What Is the 401(k) Voluntary Correction Program?

The Voluntary Correction Program lets a 401(k) sponsor disclose plan qualification failures to the IRS before examination and obtain written IRS agreement to an approved correction.

That is what the filing buys.

Not the correction itself.

The sponsor still has to:

• identify the failure
• reconstruct affected years
• calculate participant restoration
• propose a valid method
• fix administrative controls
• complete the approved work.

VCP adds something SCP cannot provide:

written IRS approval of the disclosed correction.^[1]

VCP Is the Certainty Route Inside EPCRS

EPCRS has three principal paths:

• SCP — sponsor self-corrects without IRS approval
• VCP — sponsor voluntarily asks the IRS to approve the correction
• Audit CAP — correction occurs during IRS examination.

INV-110 covers the system.

INV-115 covers SCP.

VCP sits in the middle:

more cost and process than SCP, but far more control than waiting for Audit CAP.

VCP Is Not an Audit

A common fear is:

"If we tell the IRS about one problem, they will audit the whole plan."

That is not how the IRS describes VCP.

The Service says it reviews:

the failures and correction methods identified in the submission

and does not look for failures that were not described as part of the VCP review.^[1]

That is an important limitation.

It is not the same as saying undisclosed failures disappear.

The IRS Agreement Is Narrow

If VCP is approved, the IRS issues a written agreement covering:

• the failures disclosed
• the approved correction
• required procedural changes
• the time allowed to complete the work.^[1][8]

That approval generally means the IRS will not seek to disqualify the plan because of those disclosed failures if the sponsor completes the agreed correction on time.^[1]

It does not mean:

"IRS certifies this plan is fully compliant."

Undisclosed Failures Remain Exposed

Suppose the VCP filing discloses:

late entry of 12 employees.

The IRS accepts the proposed correction.

Two years later an examination discovers:

a separate compensation-definition failure affecting bonuses.

The earlier IRS approval generally does not protect the bonus error because it was not part of the disclosed VCP case.^[1]

VCP solves identified problems.

It does not cleanse the plan globally.

Why a Sponsor Uses VCP When SCP Exists

SECURE 2.0 expanded self-correction.

That makes this question more important:

Why pay for VCP if SCP may work?

Three reasons dominate.

1. SCP eligibility is uncertain

The sponsor may be unsure whether:

• established compliance procedures were adequate
• the failure is eligible for expanded self-correction
• examination timing creates a problem
• an excluded category applies.

2. The correction method is debatable

The failure may not have a clean safe-harbor correction method.

3. Formal IRS agreement has business value

That can matter in:

• acquisition
• financing
• due diligence
• board oversight
• plan merger
• executive departure
• litigation context.

A written IRS position can be worth more than the filing fee.

VCP Can Be Rational Even for a Small Error

Assume a plan has:

$4 million in assets.

A correction will cost:

$12,000

The 2026 regular VCP user fee is:

$3,500.^[2]

If the plan sponsor is about to sell the business for $80 million, the relevant comparison is not:

$3,500 fee vs. $12,000 correction.

It is:

$3,500 fee vs. carrying unresolved tax-qualification uncertainty into the transaction.

The transaction can make VCP economically sensible even when the participant dollars are modest.

VCP Must Be Voluntary

The program is designed for a sponsor that comes to the IRS:

before examination.^[4]

Once the plan or sponsor is under examination within the EPCRS rules, VCP generally is no longer the route for the failure at issue.

That is the leverage point.

Known difficult failure + no examination:

sponsor still controls the decision.

Known difficult failure + IRS examination:

options narrow.

Do Not Wait for the Audit Letter to Decide

Assume counsel identifies a questionable correction method in:

March.

The sponsor decides:

"We'll see if anyone asks."

IRS examination starts in:

July.

That four-month delay can move the issue from:

VCP

toward:

Audit CAP

with a negotiated sanction instead of a published user fee.

Waiting has option value only while nothing happens.

The audit letter can remove it.

Form 8950 Is the Filing Gate

VCP submissions are made electronically through:

Pay.gov^[1][3]

using:

Form 8950 — Application for Voluntary Correction Program.^[3]

The electronic process replaced paper submission.

A sponsor generally:

1. establishes a Pay.gov account
2. prepares the supporting submission as a PDF
3. completes Form 8950
4. uploads the supporting file
5. pays the user fee
6. receives a Pay.gov tracking ID.^[1]

That tracking ID becomes the case/control reference for the submission.

The PDF Is the Substance

Form 8950 opens the case.

The supporting material explains it.

The IRS says the submission generally needs to describe:

• failures
• proposed corrective actions
• changes to administrative procedures intended to prevent recurrence
• other required EPCRS information.^[1]

A weak filing says:

"Match error. We will fix it."

A useful filing explains:

• what the document required
• what happened
• why it failed qualification
• affected population
• affected years
• calculation method
• earnings
• proposed correction
• procedural repair.

Form 14568 Can Structure the Submission

The IRS provides:

Form 14568 — Model VCP Compliance Statement

and issue-specific schedules for certain common failures.^[1][9]

Those forms can reduce ambiguity.

They do not replace analysis.

A schedule can prompt the sponsor for the right information.

It cannot decide whether the facts actually fit the model correction.

A Complete Submission Can Move Faster

The IRS currently performs a preliminary completeness review before assigning a VCP case to a specialist.^[7]

A complete submission can sometimes be:

closed on merit during screening

if the proposed correction is reasonable, appropriate and resembles established correction methods.^[7]

If not, the case moves to unassigned inventory and later to a specialist.

That gives sponsors a practical incentive to make the filing easy to understand.

Completeness Is Not Volume

A 300-page submission is not automatically better than a 40-page one.

The useful question is:

Can an IRS reviewer reproduce the failure and correction without guessing?

Include:

• governing terms
• clear chronology
• participant population
• calculations
• legal basis
• correction method
• preventive change.

Do not bury the issue under irrelevant plan records.

The IRS Can Ask for More Information

If the submission needs clarification, the Service can contact:

• the sponsor
• authorized representative.^[1]

The case can therefore become iterative.

IRS may ask:

• why a method was chosen
• how earnings were calculated
• whether former employees were included
• whether an amendment satisfies qualification rules
• whether other years are affected.

VCP is an approval process.

Not a document drop.

The IRS Can Require a Different Correction

A sponsor is allowed to propose a correction.

The IRS does not have to accept it.

If the Service disagrees, it generally works with the sponsor or representative to find a reasonable and appropriate correction.^[1]

That creates one of VCP's most important strategic questions:

Correct before filing or wait for agreement?

Correcting Before Filing Has a Risk

The IRS says a sponsor may correct:

• before filing
• after filing.^[1]

If the sponsor finishes the correction first and the IRS later rejects the method:

the sponsor may have to undo or modify what it already did.^[1]

That can be painful when the correction involved:

• distributions
• participant notices
• retroactive amendments
• allocation changes.

Pre-filing correction is safest when the method is well established.

Waiting Has Its Own Cost

Waiting for a compliance statement can mean:

• affected participants remain undercorrected longer
• earnings continue to accrue
• payroll must operate under interim controls
• business transactions can be delayed.

There is no universal answer.

The sponsor should separate:

undisputed corrective steps

from:

the novel part needing IRS approval.

The 2026 Regular VCP Fee Schedule

For submissions made on or after January 1, 2026, regular VCP fees are:^[2]

These are IRS user fees.

They do not include:

• attorney fees
• TPA fees
• actuarial fees
• recordkeeper work
• corrective contributions
• earnings.

The Fee Is Based on Plan Assets

For regular VCP submissions, the fee is not calculated from:

• error amount
• participant count
• number of years
• correction cost.^[2]

It is generally based on:

net plan assets.

That can produce counterintuitive results.

Example: Tiny Error, $4,000 Fee

Plan assets:

$25 million

Correction principal:

$1,500

Regular 2026 VCP fee:

$4,000.^[2]

If SCP clearly applies, paying more in IRS user fee than correction principal may make little sense.

If the correction method could jeopardize a pending transaction, the fee can still be rational.

Context decides.

Example: Large Error, $2,000 Fee

Plan assets:

$450,000

Correction principal:

$80,000

Regular 2026 VCP fee:

$2,000.^[2]

The IRS fee is not a percentage of the correction.

That distinction matters when comparing VCP with Audit CAP.

How Plan Assets Are Determined

IRS guidance generally uses the most recently filed:

Form 5500-series return

to determine net plan assets for the VCP fee.^[2]

If the plan does not file a Form 5500-series return, the IRS has separate rules using plan assets as of the most recently ended plan year.^[2]

The sponsor should not estimate the fee from:

today's recordkeeper balance

without checking the applicable asset rule.

Special Fee Rules Exist

The regular $2,000/$3,500/$4,000 schedule is not universal.

Current IRS guidance has separate treatment for:

• group submissions
• terminating orphan plans
• certain 457(b) matters.^[2]

A normal single-employer 401(k) generally uses the standard asset-based table.

Do not apply the regular fee mechanically to every EPCRS-related filing.

Anonymous VCP Filings Are Gone

Beginning:

January 1, 2022

VCP submissions can no longer be anonymous.^[4][5][6]

The filing identifies:

• plan
• sponsor.

That changed an old strategy where counsel could initially submit a correction without identifying the client.

Current articles that still describe anonymous VCP filings are outdated.

Anonymous Pre-Submission Conferences Still Exist

The IRS retained a narrower option:

anonymous, no-fee pre-submission conference.^[4][5][6]

This is not a VCP filing.

It is a preliminary discussion.

The Conference Is for Novel Correction Questions

Under the published EPCRS procedure, a representative may request the conference for a failure eligible for VCP when:

• the sponsor intends to submit VCP
• the matter could receive a compliance statement
• the proposed correction is not a safe-harbor method already described in Appendix A or B
• IRS agrees to hold the conference.^[4]

That makes the conference useful for:

"Will the IRS entertain this correction architecture?"

not:

"Can you pre-approve our ordinary missed-match calculation?"

The Conference Does Not Bind the IRS

The anonymous pre-submission conference is:

• discretionary
• nonbinding
• no-fee.^[4][5]

It does not provide reliance.

If the sponsor proceeds with VCP:

the actual filing must identify the sponsor and plan.

The conference reduces uncertainty.

It does not eliminate it.

Example: When a Pre-Submission Conference Makes Sense

A sponsor discovers a multi-year failure with:

• unusual employee population
• no Appendix A/B safe-harbor method
• proposed correction combining retroactive amendment and targeted allocations.

Counsel believes VCP is appropriate but wants to know whether the IRS views the approach as viable before spending heavily on the full filing.

That is the kind of issue where a pre-submission conference can have value.

What the Compliance Statement Actually Does

If the IRS approves the submission, it issues the formal written agreement contemplated by VCP.^[1]

The document identifies:

• disclosed failures
• approved correction
• procedural changes
• completion deadline.

Its practical value is the Service's commitment that timely completion of the required actions will generally prevent disqualification based on the disclosed failures.^[1]

That is much more than:

"we think SCP applies."

What It Does Not Do

The statement does not:

• approve undisclosed failures
• override participant rights
• prevent the IRS from examining unrelated matters
• automatically eliminate every excise tax
• fix Department of Labor fiduciary violations
• guarantee every future year remains compliant.^[1]

The protection is issue-specific.

VCP Can Include Requests for Certain Tax Relief

Some plan failures can trigger:

• excise taxes
• additional income taxes.^[1]

Under applicable EPCRS rules, a VCP submission can request that the IRS not pursue certain specified taxes in circumstances where relief is available.^[1][4]

SCP does not automatically provide that relief.

That can be a standalone reason to choose VCP.

Tax Relief Is Not Automatic

A sponsor should not write:

"We are filing VCP, therefore Form 5330 is unnecessary."

The correct analysis is:

1. what separate tax applies?
2. does EPCRS permit relief?
3. was relief specifically requested?
4. did the IRS grant it?

Qualification correction and tax relief are separate conclusions.

The 150-Day Rule Is Easy to Miss

Once the IRS issues its approval, the sponsor generally has:

150 days

from the statement's date to complete the required corrective actions.^[1][8]

The clock does not begin:

• when the failure is discovered
• when Form 8950 is submitted
• when the user fee is paid.

It begins with the compliance statement.

Missing 150 Days Can Destroy the Benefit of Filing

The IRS says that if the sponsor fails to complete the corrective actions within the 150-day period, the approval becomes invalid.^[8]

The sponsor may then need to:

• file another VCP submission
• pay another user fee
• disclose the missed completion deadline.^[8]

That is a severe administrative failure after obtaining the relief.

Put the 150-Day Date on the Calendar Immediately

When the IRS agreement arrives:

1. calculate day 150
2. assign every required correction
3. identify participant outreach
4. schedule deposits
5. obtain amendments
6. rerun tests
7. collect completion evidence.

The correction should be project-managed from the IRS deadline backward.

Not from internal convenience forward.

Extensions Can Be Requested

If additional time is genuinely needed, IRS guidance allows a sponsor to request an extension:

before the 150-day period expires.^[8]

The request should explain:

• why more time is needed
• steps already taken
• requested additional time.^[8]

A sponsor should not wait until day 151 and ask the Service to pretend the deadline never existed.

Example: Missing Participant Consents

The approved correction requires the sponsor to:

• contact affected participants
• obtain specified consents
• revise administrative procedures.

Several participants cannot be located.

Day 120 arrives.

The sponsor has documented search efforts but cannot complete every action by day 150.

That is when the sponsor should request an extension.

The right record is:

timely action + documented obstacle + timely extension request.

VCP Protection Depends on Completing the Correction

The filing is not the relief.

The approval letter alone is not enough.

The practical sequence is:

disclose → IRS approves → sponsor completes → sponsor retains proof.

Skipping the completion step defeats the point.

Prevention Is Part of the Submission

IRS asks sponsors to describe changes in administrative procedures intended to prevent recurrence.^[1]

That makes VCP more than backward-looking restitution.

Example:

Failure:

bonuses excluded from match compensation.

Correction:

• missed match
• earnings.

Prevention:

• revised payroll code map
• annual plan-to-payroll compensation review
• dual approval for payroll code changes.

The IRS wants both.

A Corrective Deposit Alone Can Be Incomplete

Suppose sponsor discovers late enrollment.

It contributes:

$80,000

before VCP filing.

But the submission ignores:

• lost earnings
• missed match
• former employees
• ADP impact
• payroll entry-date control.

The fact that money was deposited does not establish full correction.

VCP review can expose those gaps.

Former Participants Still Matter

VCP uses the same restoration principle that governs EPCRS generally.

Full correction can require locating:

• former employees
• beneficiaries.

If a participant left years ago, the plan does not erase the correction obligation because current HR no longer has an active record.

That is one reason historical population work should begin before filing.

The IRS Generally Does Not Audit While VCP Is Pending

Current IRS guidance says that, except under unusual circumstances, the Service does not audit the plan while the VCP submission is under consideration.^[1]

That is useful procedural protection.

It is not permanent immunity.

It also does not convert a submission filed after examination has begun into a valid VCP case.

A Compliance Check Is Different From an Examination

IRS guidance distinguishes certain compliance checks from formal examination.^[8]

That distinction can matter because a compliance check may not cut off EPCRS correction in the same way an examination does.

Do not infer audit status from:

"we received something from the IRS."

Identify the actual IRS process.

Current Processing Can Take Time

The IRS maintains a live VCP submission-status page showing:

• preliminary completeness review
• unassigned inventory
• assignment to a specialist
• available secure communication methods.^[7]

Sponsors should not build a transaction closing date on the assumption that:

"IRS will approve this in 30 days."

Processing time is a business-planning variable.

A Complete Filing Can Reduce Avoidable Delay

The current IRS status guidance emphasizes complete submissions because they can:

• be screened more efficiently
• sometimes close on merit without full specialist development
• avoid back-and-forth document requests.^[7]

A well-organized filing cannot control IRS inventory.

It can avoid causing its own delay.

Example: $400,000 Plan

Plan assets:

$400,000

2026 regular user fee:

$2,000.^[2]

The sponsor has a multi-year employee exclusion error.

SCP eligibility is uncertain because:

• compliance procedures were poorly documented
• correction started late.

VCP can turn that uncertainty into a submitted case with a defined proposed correction and, if approved, written IRS agreement.

The fee is small compared with carrying qualification uncertainty indefinitely.

Example: $3 Million Plan

Net plan assets:

$3 million

2026 regular fee:

$3,500.^[2]

Correction requires:

$95,000

of participant restoration.

VCP fee as percentage of principal:

3.68%

But that ratio is irrelevant to the IRS fee rule.

The fee is asset-based.

Example: SCP May Be Available, Sale Is Pending

Sponsor identifies a compensation-definition failure.

Counsel believes SCP probably applies.

Buyer asks:

"Do you have IRS confirmation?"

SCP provides no IRS approval.

VCP can.

The decision becomes:

save $3,500 and retain interpretive risk

or:

pay $3,500 plus professional cost for formal IRS resolution.

Transaction context can make the second choice stronger.

Example: Sponsor Corrects Before Filing

Sponsor uses a novel correction method.

It makes all allocations.

Then files VCP.

IRS says:

method is not acceptable

and proposes a different approach.

The sponsor can now face:

• additional allocations
• reclassification
• amendment changes
• participant communication.

Correcting first did not save time.

It created rework.

Example: Sponsor Misses the 150-Day Deadline

Compliance statement date:

January 15

Day 150:

June 14

Sponsor completes final required corrective allocation:

June 25

No extension was requested.

Under current IRS guidance, the compliance statement can become invalid.^[8]

The sponsor may have to file again and pay again.

That is an avoidable failure.

VCP vs. SCP

The important distinction is certainty.

Not paperwork.

VCP vs. Audit CAP

A sponsor that knows about a difficult failure has more leverage before examination than after.

What a Strong VCP Submission Contains

Clear issue statement

One sentence per failure.

Example:

"The plan failed to include 18 eligible NHCEs on their required July 1, 2024 entry date."

Governing authority

Identify:

• plan provision
• Code/regulation
• relevant EPCRS correction rule.

Timeline

Show:

• when failure began
• when discovered
• whether it continues
• corrective actions already taken.

Affected population

Include:

• current employees
• former employees
• beneficiaries where relevant.

Correction calculation

Show:

• missed amount
• contribution source
• earnings
• testing effects.

Proposed method

Explain why the method is:

• reasonable
• appropriate
• consistent with EPCRS.

Prevention

Describe concrete administrative changes.

Requested tax relief

If applicable, state it explicitly and cite authority.

The goal is to remove questions before the reviewer has to ask them.

The ROIStreet VCP Decision Test

Use this sequence:

Identify the failure → determine whether a direct statutory correction route remains open → test SCP eligibility → decide whether sponsor-level certainty is enough → determine examination status → identify any novel correction method → consider anonymous pre-submission conference if eligible → calculate 2026 VCP user fee → build affected population and correction calculations → prepare Form 8950 + Pay.gov submission → disclose failures precisely → explain corrective and preventive actions → respond to IRS review → obtain written IRS approval → calendar 150-day completion deadline → complete every required action or request extension before expiration → retain proof with permanent plan records

The mistake to avoid is treating VCP as:

"pay a fee and the IRS forgives the error."

That is not what happens.

VCP is valuable because it converts a disputed or uncertain correction into a defined agreement with the IRS—provided the sponsor discloses the problem accurately and actually completes the agreed work.

Sources & References

1. Internal Revenue Service: Voluntary Correction Program — General Description — https://www.irs.gov/retirement-plans/voluntary-correction-program-general-description
2. Internal Revenue Service: Voluntary Correction Program Fees — https://www.irs.gov/retirement-plans/voluntary-correction-program-vcp-fees
3. Internal Revenue Service: About Form 8950 — https://www.irs.gov/forms-pubs/about-form-8950
4. Internal Revenue Service: Revenue Procedure 2021-30 — Employee Plans Compliance Resolution System — https://www.irs.gov/irb/2021-31_IRB
5. Internal Revenue Service: Internal Revenue Bulletin 2026-01 — https://www.irs.gov/irb/2026-01_IRB
6. Internal Revenue Service: Anonymous VCP Submissions — https://www.irs.gov/retirement-plans/anonymous-vcp-submissions
7. Internal Revenue Service: Voluntary Correction Program Submission Status — https://www.irs.gov/retirement-plans/voluntary-correction-program-vcp-submission-status
8. Internal Revenue Service: Voluntary Correction Program — Did You Complete Your Correction? — https://www.irs.gov/retirement-plans/voluntary-correction-program-did-you-complete-your-correction
9. Internal Revenue Service: Correcting Plan Errors — Fill in VCP Submission Documents — https://www.irs.gov/retirement-plans/correcting-plan-errors-fill-in-vcp-submission-documents

Educational Disclaimer

ROIStreet publishes educational content about retirement-plan qualification and correction. This article is not legal, tax, actuarial, fiduciary or plan-administration advice. VCP eligibility, filing strategy, correction method, tax-relief requests, user fees and completion obligations depend on the specific failure, examination status, plan assets, affected participants, current IRS guidance and the facts presented to the IRS.

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