For months, practitioners have been anticipating that the IRS was going to issue a new Rev. Proc. governing EPCRS. It has finally arrived. See Rev. Proc 2006-27 [pdf].
It is interesting to note that the Table of Fees For Nonamenders* that was published here previously at Benefitsblog in October of 2003, as shared by IRS officials at a local meeting, has finally been made official in this new Rev. Proc. (See Section 14.04 of the Rev. Proc. at pgs. 54-55.) The table has to do with the compliance fees imposed by IRS on plan sponsors where a plan is submitted for a determination letter, and the IRS identifies-during the determination letter application process–that the plan was not properly amended for certain changes in the law. The table is as follows:
| IRS Nonamender Fee Schedule | |||||||
|---|---|---|---|---|---|---|---|
| Number of Employees | EGTRRA | GUST | UCA/OBRA | TRA’86 | T/D/R | ERISA | |
| 20 or less | $2,500 | $3,000 | $3,500 | $4,000 | $4,500 | $5,000 | |
| 21-50 | $5,000 | $6,000 | $7,000 | $8,000 | $9,000 | $10,000 | |
| 51-100 | $7,500 | $9,000 | $10,500 | $12,000 | $13,500 | $15,000 | |
| 101-500 | $12,500 | $15,000 | $17,500 | $20,000 | $22,500 | $25,000 | |
| 501-1,000 | $17,500 | $21,000 | $24,500 | $28,000 | $31,500 | $35,000 | |
| 1,001-5,000 | $25,000 | $30,000 | $35,000 | $40,000 | $45,000 | $50,000 | |
| 5,001-10,000 | $32,500 | $39,000 | $45,500 | $52,000 | $58,500 | $65,000 | |
| Greater than 10,000 | $40,000 | 48,000 | $56,000 | $64,000 | $72,000 | $80,000 | |
It is my understanding that the scenario could run something like this. Plan X comes in for a favorable determination letter during its scheduled time under Rev. Proc. 2005-66. Somehow during the IRS’s review of Plan X, it is discovered that the plan sponsor failed to adopt one of the required EGTRRA amendments on a timely basis. The plan sponsor has 1,023 employees. According to the table, the plan sponsor would now owe $25,000 in fees for the nonamender failure. (If instead the plan sponsor only had 15 employees, the compliance fee would only be $2,500.)
According to Section 14.02 of the Rev. Proc., the fees will be even higher if the nonamender failure is discovered in an IRS audit, rather than during the determination letter application process.
*The term “nonamender failure” is defined in Section 4.06 of the Rev. Proc. as a “failure to amend the plan to reflect a change in a qualification requirement within the plan’s applicable remedial amendment period, as set forth in Rev. Proc. 2005-66.”