1. Introduction: What is Form 14568-F?

IRS Form 14568-F, officially titled Schedule 6 (Form 14568-F) – Model VCP Compliance Statement: Employer Eligibility Failure (401(k) and 403(b) Plans Only), is an official compliance document issued by the Internal Revenue Service (IRS). It is governed by Employee Plans (EP), a division within the IRS Tax Exempt and Government Entities (TE/GE) Division.

This form serves as an attachment to master Form 14568 (Model VCP Compliance Statement) under the IRS Voluntary Correction Program (VCP). It is used specifically when an organization or entity establishes and maintains a Section 401(k) or Section 403(b) retirement plan that it was not legally permitted to sponsor under the Internal Revenue Code.

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

Federal tax law strictly defines what types of entities are allowed to sponsor specific retirement plans. For example, Section 403(b) plans are restricted exclusively to Section 501(c)(3) tax-exempt charities and public educational institutions, while state and local governmental units are generally prohibited from maintaining 401(k) plans unless grandfathered prior to May 6, 1986.

When an ineligible employer establishes one of these plans, the entire arrangement violates federal tax law. Form 14568-F exists to resolve this fundamental structural problem without harming the innocent employees who participated in the plan:

Protecting Participant Tax Deferrals: Without an approved correction, all employee contributions and investment earnings would be immediately taxable as ordinary gross income. Form 14568-F grants relief so past contributions remain tax-deferred.
Establishing an Orderly Wind-Down: It provides a standardized framework requiring the employer to halt future contributions immediately while allowing existing participant funds to remain in the plan until normal distributable events occur.
Preserving Rollover Rights: Approval under this schedule ensures that when employees eventually leave the organization or retire, their distributions are treated as valid rollovers into IRAs or other qualified plans.

3. Who Needs to File This Form?

Form 14568-F is completed by employers, organizations, and plan administrators who discover that their entity had no legal authority to sponsor its existing 401(k) or 403(b) plan. You should file this form if you meet the following conditions:

You are an ineligible organization—such as a for-profit corporation, a 501(c)(4) social welfare organization, or a 501(c)(6) trade association—that mistakenly established a Section 403(b) tax-sheltered annuity plan.
You are a state or local government agency, municipality, or public body that established a Section 401(k) plan after May 6, 1986, without meeting statutory grandfathering rules.
You have identified this employer eligibility defect internally and wish to correct it voluntarily before receiving notice of an IRS examination.
You are submitting a formal Voluntary Correction Program filing via Pay.gov using IRS Form 8950 and master Form 14568.

4. Who Is Exempt / Not Required to File?

Form 14568-F applies exclusively to employer eligibility failures in 401(k) and 403(b) arrangements. Organizations and plans are exempt or not eligible to use this schedule in the following scenarios:

Legally Eligible Sponsors: 501(c)(3) nonprofits and public schools sponsoring 403(b) plans, as well as private business entities sponsoring 401(k) plans, are fully eligible and do not use this schedule.
Employee Eligibility Errors: If the employer is legally eligible to sponsor the plan, but mistakenly excluded or improperly enrolled specific employees, you must use other correction methods rather than Form 14568-F.
Other Plan Types: Sponsoring errors involving Simplified Employee Pensions (SEPs), SIMPLE IRAs, or Section 457(b) plans are governed by different rules and cannot be resolved on this form.
Plans Under IRS Examination: If the IRS has already notified the employer that the plan is under an Employee Plans audit, the Voluntary Correction Program is closed, and the failure must be handled through the Audit Closing Agreement Program (Audit CAP).

5. When to File: Deadlines and Frequency

Form 14568-F is an event-based submission rather than an annual tax filing. It is prepared and filed as soon as an employer discovers that it lacks the legal authority to maintain its retirement plan.

A critical timing requirement applies to this schedule: all contributions to the ineligible plan must cease no later than the date the VCP submission is filed. To obtain the favorable terms of the Voluntary Correction Program, the application must be submitted before the IRS initiates an audit of the employer or plan. Once the IRS issues an approved compliance statement, the employer must finalize all administrative transition steps within the standard 150-day implementation period.

6. Where and How to File

Form 14568-F cannot be submitted via regular paper mail for initial applications. It must be processed digitally through the federal government’s online payment and filing system:

Pay.gov Submission: Complete Form 14568-F as an attachment to master Form 14568. Merge these forms, organizing documents, and participant schedules into a single PDF package and upload it via Pay.gov alongside Form 8950 (Application for Voluntary Correction Program).
Electronic User Fee: Pay the mandatory VCP user fee on Pay.gov when submitting. The user fee is determined by the total net assets held in the ineligible plan.
Supplemental Records: If the assigned IRS Employee Plans specialist requests additional organizing charters or contribution records, submit them through secure electronic channels or deliver them to the designated IRS address as per instructions provided by the specialist.

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

Form 14568-F provides a standardized model agreement that documents the organization’s legal structure, confirms the cessation of contributions, and outlines asset preservation rules. The table below details its primary sections.

Section	Title	Required Information
Header	Plan & Sponsor Details	Plan name, Employer Identification Number (EIN), and 3-digit plan number (on every page).
Section I	Identification of Failures	Checkboxes identifying whether the error is an ineligible 401(k) or 403(b) plan, with entity tax status details.
Section II	Description of Proposed Correction	Confirmation of the date contributions ceased, commitment to hold assets until distributable events, and rollover treatment.
Section III	Administrative Procedures	Narrative describing updated legal review procedures to prevent establishing unauthorized benefit plans in the future.
Section IV	Enclosures	Checkboxes for attached plan documents, organizing charters, tax-exempt determination letters, and participant notices.

Header: Plan and Employer Information

Enter the complete legal name of the retirement plan, the plan sponsor’s nine-digit Employer Identification Number (EIN), and the three-digit plan number (such as 001). This exact header information must appear at the top of every page of Form 14568-F and all attached exhibits.

Section I: Identification of Failures

Select the specific type of employer eligibility failure that occurred:

Ineligible 403(b) Plan: Check this box if your organization sponsored a 403(b) plan but did not qualify as a 501(c)(3) tax-exempt organization or a public educational institution. You must describe your organization’s actual legal tax classification (such as a 501(c)(4), 501(c)(6), or taxable entity).
Ineligible 401(k) Plan: Check this box if your organization is a state or local government entity that adopted a 401(k) cash or deferred arrangement after May 6, 1986, without possessing statutory grandfathered status.

Section II: Description of Proposed Method of Correction

Confirm the standard correction requirements established by the IRS under EPCRS:

Provide the exact calendar date on which all employee salary deferrals, employer matching contributions, and nonelective contributions ceased. This date must be on or before the VCP filing date.
Affirm that all existing plan assets will remain in the trust, annuity contracts, or custodial accounts until distributed to participants upon legitimate distributable events (such as severance from employment, death, disability, or attainment of age 59½).
Acknowledge that for the period prior to the cessation date, the plan will be treated as an eligible plan for purposes of tax deferrals and participant rollover eligibility.

Section III: Revision of Administrative Procedures

Explain the internal changes and governance controls implemented by your organization to avoid similar errors in the future. For example, describe new requirements for outside ERISA legal counsel to review and approve all employee benefit arrangements prior to adoption by the board of directors.

Section IV: Enclosures and Attachments

Assemble and check off all supporting documentation, including the original plan document, current account balance statements, proof of entity classification (such as articles of organization or IRS determination letters), and copies of notifications provided to employees regarding the cessation of contributions.

8. Required Documents and Information Needed Before Filling

Before preparing Form 14568-F, compile the following corporate and employee benefit records:

The original plan document, adoption agreements, and all trust or custodial agreements.
Official corporate governance records, such as state incorporation articles, bylaws, or legislative charters establishing your entity.
IRS tax-exempt determination letters (if operating under a tax-exempt section other than 501(c)(3)).
Payroll and accounting records establishing the exact date all plan contributions were stopped.
A participant census showing total active and terminated accounts, along with total asset values.
Completed master Form 14568 and Form 8950.
A signed Form 2848 (Power of Attorney) if an ERISA attorney or qualified tax professional represents your organization.

9. Common Mistakes to Avoid

Errors on Form 14568-F can complicate an already delicate compliance situation. Avoid these critical mistakes:

Continuing Contributions After Filing: The most critical rule of Form 14568-F is that all contributions must halt on or before the VCP submission date. Continuing to deposit salary deferrals after filing invalidates the proposed correction.
Forcing Immediate Total Distributions: Employers often assume they must cash out all accounts and shut down the plan immediately. Forcing payouts without a statutory distributable event triggers immediate taxes for participants; funds must generally remain invested until an allowable event occurs.
Altering Model Language: The wording on Form 14568-F is pre-approved by the IRS. Deleting, striking through, or rewriting the boilerplate text will result in your application being rejected as a non-standard filing.
Confusing Employer with Employee Eligibility: Do not use this schedule if you mistakenly enrolled part-time workers or excluded full-time staff in an otherwise valid plan. Form 14568-F is strictly for when the employer was ineligible to sponsor the plan.
Failing to Notify Participants: While participants are protected from back taxes, you must provide clear written communication explaining that future contributions have ended and describing how their accounts will be maintained.

10. Penalties for Non-Filing or Errors

If an employer eligibility failure is ignored and subsequently uncovered during an IRS examination, the consequences are catastrophic for both the employer and employees:

Total Plan Invalidation: The plan is treated as completely non-qualified from inception.
Immediate Participant Taxation: All vested account balances across all years become immediately taxable to employees as ordinary income, creating enormous unexpected tax bills for workers.
Loss of Rollover Protection: Any past distributions rolled over into IRAs or other retirement plans are reclassified as ineligible distributions, subjecting participants to excess IRA contribution excise taxes under Section 4973.
Disallowed Employer Deductions: Taxable employers lose federal income tax deductions taken for company matching or nonelective contributions across all open tax years.
Severe Audit CAP Sanctions: Resolving an employer eligibility failure under an IRS audit requires paying a negotiated financial penalty under Audit CAP, which is drastically higher than standard VCP user fees.

11. Related Forms or Schedules

Form 14568-F operates within a broader framework of IRS retirement compliance documents:

Form 14568: Model VCP Compliance Statement (the master application).
Form 14568-A: Schedule 1 – Plan Document Failures for 403(b) Plans.
Form 14568-B: Schedule 2 – Nonamender Failures for 401(a) Plans.
Form 8950: Application for Voluntary Correction Program (VCP) Submission.
Form 8951: Additional User Fee Payment for Open VCP Request.
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. What is the difference between an employer eligibility failure and an employee eligibility failure?

An employer eligibility failure means the company or organization itself had no statutory right to sponsor the retirement plan (e.g., a for-profit company sponsoring a 403(b)). An employee eligibility failure means an eligible employer made a mistake in determining which workers could participate.

2. Who is legally permitted to sponsor a 403(b) plan?

Under Internal Revenue Code Section 403(b), only Section 501(c)(3) tax-exempt nonprofit organizations and public educational institutions (such as public school districts, state colleges, and universities) are legally authorized to sponsor 403(b) plans.

3. Can a governmental employer ever sponsor a 401(k) plan?

Generally, no. State and local governmental units are barred by federal law from maintaining 401(k) cash or deferred arrangements unless the plan was officially adopted prior to May 6, 1986. Most public employers must use Section 457(b) or 401(a) defined contribution plans instead.

4. Do employees have to withdraw their money immediately once Form 14568-F is filed?

No. Under standard EPCRS correction guidelines, existing assets must remain in the plan’s trust or custodial accounts until participants experience a legitimate distributable event, such as leaving the employer, reaching age 59½, becoming disabled, or passing away.

5. Are past employee contributions protected from income tax if Form 14568-F is approved?

Yes. That is the primary purpose of filing Form 14568-F. When the IRS executes the compliance statement, the plan is treated as an eligible plan for past years, ensuring employees are not taxed on their savings until they take distributions.

6. How much is the IRS user fee for filing Form 14568-F?

The VCP user fee is based on the total net assets held in the ineligible plan at the time of submission, typically ranging between $1,500 and $3,500, paid electronically via Pay.gov.

13. Conclusion: Key Takeaways

IRS Form 14568-F provides an essential, protective legal bridge for organizations that mistakenly established a 401(k) or 403(b) retirement plan without statutory authority. By utilizing this model schedule under the Voluntary Correction Program, employers can halt future unauthorized contributions, secure their employees’ accumulated savings, and eliminate the risk of retroactive tax penalties.

Because correcting an employer eligibility failure often requires terminating an ineligible plan and establishing a replacement retirement program (such as a 401(a) or 457(b) plan), plan sponsors should work closely with an experienced ERISA attorney, third-party administrator, or benefits consultant when preparing Form 14568-F.

IRS Form 14568-F Guide: Employer Eligibility Failure Rules