What should you do if you discover that you made an error in administration of your 401(k) Plan or overlooked something that you should have completed? There are 2 self-correction programs offered by the Internal Revenue Service and the Department of Labor that you can consider. We’ll review the IRS programs in this blog post.
The first option the IRS offers is a program called the “Retirement Plan Self-Correction Program” (RPSCP). This program can be used for insignificant errors that can be corrected by the end of the second plan year after the year the error occurred. There is no fee or submission to the IRS required for this program.
The second option the IRS offers is titled the “Voluntary Correction Program” (VCP). This program should be used to correct more significant operational errors. This program requires payment of a fee and submission to the IRS detailing the failure. The IRS will review the submission and, if approved, will note the correction method to be used.
Both options are preferable to leaving the item uncorrected and risking much more significant fines, penalties, and time for correction if the error is identified by your employees or the IRS during an audit.
As the plan sponsor, when it’s time to audit your plan, it’s vital that you hire an experienced auditor to ensure your plan is in compliance. At Summit CPA we specialize in retirement plan audits. We have the ability to offer assistance entirely off-site with little or no distraction to your daily office routine. We also offer flat-fee pricing so there are no surprises on your bill when the job is complete. For assistance contact our office at (866) 497-9761 to schedule an appointment.