People in the retirement plan business sure do like their acronyms. All these letters get thrown around, and I do not know what half of them mean.
What do all those acronyms stand for?
We couldn’t agree with you more. All that alphabet soup can be tough to keep straight, especially if you don’t work with these concepts on a regular basis. Have no fear; DWC is here to help you make sense of it all.
Every so often, we will include an installment of the QOTW that explains some of these acronyms. For this installment, we will cover some of the basics.
What It Means: Employee Plans Compliance Resolution System
How To Pronounce It: epp-KURS
What It Is: EPCRS is the IRS program that allows plan sponsors to voluntarily correct the occasional mistakes that can happen in the complex world of maintaining a retirement plan. It includes examples of correction methods the IRS has pre-approved for more common oversights but also affords flexibility to craft custom, good-faith correction methods when the situation doesn’t fit into one of the pre-approved methods.
What It Means: Self Correction Program
How to Pronounce It: S-C-P
What It Is: SCP is one component of EPCRS and allows plan sponsors to correct mistakes without seeking formal approval from the IRS. In order to be eligible for correction under SCP, the mistake must be insignificant in nature, or it must be caught and corrected within two years.
What It Means: Voluntary Correction Program
How to Pronounce It: V-C-P
What It Is: VCP is another component of EPCRS. It allows for correction of a broader array of mistakes but also requires that the correction be submitted to the IRS for approval.
What It Means: Voluntary Fiduciary Correction Program
How to Pronounce It: V-F-C-P
What It Is: VFCP is a plan correction program maintained by the Department of Labor. Rather than tax compliance matters, it focuses on mistakes related to fiduciary duties and certain employee protections. VFCP is much less flexible than EPCRS. Only certain, limited types of mistakes are eligible, and they must be fixed exactly the way the DOL says. The most common mistake that falls under VFCP is the late deposit of employee 401(k) contributions. Self-correction is not permitted, so plan fiduciaries are expected to apply for DOL approval of any corrections made using this program.
What It Means: Delinquent Filer Voluntary Compliance Program
How to Pronounce It: D-F-V-C-P
What It Is: Also maintained by the Department of Labor, DFVCP’s sole purpose in being is to allow sponsors who did not file their Forms 5500 on time to get caught up. Outside of the program, the DOL can assess penalties of more than $3,000 for each day a form is late. By using the program to submit late filings that can be reduced to as little as a one-time fee of $750.
Hopefully, your plan is running smoothly and is not in need of correction. But, if the occasional accident happens, now you can speak the language.