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Does a TPA’s or recordkeeper's employee represent a plan sponsor in a VCP submission?


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Please let me preface this request by saying I don’t do corrections work, and my interest is only academic. I’m developing a lesson for my multidisciplinary course on Professional Conduct in Tax Practice.

For a Voluntary Correction Program submission to the Internal Revenue Service, a plan sponsor might want a representative, and might find it efficient and effective to be represented by a practitioner who works for the recordkeeper or third-party administrator.

Do some offer this service?

Must a submission be prepared, or at least supervised, by an owner or employee who is an attorney, accountant, actuary, or enrolled retirement plan agent recognized for practice before the IRS?

If the practitioner’s employer was at fault for the to-be-corrected failure, does the practitioner have a conflict of interests?

What ways do you use to avoid or manage such a conflict?

If the practitioner’s employer was not at fault for but was involved about the to-be-corrected failure, does the practitioner have a conflict of interests?

What ways do you use to avoid or manage such a conflict?

If a recordkeeper or TPA does not offer a service of letting its employee serve as a plan sponsor’s representative, is that because you see a conflict that can’t be avoided or managed?

Because I lack experience, I hope BenefitsLink neighbors will help me learn about real-world practice.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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2 hours ago, Peter Gulia said:

Do some offer this service?

Yes.

 

2 hours ago, Peter Gulia said:

Must a submission be prepared, or at least supervised, by an owner or employee who is an attorney, accountant, actuary, or enrolled retirement plan agent recognized for practice before the IRS?

I believe a submitter who is not the plan sponsor must be authorized to practice before IRS (but do not know this for certain). If not, they could prepare the submission for the plan sponsor to file.

 

2 hours ago, Peter Gulia said:

conflict of interests

Good questions, never thought about it. My thoughts are about this in general, not your specific inquiries. If the practitioner was at fault and is proposing an aggressive remedy that is not a standard correction and which would limit the correction cost for which it is presumably responsible then I'd say that is a conflict and must be disclosed to the client. If the at fault practitioner is doing the correction work w/o fees to avoid incurring another professional's costs, maybe that could be a conflict. However, any instance where the correction is routine and mandated, whether completed by an at fault practitioner or not, I don't see where there would be any conflict. My general thought, if a practitioner made a mistake they need to make it right.

These are my personal opinions. I have no answers or opinions on your other specific questions.

 

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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Thank you for your thinking, especially about what might or might not set up a conflict of interests.

Others with different or further observations?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Any TPA with an ERPA on staff is likely to handle VCP submissions.  An ERPA can get Power of Attorney and prepare the submission on behalf of the client, as well as having direct conversations with the IRS if there are any follow-up items.  I have prepared many a VCP, and I'm sure that is the case for most ERPAs reading this posting. 

While a plan sponsor isn't required to find someone to represent them, I have never seen a client yet who would tackle a VCP submission on their own.  Although the submissions are fairly boilerplate, the attachments and the narratives and the process as a whole requires a certain level of expertise.

My experience has been that recordkeepers step away from any issues that involve functions outside of recordkeeping / lower level plan administration processes if they are not a fiduciary.  I can't speak to bundled arrangements where the recordkeepers serve as Trustee and handle TPA functions.  

Typically, a VCP submission is prepared because the client has made an error, but once in while you will see a VCP submission for a situation where the error was the TPA's.  I recall our office prepared a group submission that was the result of a universal document error many years ago.  This was so long ago that I don't clearly remember if it was our office or the document provider's fault, but the submission was required and it impacted all clients on that document, and I'm pretty sure we prepared the submission.  When I say "we," that means I wasn't the lucky person who got to do that, so I just don't remember.  

Clearly the big question is about conflicts of interest, and I have never even considered it might be a possibility when preparing submissions, regardless of the reason.  The focus is always to clear up a plan qualification issue.

 

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Towanda, thank you for your helpful information.

Because we recognize that a plan sponsor’s representative practices before the IRS, here’s the Circular 230 rule about conflicting interests:

§ 10.29   Conflicting interests.

(a)    Except as provided by paragraph (b) of this section, a practitioner shall not represent a client before the Internal Revenue Service if the representation involves a conflict of interest. A conflict of interest exists if—

(1)    The representation of one client will be directly adverse to another client; or

(2)    There is a significant risk that the representation of one or more clients will be materially limited by the practitioner’s responsibilities to another client, a former client{,} or a third person, or by a personal interest of the practitioner.

(b)    Notwithstanding the existence of a conflict of interest under paragraph (a) of this section, the practitioner may represent a client if—

(1)    The practitioner reasonably believes that the practitioner will be able to provide competent and diligent representation to each affected client;

(2)    The representation is not prohibited by law; and

(3)    Each affected client waives the conflict of interest and gives informed consent, confirmed in writing by each affected client, at the time the existence of the conflict of interest is known by the practitioner. The confirmation may be made within a reasonable period after the informed consent, but in no event later than 30 days.

(c)    Copies of the written consents must be retained by the practitioner for at least 36 months from the date of the conclusion of the representation of the affected clients, and the written consents must be provided to any officer or employee of the Internal Revenue Service on request.

31 C.F.R. § 10.29 https://www.ecfr.gov/current/title-31/section-10.29.

As CuseFan suggests, whether a conflict exists turns on the surrounding facts and circumstances, which might include whether the practitioner’s advice is obvious or involves discretion that could an affect an interest beyond the plan sponsor’s interest.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Peter, I think it is often advisable to put an attorney in charge of the correction and have the attorney hire the non-attorney service providers that will be involved in the VCP investigation and submission, pursuant to a Kovel agreement. The purposes of doing this is to shield all of the pre-submission fact-finding, advice, and decision-making behind attorney-client privilege, which can be important in situations where it is not clear from the outset, prior to completion of the factual investigation and review of possible correction costs, that the plan sponsor will be willing to bare its qualified plan soul to IRS and accept any correction required by it, but instead wants to explore possible correction alternatives both with a practitioner and with the IRS through a pre-submission conference, Attorney-client privilege can also be valuable in large cases where the employer may be considering requesting indemnification from a third party.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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We normally prepare and submit VCP filings. We did have one case where the attorney formally submitted it, but hired us to prepare everything. Normally there is no attorney involved. Luke's suggestions seem good to me, but typically our plans are small employers, and they don't want to pay attorney fees for what are normally fairly routine corrections.

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Luke Bailey and Belgarath, thank you for your further observations.

Luke Bailey, thank you for mentioning Kovel translation or explanation, fact-gathering, and other arrangements preparing a lawyer to form her advice.

In my course’s lesson about confidences and evidence-law privileges, we’ve considered whether a Kovel (or similar State-law) tolerance applies when a lawyer engages an accounting firm or consulting firm but nothing in that firm’s work involves accounting, actuarial practice, business advice, investment advice, or any discipline other than legal advice.

But a lawyer’s engagement of others for fact-gathering should work with no need for any Kovel doctrine.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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