SECTION 3. EARNINGS ADJUSTMENT METHODS AND EXAMPLES

.01 Earnings Adjustment Methods . .................................................................................................................................p. 165 .02 Examples ....................................................................................................................................................................p. 167

APPENDIX C: VCP CHECKLIST ................................................................................................................................................p. 170

Plan, the plan sponsor generally may correct even significant Operational Failures without payment of any fee or sanction.

• Voluntary correction with Service approval (VCP) . A plan sponsor, at any time before audit, may pay a limited fee and receive the Service’s approval for correction. Under VCP, there are special procedures for certain submissions involving only Operational Failures (Voluntary Correction of Operational Failures (“VCO”)), and for certain submissions in which limited Operational Failures are being corrected using standardized corrections (Voluntary Correction of Operational Failures Standardized (“VCS”)). VCP also includes a special procedure that applies to 403(b) Plans (Voluntary Correction of Tax-sheltered Annuity Failures (“VCT”)), a special procedure for anonymous submissions (“Anonymous Submission Procedure”), a special procedure for group submissions (Voluntary Correction of Group Failures (“VCGroup”)), and a special procedure that applies to SEPs (Voluntary Correction of SEP Failures (“VCSEPs”)).

• Correction on audit (Audit CAP) . If a failure (other than a failure corrected through SCP or VCP) is identified on audit, the plan sponsor may correct the failure and pay a sanction. The sanction imposed will bear a reasonable relationship to the nature, extent and severity of the failure, taking into account the extent to which correction occurred before audit.