July 31, 2020 was the date the IRS required that these plans be updated to reflect changes since the PPA was passed in 2016.
The PPA restatement is not optional. Failure to do so by the deadline is a plan disqualification issue that could adverse tax consequences for plan sponsors and participants. However, the IRS does provide a method to avoid plan disqualification. Here are the details.
The IRS has a program called the Voluntary Compliance Program (“VCP’) which is part of an overall program called EPCRS which is short for the Employee Plans Compliance Resolution System. It’s the method that allows plan sponsors to correct failures and get their plans back into compliance including missed restatement deadlines.
How VCP Works
Plan sponsors under VCP would adopt the restated plan and then submit the required paperwork to the IRS for approval. The fee for the submission is based on the amount of net plan assets.
Once the IRS determines that the submission is complete, the IRS may contact the plan sponsor or the plan sponsor’s authorized representative to discuss the submission; or, the IRS may issue a compliance statement without contacting the plan sponsor or the plan sponsor’s authorized representative.
Effect of Compliance Statement
The compliance statement only addresses the failures described in the submission. In general, the compliance statement provides that the IRS will not treat the plan as failing to satisfy the document requirements identified in the submission. It does not provide reliance for any other failure.
Audit Agreement Closing Program
VCP as mentioned above is voluntary. Sometimes it’s mandatory. If the IRS finds the plan to be non-compliant on a plan audit, the plan sponsor would be required to submit an updated plan to avoid disqualification. Instead of VCP, the process is the IRS’ Audit Agreement Closing Program or Audit CAP. The cost of which would be significantly more than if the missed deadline was dealt with on a voluntary basis through VCP.
It should be obvious. Contact them before they contact you.