The IRS has eliminated the Anonymous VCP program effective December 31, 2021. See the latest revenue procedure issued for the Employee Plans Compliance Resolution System (EPCRS), Rev. Proc. 2021-30.
Anonymous VCP submissions, also called “John Doe” submissions, have long been an important way to submit corrections that seem less likely to be approved. For example, those with little, or no, documentation supporting the proposed correction. The anonymous submission withholds identifying information until the IRS and counsel negotiate an acceptable correction; only then is the identity of the plan sponsor revealed and the final compliance agreement issued.
If no acceptable outcome is reached, the submission can be withdrawn without identifying the plan sponsor. Compare this with a regular VCP, in which the IRS knows the sponsor’s identity from the outset and cannot “unsee” the facts disclosed in the submission.
Rev. Proc. 2021-30 provides for a new, alternative process effective January 1, 2022. The new process will be an anonymous, no-fee, pre-VCP conference, of rather limited utility. The main drawbacks of this new program are:
- The IRS has discretion to grant or deny the conference; and
- The IRS is not bound by anything said in the pre-VCP conference. Rather, a post-conference letter is issued confirming only that there had been a conference, with no confirmation as to what was discussed regarding the correction.
This pre-VCP conference removes the main advantage to the plan sponsor of the Anonymous VCP—the guarantee of a satisfactory correction. By leaving the IRS the option to change its position on the correction after the pre-submission conference, it provides a huge disincentive for plan sponsors to submit a correction under VCP except in the most standard of situations, and with the most conservative of correction methods.
For more on the changes to EPCRS, see our Fall 2021 newsletter.