Certified Plan Sponsor Professional (CPSP) Practice Exam

Which IRS corrections program allows plan sponsors to fix plan failures identified during an audit?

1. Voluntary Correction Program (VCP)

2. Closing Agreement Program (CAP)

3. Self-Correction Program (SCP)

4. Audit Correction Program (ACP)

The correct answer is: Closing Agreement Program (CAP)

The Closing Agreement Program (CAP) is specifically designed for situations where plan failures are identified during an audit. This program allows plan sponsors to enter into a legally binding agreement with the IRS to rectify their plan issues while also providing assurance that they will be in compliance moving forward. The CAP is beneficial as it often affords plan sponsors the opportunity to correct significant failures without facing the potential penalties that might arise from non-compliance. The other programs, such as the Voluntary Correction Program (VCP) and the Self-Correction Program (SCP), are typically utilized for voluntary corrections that are identified before or outside an audit context, focusing on preemptive