Contributing Author: Kristine Custodio Suero, Advanced Certified Paralegal

Administering a retirement plan comes with a host of responsibilities—and occasional errors are inevitable. Fortunately, the IRS offers several correction pathways under its Employee Plans Compliance Resolution System (EPCRS) to help plan sponsors preserve the tax-qualified status of their plans. Below, we've compiled answers to some of the most frequently asked questions related to the Self-Correction Program (SCP), Voluntary Correction Program (VCP), and Audit Closing Agreement Program (AuditCAP).

Whether you're a plan sponsor, third-party administrator, or benefits consultant, understanding these programs is essential—and partnering with experienced ERISA counsel can help you navigate the rules with confidence.

1. What is the IRS Self-Correction Program (SCP)?

• SCP allows plan sponsors to correct certain operational failures without IRS involvement or payment of a user fee.
• The error must be insignificant or corrected within a specified timeframe if significant.
• The plan must have established practices and procedures in place at the time of the failure—not just written documents.
• SCP does not apply to document failures or plan qualification issues that require formal IRS approval.

2. What types of errors can be corrected under SCP

• Missed elective deferrals (e.g., failing to implement salary deferrals)
• Incorrect employer matching contributions
• Improper exclusion of eligible employees
• Loan errors, if corrected promptly and appropriately
• Vesting and allocation mistakes

Tip: Operational failures are more likely to qualify for SCP if identified and corrected early.

3. When should a plan sponsor use the Voluntary Correction Program (VCP)?

• VCP is used for both operational and document failures that cannot be self-corrected.
• It requires a formal submission to the IRS, including a description of the error, proposed correction method, and compliance documentation.
• The plan must not be under audit at the time of submission.
• A user fee is required and based on plan asset size, with the current fee schedule ranging from $1,500 to $3,500.
• VCP offers the benefit of IRS approval and protection from plan disqualification.

4. What is the Audit Closing Agreement Program (AuditCAP), and when does it apply?

• AuditCAP applies when the IRS identifies a plan failure during an audit or examination.
• Unlike SCP or VCP, you cannot initiate this program voluntarily.
• The plan sponsor enters into a closing agreement with the IRS, agrees to correct the failure, and pays a negotiated sanction.
• Sanctions are based on facts and circumstances and are generally higher than VCP fees, but significantly lower than full plan disqualification penalties.
• Legal counsel is essential during an IRS audit to guide you through AuditCAP negotiations.

5. How can plan sponsors reduce the risk of noncompliance?

• Conduct regular compliance reviews—ideally mid-year and year-end.
• Coordinate closely with your third-party administrator and document provider.
• Maintain robust written procedures and actual practices for plan administration.
• Consult with ERISA attorneys to evaluate potential risks, correction options, and documentation strategy.

6. How can an ERISA attorney help with SCP, VCP, or AuditCAP?

• Evaluate whether an error qualifies for SCP or requires VCP submission.
• Prepare and review correction documentation, including calculations and participant notices.
• Draft and submit a comprehensive VCP application package to the IRS.
• Represent the plan sponsor during an IRS audit and help negotiate favorable outcomes under AuditCAP.
• Provide training and recommendations to prevent future errors.

Navigating the IRS correction programs requires technical knowledge, strategic planning, and timely action. Whether you're dealing with a one-time mistake or a recurring administrative error, the best first step is to seek experienced ERISA counsel to assess your options. Proactive correction not only helps you stay in compliance—it protects the integrity and tax-favored status of your retirement plan.

ERISA compliance is complex, but our experienced attorneys can help you navigate these rules and regulations to avoid costly penalties. Contact Schechter Benefits Law Group today to ensure your employee benefit plans meet all legal requirements and that you're doing all you can to fulfill your legal responsibilities.

*Nothing stated herein is to be construed as legal or tax advice and shall not form any attorney-client relationship. Each individual situation is unique. Please contact us and speak with one of our attorneys regarding your individual situation.