IRS Employee Plans News (June 3, 2022)
Available at https://www.irs.gov/retirement-plans/employee-plans-news
The IRS has announced a pre-examination compliance program for qualified retirement plans, including 401(k) plans. Under this pilot program, which begins this month, sponsors of plans that have been selected for an upcoming IRS examination will be notified by letter. The plan sponsor then will have 90 days to review its plan documents and operations for compliance with Code requirements and respond to the IRS.
Mistakes discovered during the plan sponsor’s review may be eligible for self-correction using the Employee Plans Compliance Resolution System (EPCRS) (see our Checkpoint article). For mistakes that are not eligible for self-correction, the plan sponsor may request a closing agreement, which will require payment of a sanction amount determined using the Voluntary Correction Program fee structure. The IRS will determine if it agrees with the plan sponsor’s conclusions and that mistakes were appropriately self-corrected and will then issue a closing letter or conduct a limited- or full-scope examination. The IRS will evaluate the pilot program’s effectiveness to determine whether the program should continue to be part of its overall compliance strategy.
EBIA Comment: Plan sponsors will likely appreciate the opportunity to self-correct and potentially avoid a full IRS examination. Those that receive a pre-examination letter should be prepared to undertake an internal review promptly, because 90 days can go by quickly. If no response is received within 90 days, the IRS will schedule an examination of the plan. For more information, see EBIA’s 401(k) Plans manual at Sections XXXII.B (“IRS Examinations”) and XXXV (“Correcting Plan Mistakes: IRS’s EPCRS”).
Contributing Editors: EBIA Staff.