New pension plan self-correction programs.
Revenue procedure 98-12 provides a uniform set of correction principles that clarify the use of EPCRS. It also ensures that EPCRS is consistently administered. The new procedure has a graduated sanction schedule that takes into account the nature, extent and severity of the violation. The administrative programs that were consolidated into EPCRS include
* Administrative Policy Regarding Self-Correction (APRSC), which permits a plan sponsor with established compliance practices and procedures to correct "insignificant" operational failures without IRS approval, or a fee, and to amend "significant" failures within a two-year period with IRS approval.
* Voluntary Compliance Resolution (VCR), which allows a plan sponsor prior to audit and with IRS approval (and for a limited fee) to rectify operational defects that do not qualify for APRSC.
* Walk-In Closing Agreement Program (Walk-In CAP), which enables a sponsor to voluntarily disclose and correct qualification defects that do not qualify under the VCR program, with the payment of a compliance correction fee based on a new fee schedule.
* Audit Closing Agreement Program (Audit CAP), which allows a plan sponsor to negotiate the monetary sanctions for, and the methods of correcting, plan failures discovered on examination.
Observation. The IRS has exacted hefty monetary penalties from sponsors whose plans did not Comply with the extensive legislative and regulatory qualification rules. EPCRS brings needed clarity to the self-correction process and provides for more reasonable sanctions. Plan sponsors and their advisers should familiarize themselves with the programs that fall under the EPCRS umbrella.
--Tracy Hollingsworth, Esq., staff director of tax councils at Manufacturers Alliance, Arlington, Virginia.
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||IRS programs|
|Publication:||Journal of Accountancy|
|Article Type:||Brief Article|
|Date:||Aug 1, 1998|
|Previous Article:||Roth IRA planning.|
|Next Article:||Unsecured note makes gain disappear.|