Certified Plan Sponsor Professional (CPSP) Practice Exam

What corrections program allows for plan corrections without fees if done within the correction period?

1. Voluntary Correction Program (VCP)

2. Self-Correction Program (SCP)

3. Closing Agreement Program (CAP)

4. Qualified Plan Correction Program (QPCP)

The correct answer is: Self-Correction Program (SCP)

The Self-Correction Program (SCP) is designed to allow plan sponsors to correct certain operational failures without the need to pay any fees, provided that the corrections are made within the specified correction period. This program is particularly beneficial as it encourages plan sponsors to proactively address and rectify issues to maintain compliance with IRS regulations. Under this program, plan sponsors do not need to apply to the IRS, which streamlines the correction process and alleviates the financial burden associated with rectifying mistakes. The key advantage of the SCP is that it allows for a more flexible and cost-effective approach to compliance, as it enables plan sponsors to identify and correct errors independently before they escalate into larger issues. The other options, while related to correction programs, are structured differently. The Voluntary Correction Program (VCP) typically involves submitting correction plans to the IRS and may incur fees. The Closing Agreement Program (CAP) is used for significant violations and generally involves negotiation with the IRS, which also may incur fees and is less favorable for minor corrections. Lastly, the Qualified Plan Correction Program (QPCP) is not a recognized IRS program, further distinguishing the clarity and acceptance of the Self-Correction Program.