The audit CAP differs from the Free Correction Program (SCP) and the Voluntary Correction Program (VCP), since this program is initiated as a result of the IRS, which finds the errors in qualifying the plan by a planaudit, not the sponsor of the plan that finds the errors. The Internal Revenue Service manages the Employment Plan Compliance Resolution System (EPCRS) to enable and enable plan sponsors to correct most non-compliance cases themselves in some way. Most of the time, the prescribed corrective action puts the participants concerned in the position where they would have put themselves in danger if the mistake had not been made. EPCRS supports three core programs The Employee Plan Compliance Resolution System (EPCRS) was implemented as a means for plan sponsors to take corrective action to avoid the tax consequences of disqualification from the plan. One of the three components of EPCRS is the Closed Audit Program (CAP). As part of this program, the plan sponsor agrees to correct the failure of the qualification, pay a penalty, and sign a closing agreement with the IRS. The IRS offers many self-correction programs and QPS can help you determine which one fits your situation. Below you will find links to the most common planning errors and links to the various programs offered: the conclusion agreement is an agreement between the IRS and the sponsor of the plan, which is mandatory for the periods specified for the tax matters mentioned in the agreement. Depending on the nature of the error(s), the IRS will discuss with the plan sponsor the adequacy of the plan`s existing administrative procedures. If the existing administrative procedures are not sufficient to implement the plan in accordance with the applicable requirements of the Code, the closure agreement may be subject to the implementation of those procedures.
Plan sponsors may be reluctant to document errors, even if they are properly corrected under the SCP. However, the documentation of the error and the nature of the correction show the ability of a plan sponsor to detect and correct an error as part of the plan and will likely prove useful for the independent annual review of the plan, if necessary, and for any IRS audit activity. A plan sponsor who does not apply to the IRS, but whose retirement plan has encountered significant issues discovered by the IRS during the review or application process for the letter of inquiry, is entitled, as part of the audit correction program, to obtain the tax benefits associated with properly maintained pension plans. . . .