In Employee Plans News (March 23, 2011), the Internal Revenue Service (the “IRS”) warned that some errors made in connection with 403(b) plans may not be corrected under the IRS’ Voluntary Correction Program (“VCP”). Here is what the IRS said:
Recently, we have received several VCP submissions for 403(b) retirement plan failures that are currently ineligible for correction through VCP. Ineligible submissions include cases where:
— the plan’s written program did not satisfy the legal requirements under Code §403(b) and the 403(b) final regulations, or the plan failed to adopt a written plan program before December 31, 2009; or
— the plan failed to operate according to its written program’s terms.
We will return all VCP submissions (including fees) containing ineligible failures. An employer sponsoring a 403(b) plan may currently use VCP to correct employer eligibility and demographic failures, and the operational failures listed in Revenue Procedure 2008-50 §5.02(2)(a). We are in the process of updating Revenue Procedure 2008-50 to expand EPCRS to include post-December 31, 2008 failures.