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IRS Updates Instructions for Form 8950

The IRS on Sept. 23 released an updated set of instructions for Form 8950, Application for Voluntary Correction Program (VCP) Under the Employee Plans Compliance Resolution System (EPRCS).

The IRS revised the form to reflect changes made to EPCRS by Revenue Procedure (Rev. Proc.) 2013-12, Rev. Proc. 2015-27 and Rev. Proc. 2015-28. The modifications include reducing the compliance fees relating to certain submissions and modifications to the correction rules, as well as new supplemental safe harbor correction methods.

The IRS issued Rev. Proc. 2015-28 on April 2. It provides new safe harbor correction methods for errors relating to automatic contribution features.

If an error is detected within 9½ months after the year of the failure, no corrective qualified non-elective contribution is required, as long as the person is enrolled within the 9½ month period (or earlier if the affected employee notifies the employer of the mistake).

Under the new safe harbor, plan sponsors would only have to make up the matching contributions that would have been made concerning the deferrals that were not withheld. Affected eligible employees must receive notice of the failure to enroll the participant within 45 days after the date on which correct deferrals begin.

ASPPA was a primary instigator of these changes, and the final safe harbor largely mirrors the recommendations ASPPA and the Council of Independent 401(k) Recordkeepers (CIkR) submitted to the Treasury in 2012.