS User Fee and get the same results by filing with the DOL.  BTW, you hit what happened right on the nail head.  That is exactly what happened.  Just add to it that the Client called the DOL themselves and decided to do a filing outside of our service; thereby, avoiding all service fees.  This does fit the character of this Client, as they hold getting the lowest fee (or no fee) as the most important factor.  Service quality, etc... are not a factor to them.

[RatherBeGolfing]

26 minutes ago, Below Ground said:

So the DOL does indeed have a version of VCP for late deferrals that has no User Fee!

Well not quite.  VCP (or SCP) as part of EPCRS corrects the operational failure, but not the prohibited transaction, which is cured by filing VFCP with DOL.  So they are really not different versions, they are different programs with similar names that sometimes work with each other.  

[Below Ground]

I think this Client is in for a surprise, especially since the penalty tax was under $10.