SECTION 14. AUDIT CAP SANCTION

.01 Determination of sanction . Except as otherwise provided in section 14.04, the sanction under Audit CAP is a negotiated percentage of the Maximum Payment Amount. Sanctions will not be excessive and will bear a reasonable relationship to the nature, extent, and severity

implement optional law changes, as described in section 6.05(3)(a), is $375.

.04 VCP fee for Group Submission . The compliance fee for a Group Submission is based on the number of plans affected by the failure as described in the compliance statement. With respect to pre-approved plans, the fee is determined based on the number of basic plan documents submitted, irrespective of the number of accompanying adoption agreements. The initial fee for the first 20 plans is $10,000. An additional fee is due equal to the product of the number of plans in excess of 20 multiplied by $250. The maximum compliance fee for a Group Submission is $50,000. If additional plans are added following the Group Submission, the additional fee is paid subject to the $50,000 maximum compliance fee. If more than one master or prototype plan is submitted as a Group Submission, each master or prototype plan is considered a separate Group Submission for purposes of the compliance fee.

.05 VCP fee for SEPs and SIMPLE IRA Plans . (1) In general, the compliance fee for a SEP or a SIMPLE IRA Plan submission (including an Anonymous Submission) is $250. Notwithstanding the preceding sentence, the Service reserves the right to impose the fee schedule under section 12.02 or section 12.06 in appropriate circumstances.

(2) In any case in which a SEP or SIMPLE IRA Plan correction is not similar to a correction for a similar Qualification Failure (as provided under section 6.10(1)), the Service may impose an additional fee. If the failure involves an Excess Amount to a SEP or a SIMPLE IRA Plan and the Plan Sponsor retains the Excess Amount in the SEP or SIMPLE IRA Plan, a fee equal to at least 10% of the Excess Amount excluding earnings will be imposed. This is in addition to the SEP or SIMPLE IRA Plan compliance fee set forth in section 12.05(1).

.06 VCP fee for egregious or intentional failures . Notwithstanding the preceding provisions of this section 12, in cases involving failures that are egregious (as described in section 4.11) or where the failure is not inadvertent ( i.e., is not a result of an oversight or mistake), the compliance fee for Qualified Plans, 403(b) Plans, SEPs and SIMPLE IRA Plans is the greater of (1) the fee that would be determined un

der the preceding provisions of this section 12, or (2) an amount equal to a negotiated percentage of the Maximum Payment Amount, with such percentage not to exceed 40%.

.07 Establishing the number of plan participants . Compliance fees under this section 12 are determined based on the total number of plan participants. For a description of participant, see the Instructions for Form 5500, lines 6 and 7. For new plans and ongoing plans, the number of plan participants is determined from the most recently filed Form 5500 series. Thus, with respect to the 2007 Form 5500, the Plan Sponsor would use the number shown in item 7f (or the equivalent item on the Form 5500 C/R or EZ) to establish the total number of plan participants. In the case of a terminated plan, the Form 5500 used to determine the number of plan participants must be the one filed for the plan year prior to the plan year for which the Final Form 5500 return was filed. 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 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.