of participants Fee range Presumptive Amount

10 or fewer VCO fee* to $4,000 $2,000

11 to 50 VCO fee* to $8,000 $4,000

51 to 100 VCO fee* to $12,000 $6,000

101 to 300 VCO fee* to $16,000 $8,000

301 to 1,000 VCO fee* to $30,000 $15,000

Over 1,000 VCO fee* to $70,000 $35,000

• Items marked by asterisk refer to the VCO compliance fee that would apply under section 12.02 if the plan had been submitted under VCO.

(2) Factors considered . Except as provided in section 12.01(3) with respect to nonamenders and section 12.01(4) relating to egregious failures, consideration of whether the compliance fee should be equal to, greater than, or less than the presumptive amount will depend on factors relating to the nature, extent,

and severity of the failure. These factors include: (a) whether the failure is a failure to satisfy the requirements of § 401(a)(4), § 401(a)(26), or § 410(b), (b) whether the plan has both Operational and Plan Document Failures, (c) the period over which the violation occurred (for example, the time that has elapsed since the end of the

applicable remedial amendment period under § 401(b) for a Plan Document Failure), (d) the extent to which the plan has accepted Transferred Assets, and the extent to which the failures relate to the Transferred Assets and occurred before the transfer, and (e) whether the plan has a Favorable Letter.

July 22, 2002 151 2002–29 I.R.B.

(3) VCP fee for nonamenders . The VCP compliance fee for a submission that includes only a Plan Document Failure that is solely a failure to amend the plan timely to comply with required tax law changes is determined in accordance with section 12.01(1), as follows:

(a) GUST (for plans filed after September 3, 2002), UCA or OBRA ’93 model amendments only - the fee is the halfway point between the minimum amount and the presumptive amount of the applicable fee range.

(b) TRA ’86 - the fee is the presumptive amount of the applicable fee range, and clause (a) does not apply.

(c) TEFRA, DEFRA, or REA the fee is the halfway point between the presumptive amount and the maximum amount of the applicable fee range, and clauses (a) and (b) do not apply.

(d) ERISA — the fee is the maximum amount of the applicable fee range, and clauses (a), (b), and (c) do not apply.

(4) Egregious failures . In cases involving failures that are egregious (as described in section 4.09), (a) the maximum compliance fee applicable to the plan under the chart in 12.01(1) is increased to 40 percent of the Maximum Payment Amount and (b) no presumptive amount applies.

.02 VCO fee . Unless VCS is applicable, the VCO compliance fee depends on the assets of the plan and the number of plan participants.

(1) The fee for a plan with assets of less than $500,000 and no more than 1,000 plan participants is $500. (2) The fee for a plan with assets of at least $500,000 and no more than 1,000 plan participants is $1,250.

(3) The fee for a plan with more than 1,000 plan participants but fewer than 10,000 plan participants is $5,000.

(4) The fee for a plan with 10,000 or more plan participants is $10,000.

.03 VCS fee . The VCS compliance fee is $350.

.04 Fee for Anonymous Submission . The compliance fee for the Anonymous Submission Procedure is the fee applicable under other provisions of this section 12 ( i.e., the fee under section 12.01 for VCP general procedures, the fee under section 12.02 for VCO, or the fee under section 12.05 for VCT).

(1) The initial portion of the fee is the amount determined under section 12.02 (for the VCP general procedures or VCO) or 12.05(2) (for VCT).

(2) The additional fee, if any, is the fee determined under section 12.01 or 12.05, if applicable, reduced by the fee in section 12.04(1).

.05 VCT Fee . (1) VCT compliance fee . The applicable VCT compliance fee depends on the type of failure and, generally, the number of employees of the employer.

(2) Fee for Operational Failures . Subject to section 12.05(3), the compliance fee for submissions that include only Operational Failures is as follows:

(a) The fee for an employer with fewer than 25 employees is $500.

(b) The fee for an employer with at least 25 and no more than 1,000 employees is $1,250.

(c) The fee for an employer with more than 1,000 employees but less than 10,000 is $5,000. (d) The fee for an employer with 10,000 or more employees is $10,000. (3) Fee for certain Excess Amounts . Subject to section 12.05(6), the compli

ance fee for Excess Amounts that are corrected pursuant to section 6.05(2)(b) is equal to the sum of (a) the applicable fee described in section 12.05(2), plus (b) ten percent of the Excess Amounts, adjusted for earnings through the date of the VCT application, contributed or allocated in the calendar year of the VCT application and in the three calendar years prior thereto. If there is a failure to satisfy both the § 403(b)(2) and § 415 limits with respect to a single employee for a year, the fee will take into account only the larger Excess Amount.

(4) Fee for Demographic and Eligi- bility Failures . (a) Subject to section 12.05(6), the compliance fee for a 403(b) Plan with failures that include any Demographic or Employer Eligibility Failure is determined in accordance with the VCP fee table in section 12.01(1), except that (i) the reference to VCO fees is changed to refer to the VCT compliance fee for Operational Failures in section 12.05(2) above and (ii) the fee is determined with reference to the number of employees rather than participants.

(b) In addition to the types of factors listed in section 12.01(2), factors considered in determining the compliance fee for failures that include any Demographic or Employer Eligibility Failure under VCT include: (i) whether the failures include a Demographic Failure, (ii) whether the 403(b) Plan has a combination of two or more types of failures (Operational, Demographic, and Employer Eligibility); and (iii) the period of time over which the failure occurred.

(5) Fee for multiple failures . If correction is requested for multiple failures, the compliance fee is determined in accordance with the table below.

Multiple Operational Failures Fee described in section 12.05(2) Multiple Demographic or Eligibility Failures Fee described in section 12.05(4)

Combination of Operational and Demographic or Eligibility Failures Fee described in section 12.05(4) Operational Failure(s) with section 6.05(2)(b) correction of Excess Amounts Fee described in section 12.05(3) Demographic or Eligibility Failures and Operational Failures Fee described in section 12.05(3), substituting section including section 6.05(2)(b) correction of Excess Amounts 12.05(4) fee for section 12.05(2) fee

2002–29 I.R.B. 152 July 22, 2002

(6) Fee for egregious failures . In cases involving failures that are egregious, the maximum VCT compliance fee applicable to the plan is increased to 40 percent of the Total Sanction Amount and no presumptive amount applies.

.06 VCGroup fees . The compliance fee for a VCGroup submission is based on the number of plans to which the compliance statement is applicable. The initial fee is $10,000. In the case of a submission with only corrections under Appendix A or B, an additional fee is due equal to the product of the number of plans in excess of 20 times $125, up to a maximum of $40,000; in any other case, the additional fee is equal to the product of the number of plans in excess of 20 times $250, up to a maximum of $90,000.

.07 VCSEP fees . The applicable VCSEP compliance fee is the same as the fee for VCP in section 12.01, subject to the following:

(1) In the case of a SEP with Operational Failures only, the compliance fee is determined in accordance with the VCO fee schedule in section 12.02, except that the fee is determined solely on the basis of the number of plan participants.

(2) In any case in which a SEP correction is not similar to a correction for a similar Qualification Failure (as provided under section 6.08(1)), the Service may impose an additional fee. If the failure involves an overcontribution to a SEP that is not the result of a failure to satisfy a statutory limit on contributions to a SEP and the Plan Sponsor retains the overcontribution in the SEP, a fee equal to at least ten percent of the overcontribution excluding earnings will be imposed. This is in addition to the VCSEP compliance fee.

.08 Establishing amount of assets and number of plan participants . Compliance fees under this section 12 are calculated by the Plan Sponsor using the numbers from the most recently filed Form 5500 series to establish the fee. Thus, with respect to the 1999 Form 5500, the Plan Sponsor would use the number shown on line 7(f) (or the equivalent line on the Form 5500 C/R or EZ) to establish the number of plan participants and would use line 31(f) (or the equivalent line on the Form 5500 C/R or EZ) to establish the amount of plan assets. If the submission involves a plan with Transferred

Assets and no new incidents of the failure occurred after the end of the second plan year that begins after the corporate merger, acquisition, or other similar employer transaction, the Plan Sponsor may calculate the amount of plan assets and number of plan participants based on the Form 5500 information that would have been filed by the Plan Sponsor for the plan year that includes the employer transaction if the Transferred Assets were maintained as a separate plan. In the case of a SEP not required to file a Form 5500, the Plan Sponsor may use other reasonable information to determine the amount of plan assets and the number of participants.