IRS Form 14568 Guide: Model VCP Compliance Statement Rules

1. Introduction: What is Form 14568?

IRS Form 14568, titled Model VCP Compliance Statement, is an official document published by the Internal Revenue Service (IRS). It is governed by the Employee Plans (EP) office under the IRS Tax Exempt and Government Entities Division.

This form is used by employers and retirement plan sponsors participating in the Voluntary Correction Program (VCP), which is part of the broader Employee Plans Compliance Resolution System (EPCRS). Form 14568 serves as a standardized agreement framework where an employer identifies mistakes made in administering a retirement plan, proposes specific correction methods, and requests formal IRS approval to keep the plan tax-qualified.

2. Purpose of the Form: Why Does Form 14568 Exist?

Tax-qualified retirement plans—such as 401(k), 403(b), SEP, and SIMPLE IRA plans—enjoy substantial federal tax advantages. In exchange for these benefits, employers must follow complex statutory rules and strictly adhere to their written plan documents. If an employer makes an operational mistake or misses a mandatory legal amendment deadline, the entire retirement plan risks disqualification.

Form 14568 exists to provide an orderly, predictable process to fix these mistakes before the IRS discovers them during an audit. It solves major compliance problems by:

• Preventing Plan Disqualification: If a plan is disqualified, the trust loses its tax exemption, employers lose past deductions, and employees face immediate taxation on their vested account balances. Form 14568 avoids this catastrophic outcome.
• Standardizing the Correction Agreement: It provides a uniform template for plan sponsors to describe mistakes, explain retroactive corrections, and outline new administrative procedures to prevent future errors.
• Granting Binding Legal Protection: Once signed and approved by the IRS, the compliance statement becomes a binding agreement confirming that the IRS will not revoke the plan’s qualified status over the disclosed errors.

3. Who Needs to File This Form?

Form 14568 is filed by employers, business owners, and plan administrators known legally as “plan sponsors.” You need to use this form if:

• You sponsor a retirement plan (such as a 401(a), 401(k), 403(b), SEP IRA, or SIMPLE IRA) and identified errors that cannot be corrected without IRS approval.
• Your plan experienced operational failures (such as failing to follow plan terms, excluding eligible employees, or miscalculating employer matching contributions).
• Your plan experienced plan document failures (such as failing to adopt mandatory tax law amendments by legal deadlines).
• Your plan experienced demographic failures or participant loan errors that require specific retroactive plan amendments or IRS relief from deemed distributions.

4. Who Is Exempt / Not Required to File?

Not every retirement plan error requires a formal submission under Form 14568. Employers and individuals are exempt from filing this form under the following conditions:

• Self-Correction Program (SCP) Eligible Errors: Many insignificant operational errors, and certain significant errors corrected within statutory guidelines, can be corrected internally under EPCRS Self-Correction rules without notifying the IRS or paying a user fee.
• Plans Under Examination: If the IRS has already notified you that your retirement plan or company is under an Employee Plans examination (audit), you are disqualified from using VCP and Form 14568. Those issues must instead be resolved under Audit Closing Agreement Program (Audit CAP) terms.
• Individual Retirement Account Owners: Individual taxpayers managing personal Traditional or Roth IRAs do not use Form 14568; this form is strictly for employer-sponsored plans.
• Errors Involving Misuse of Plan Assets: Severe fiduciary breaches, such as the outright diversion or theft of plan assets for personal business use, cannot be resolved through Form 14568.

5. When to File: Deadlines and Frequency

Form 14568 is an event-based submission rather than an annual recurring tax return. You submit it only when you discover qualification failures that require formal IRS approval to correct.

Timing is critical because an employer is only eligible for the Voluntary Correction Program if the submission is made before the plan or sponsor receives verbal or written notice of an upcoming IRS audit. Once the IRS opens an examination, the opportunity to use Form 14568 is lost, and substantially higher sanction penalties apply. After the IRS approves Form 14568 and issues your compliance statement, you generally have 150 calendar days from the date of the statement to complete all corrective actions.

6. Where and How to File

Submitting Form 14568 is handled through an integrated digital process. Physical paper filings are no longer accepted for initial applications:

• Pay.gov Submission: Form 14568 is completed as a fillable PDF, merged with supporting schedules and attachments, and uploaded electronically through the federal Pay.gov website alongside IRS Form 8950 (Application for Voluntary Correction Program).
• User Fee Payment: The applicable VCP user fee—which is based on the total value of assets held in the retirement plan—must be paid electronically through Pay.gov at the time of submission.
• Supplemental Submissions: If the IRS specialist reviewing your case requests additional documentation, items are submitted electronically, via secure fax, or delivered to the designated IRS address as per instructions provided by the assigned agent.

7. Step-by-Step Instructions to Fill Form 14568

Form 14568 serves as the master model compliance document. It is frequently accompanied by one or more standardized schedules (Forms 14568-A through 14568-I) covering specific common failures. The table below summarizes the core sections of the master form.

Section	Section Title	Information Required
Header	Identifying Information	Plan name, Plan Sponsor EIN, and 3-digit Plan Number (must appear on every page).
Section I	Identification of Failures	Checkboxes identifying whether failures are documented on model schedules or separate attachments.
Section II	Description of Proposed Correction	Detailed explanation of how the plan will restore participants to the financial position they should have had.
Section III	Administrative Procedures	Clear description of updated internal controls designed to prevent the same mistakes from recurring.
Section IV	Enclosures & Verification	List of attached schedules, calculations, proposed amendments, and authorized signature.

Header: Plan and Sponsor Identification

Enter the legal name of the retirement plan, the plan sponsor’s nine-digit Employer Identification Number (EIN), and the three-digit plan sequence number (such as 001). Federal rules require this exact identifying information to appear on every single page of Form 14568 and all attached schedules.

Section I: Identification of Failures

Indicate whether you are using standardized Form 14568 schedules (Forms 14568-A through 14568-I) or customized narrative attachments. You will check specific boxes identifying the nature of the failures, such as missed amendment deadlines, excluded eligible employees, improper plan loans, or missed required minimum distributions.

Section II: Description of Proposed Method of Correction

In this section, explain the exact corrective actions you will take. Under EPCRS principles, the general correction rule is to restore both active and former participants to the financial position they would have occupied had the failure never occurred:

• Explain any corrective contributions the employer will make, such as Qualified Nonelective Contributions (QNECs).
• Detail how lost earnings were computed using actual plan investment performance or the Department of Labor calculator.
• Explain any retroactive plan amendments needed to conform the plan document to actual administrative operations.

Section III: Revision of Administrative Procedures

The IRS will not approve a compliance statement unless the employer proves it has implemented safeguards to prevent the mistake from happening again. You must provide a clear narrative explaining what internal processes, payroll checks, or third-party administrator (TPA) oversight mechanisms have been updated.

Section IV: Enclosures and Compliance Statement Acknowledgment

Confirm all attached schedules and documentation, including earnings calculation worksheets, board resolutions, or participant notices. Once reviewed and accepted by the IRS, the compliance statement is formally executed, binding both the sponsor and the government to the agreed-upon corrections.

8. Required Documents and Information Needed Before Filling

To successfully prepare Form 14568, you must assemble extensive plan and payroll records:

• The original plan document, adoption agreements, trust agreements, and all subsequent amendments.
• IRS favorable determination letters, opinion letters, or advisory letters previously issued to the plan.
• Relevant model schedules (such as Form 14568-B for late amendments or Form 14568-E for participant loan errors).
• Payroll ledgers, participant census files, and contribution records for the affected years.
• Detailed accounting spreadsheets showing individual correction calculations, including lost earnings calculations.
• Completed IRS Form 8950 (Application for Voluntary Correction Program) for electronic Pay.gov processing.
• A signed Form 2848 (Power of Attorney) if an ERISA attorney, CPA, or pension consultant is representing you.

9. Common Mistakes to Avoid

Submitting an incomplete or poorly organized Form 14568 can cause months of delays or rejection by the IRS Employee Plans division. Avoid these frequent errors:

• Altering the Standard Model Language: The IRS provides Form 14568 as a standardized model. Editing or deleting boilerplate legal text on the form or its schedules will result in processing delays or rejection.
• Omitting Header Details on Attachments: Every attachment, schedule, and calculation sheet must include the plan name, employer EIN, and plan number at the top.
• Failing to Explain Earnings Computations: When making corrective contributions to participant accounts, you cannot simply deposit flat amounts. You must document the specific interest rate or investment return used to calculate earnings.
• Vague Explanations for Prevention: Stating that your staff will “be more careful” does not satisfy Section III. You must describe concrete administrative workflows and automated payroll checks.
• Failing to Complete Corrections on Time: Once the IRS signs the compliance statement, you must complete all corrective distributions, contributions, and amendments within the 150-day window.

10. Penalties for Non-Filing or Errors

If you fail to correct retirement plan qualification failures through Form 14568 and the IRS uncovers the errors during an audit, the consequences are severe:

• Full Plan Disqualification: The plan’s tax-exempt trust status is revoked under Internal Revenue Code Section 501(a).
• Loss of Employer Deductions: The business can lose prior tax deductions claimed for plan contributions across all open tax years.
• Immediate Participant Taxation: All vested account balances become immediately taxable to plan participants as ordinary gross income, creating immense employee relations issues.
• Audit CAP Sanctions: Resolving failures under an IRS audit requires paying a negotiated monetary sanction under Audit CAP, which is significantly more expensive than the modest user fees paid under VCP.

11. Related Forms or Schedules

Form 14568 functions as the core of an interconnected family of VCP forms and model schedules:

• Form 8950: Application for Voluntary Correction Program (VCP) Submission.
• Form 8951: Additional User Fee Payment for Open VCP Request.
• Form 14568-A through 14568-I: Model VCP Schedules 1 through 9 (covering 403(b) document failures, nonamender failures, SEPs, SIMPLE IRAs, loan failures, eligibility failures, excess deferrals, RMD failures, and safe harbor amendments).
• Form 5500 / 5500-SF: Annual Return/Report of Employee Benefit Plan.
• Form 2848: Power of Attorney and Declaration of Representative.

12. Frequently Asked Questions (FAQs)

1. Can I use Form 14568 for any type of retirement plan?

Form 14568 can be used for most employer-sponsored qualified plans under Internal Revenue Code Section 401(a)—including 401(k), profit-sharing, and money purchase plans—as well as 403(b) plans, SEPs, and SIMPLE IRAs.

2. What is the difference between Self-Correction (SCP) and using Form 14568 (VCP)?

Self-Correction (SCP) allows employers to fix certain minor or timely identified errors internally without notifying the IRS or paying a fee. The Voluntary Correction Program (VCP) using Form 14568 requires a formal electronic application, payment of a user fee, and written approval from the IRS.

3. How long does the IRS take to review and approve Form 14568?

Once a complete package is uploaded to Pay.gov, typical processing times range between four and six months. Complex cases involving customized narratives or plan demographic testing issues may take longer.

4. Does submitting Form 14568 trigger an automatic IRS audit?

No. The IRS Employee Plans division treats VCP submissions as voluntary compliance efforts rather than audit flags. Making a submission does not automatically subject your business or plan to an examination.

5. What happens if I miss the 150-day deadline to finish corrections after approval?

If you anticipate that you cannot complete all participant payouts or asset transfers within 150 days, you must submit a written extension request explaining the delay to the IRS before the 150-day window expires.

6. Can I file Form 14568 anonymously?

While anonymous submissions were largely phased out under updated EPCRS guidelines, plan sponsors and their legal representatives can utilize the IRS VCP Pre-Submission Conference process to discuss unique or complex correction methods anonymously before submitting a formal application.

13. Conclusion: Key Takeaways

IRS Form 14568 is the primary legal tool employers use to correct retirement plan administration errors and preserve the tax-qualified status of their plans. By documenting plan failures, detailing equitable participant corrections, and adopting stronger administrative procedures, employers can successfully eliminate the risk of plan disqualification.

Because employee benefits law involves strict statutory requirements and intricate earnings calculations, plan sponsors should work closely with an experienced ERISA attorney, third-party administrator, or qualified retirement plan consultant when preparing Form 14568.