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IRS EXTENSION ON VOLUNTARY COMPLIANCE RESOLUTION

 WASHINGTON, Sept. 2 /PRNewswire/ -- The Internal Revenue Service (IRS) extended the Voluntary Compliance Resolution (VCR) Program for another year through 1994, IRS officials said Sept. 1.
 Under the program, employers sponsoring eligible plans can avoid substantial penalties flowing from plan disqualification, by correcting operational plan defects and paying a compliance fee, said Elaine Church, a tax consultant with Price Waterhouse.
 "Based on the number of plan participants and the amount of plan assets, the compliance fee can range from $500 to $10,000," Church said.
 Failure to comply with plan qualification rules under current tax laws could result in penalties equivalent to loss of employer deductions, taxation of plan earnings and taxation of the plan's participants.
 Given the heavy financial costs of IRS audit discovery of noncompliance, employers should act now to consider voluntarily correcting errors, especially in view of enhanced audit activity, Church said.
 In addition to extending the VCR program, the IRS:
 -- Expanded the definition of eligible plans to permit plans aggregated with a plan under audit to request VCR relief for most qualification defects unrelated to coverage and non-discrimination.
 -- Clarified that plans are not ineligible for VCR relief merely because violations continue for several years, if the violations are not outstanding and do not involve exclusive benefit violations from misuse of plan assets.
 -- Established principles for evaluating acceptable correction methods.
 IRS Revenue procedure 93-36, released Aug. 30, and covering VCR revisions, also provides a new standardized VCR procedure permitting correcting specific errors for only $350. The procedure permits correction of four errors:
 -- Failure to provide required "top heavy" benefits.
 -- Failure to satisfy the special non-discrimination tests applying to pre-tax 401(k) contributions, after-tax employee contributions or employer matching contributions.
 -- Failure to distribute 401(k) deferrals in excess of the maximum dollar limit of $8,994 for 1993.
 -- Exclusion of an eligible employee.
 "Price Waterhouse can assist employers by evaluating plan documents, procedures and operations to identify potential qualification defects. We can work with employers to quantify the impact of any defects and can develop a correction strategy that meets IRS objectives," Church said.
 -0- 9/2/93
 /CONTACT: Betsy Freeman, marketing communications manager, Price Waterhouse, 202-728-9781/


CO: Internal Revenue Service; Price Waterhouse ST: District of Columbia IN: FIN SU: EXE

IH-DC -- DC013 -- 8394 09/02/93 11:45 EDT
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Publication:PR Newswire
Date:Sep 2, 1993
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