SECTION 12. APPLICATION

PROCEDURES FOR VCR AND WALKIN CAP

.01 General rules. This section sets forth the procedures for requesting a compliance statement from the Service under

the VCR program (including SVP) and for requesting a closing agreement under Walk-in CAP. In general, a request under the VCR program or Walk-in CAP consists of a letter from the plan sponsor or the plan sponsor’s representative to the Service that contains a description of the failures, a description of the proposed methods of correction, and other procedural items, and includes supporting information and documentation as described below.

.02 Multiemployer and multiple em- ployer plans. In the case of a multiemployer or multiple employer plan, the plan administrator (rather than any contributing or adopting employer) must request consideration of the plan under the programs. The request must be with respect to the plan, rather than a portion of the plan affecting any particular employer.

.03 Submission requirements. The letter from the plan sponsor or the plan sponsor’s representative must contain the following:

(1) A complete description of the failures and the years in which the failures occurred, including closed years (that is, years for which the statutory period has expired).

(2) A description of the administrative procedures in effect at the time the failures occurred.

(3) An explanation of how and why the failures arose.

(4) A detailed description of the method for correcting the failures that the plan sponsor has implemented or proposes to implement. Each step of the correction method must be described in narrative form. The description must include the specific information needed to support the suggested correction method. This information includes, for example, the number of employees affected and the expected cost of correction (both of which may be approximated if the exact number cannot be determined at the time of the request), the years involved, and calculations or assumptions the plan sponsor used to determine the amounts needed for correction. See section 10.12 for special procedures regarding SVP.

(5) A description of the methodology that will be used to calculate earnings or actuarial adjustments on any corrective contributions or distributions (indicating the computation periods and the basis for

determining earnings or actuarial adjustments, in accordance with section 6.02(3)). (6) Specific calculations for each affected employee or a representative sample of affected employees. The sample calculations must be sufficient to demonstrate each aspect of the correction method proposed. For example, if a plan sponsor requests a compliance statement with respect to a failure to satisfy the contribution limits of § 415(c) and proposes a correction method that involves elective contributions (both matched and unmatched) and matching contributions, the plan sponsor must submit calculations illustrating the correction method proposed with respect to each type of contribution. As another example, with respect to a failure to satisfy the actual deferral percentage (“ADP”) test in § 401(k)(3), the plan sponsor must submit the ADP test results both before the correction and after the correction.

(7) The method that will be used to locate and notify former employees and beneficiaries, or an affirmative statement that no former employees or beneficiaries were affected by the failures.

(8) A description of the measures that have been or will be implemented to ensure that the same failures will not recur.

(9) A statement that, to the best of the plan sponsor’s knowledge, neither the plan nor the plan sponsor is Under Examination.

(10) In the case of a VCR submission, a statement (if applicable) that the plan is currently being considered in a determination letter application. If the request for a determination letter is made while a request for consideration under VCR is pending, the plan sponsor must update the VCR request to add this information.

(11) In the case of an SVP submission, a statement that it is an SVP request, a description of the applicable correction in accordance with Appendix A, and a statement that the plan sponsor proposes to implement (or has implemented) the correction(s).

.04 Required documents. The submission must be accompanied by the following documents:

(1) In the case of a VCR submission, a copy of the first page and a copy of the

1998–12 I.R.B. 23 March 23, 1998

page containing employee census information (currently, line 7f of the 1997 Form 5500) and a copy of the page containing the total amount of plan assets (currently, line 31f of the 1997 Form 5500) of the most recently filed Form 5500 series return, or in the case of a Walk-in CAP submission, a copy of the most recently filed Form 5500 series return.

(2) A copy of the relevant portions of the plan document. For example, in a case involving improper exclusion of eligible employees from a profit-sharing plan with a cash or deferred arrangement, relevant portions of the plan document include the eligibility, allocation, and cash or deferred arrangement provisions of the basic plan document (and the adoption agreement, if applicable), along with applicable definitions in the plan.

(3) In the case of a VCR submission, a copy of the determination letter, opinion letter, or notification letter that considered TRA ’86, except:

(a) individually designed plans (including volume submitter plans) for which the TRA ’86 remedial amendment period under § 401(b) would have expired but for the fact that an application for a determination or notification letter that considers TRA ’86 was timely submitted to the Service and is pending at the time of the application to the VCR program should submit a copy of the determination letter that considered TEFRA, DEFRA, and REA and a copy of the letter from the Service acknowledging receipt of the TRA ’86 determination letter application (Form 2693),

(b) plans for which the TRA ’86 remedial amendment period has not yet expired should submit a copy of the determination, opinion, or notification letter that considered TEFRA, DEFRA, and REA and a statement that explains the reason why the period has not yet expired (for example, because the plan is a governmental plan, or because it is an adopter of a master or prototype plan that is still entitled to continued or interim reliance under Rev. Proc. 89–9, 1989–1 C.B. 780), and

(c) plans initially adopted or effective after December 7, 1994, should submit a statement indicating that the plan will be submitted timely for a determination, opinion, or notification letter within the plan’s remedial amendment period under § 401(b).

.05 Fee. The VCR submission must include the appropriate fee described in section 13.02 or 13.04 below. (The Walk-in CAP compliance correction fee is due at the time the closing agreement is signed.)

.06 Signed submission. The submission must be signed by the plan sponsor or the sponsor’s representative.

.07 Power of attorney requirements. To sign the submission or to appear before the Service in connection with the submission, the plan sponsor’s representative must comply with the requirements of section 9.02(11) and (12) of Rev. Proc. 98–4, 1998–1 I.R.B. 113. .08 Penalty of perjury statement. The following declaration must accompany a request and any factual information or change in the submission at a later time: “Under penalties of perjury, I declare that

I have examined this submission, including accompanying documents, and, to the best of my knowledge and belief, the facts presented in support of this submission are true, correct, and complete.” The declaration must be signed by the plan sponsor, not the sponsor’s representative.

.09 Checklist. The Service will be able to respond more quickly to a VCR or Walk-in CAP request if the request is carefully prepared and complete. The checklist in Appendix B is designed to assist plan sponsors and their representatives in preparing a submission that contains the information and documents required under this revenue procedure. The checklist in Appendix B must be completed, signed, and dated by the plan sponsor or the plan sponsor’s representative, and should be placed on top of the submission. A photocopy of this checklist may be used.

.10 Designation. The letter to the Service should be designated “VCR PROGRAM,” “SVP/VCR PROGRAM,” or “WALK-IN CAP PROGRAM,” as appropriate, in the upper right hand corner of the letter.

.11 VCR/SVP mailing address. VCR/ SVP submissions should be mailed to:

Internal Revenue Service Attention: CP:E:EP:VCR P.O. Box 14073 Ben Franklin Station Washington, DC 20044 .12 Walk-in CAP mailing address. Walkin CAP submissions should be mailed to the Closing Agreement Coordinator in the appropriate Key District Office:

NORTHEAST REGION EP/EO Division Review Staff Internal Revenue Service 10 Metro Tech Center 625 Fulton Street Brooklyn, NY 11201 Office (718) 488-2372 FAX (718) 488-2405 SOUTHEAST REGION EP/EO Division Technical Branch Internal Revenue Service Room 1520 P.O. Box 13163 Baltimore, MD 21203 Office (410) 962-3499 FAX (410) 962-0882 MIDSTATES REGION EP/EO Division Branch Office Internal Revenue Service 230 S. Dearborn Chicago, IL 60604 Office (312) 886-4700

March 23, 1998 24 1998–12 I.R.B.

FAX (312) 886-3275 WESTERN EP/EO Division Internal Revenue Service Attention: EP Walk-in CAP Coordinator McCaslin Industrial Park 2 Cupania Circle Monterey Park, CA 91755-7431 Office (213) 725-1852 FAX (213) 725-7065

.13 Maintenance of copies of submis- sions. Plan sponsors and their representatives should maintain copies of all correspondence submitted to the Service with respect to their VCR and Walk-in CAP requests.