IRS Webpage: Employee Plans Compliance Unit (EPCU)
The newest projects listed on the IRS’s Employee Plans Compliance Unit (EPCU) webpage are compliance checks that focus on data errors identified on Forms 5500 and 5330. The EPCU’s compliance check program involves contacting plan sponsors by letter to resolve recordkeeping, reporting, and other issues without an audit. (For a description of some past EPCU projects, see our Checkpoint article.) An EPCU compliance check differs from an audit in that the plan’s underlying books and records are not examined, and the plan does not lose access to certain IRS correction programs. Sponsors are instructed to respond to the EPCU’s request by the due date or request an extension, if needed, and to provide any clarifying documentation. Although there is no monetary penalty for not responding within the stated timeframe, failing to respond could result in a full-blown audit. When a project ends, the collected data is analyzed to help the IRS focus its compliance efforts. Here are highlights of the EPCU’s newest projects:
- Verification of Pension Feature Codes on Form 5500 Series. In a review of 2012 and later Forms 5500, 5500-SF, and 5500-EZ, the EPCU identified pension feature codes that were missing, inconsistent, or incomplete. To correct these errors, the EPCU is sending letters, accompanied by a list of the pension feature codes, to the sponsors of the identified plans and asking those sponsors to indicate which codes apply to their plans. The letters will include instructions on how to amend filings to correct the pension feature codes and any other missing or inaccurate information. (The EPCU’s letter may identify other errors which will also need to be corrected.)
- Final Form 5500 Series Filings Showing Year-End Assets. For this project, the EPCU identified Form 5500 series filings marked as “Final Return” that showed plan assets at the end of the plan year. (A filing should not be marked as a final return unless there are zero assets and zero participants at the end of the plan year.) Plan sponsors receiving a letter in connection with this project will be asked to clarify why the “Final Return” checkbox was selected.
- 401(k) Plans Reporting a Code § 4971 Excise Tax on Form 5330. The EPCU is sending letters to 401(k) plan sponsors that filed Form 5330 indicating that an excise tax under Code § 4971 was due. (The Code § 4971 excise tax applies only to retirement plans subject to the minimum funding requirements; those requirements do not apply to 401(k) plans.) Plan sponsors receiving a letter will be asked to confirm the type of plan (defined contribution or defined benefit), the correct plan number, the correct plan name, and the type of plan contributions (elective deferrals or employer contributions) to determine if an amended Form 5330 should be filed and, if a different excise tax was owed, whether the amount due differs from that reported on Form 5330.
EBIA Comment: In addition to resolving reporting errors on these and other filings, the goals of the EPCU program are to “educate plan sponsors, administrators and trustees about plan reporting and filing requirements, and increase voluntary compliance.” (See IRS webpage “Employee Plans Compliance Unit – General FAQs.”) Plan sponsors and administrators can avoid an EPCU compliance check by paying close attention to the accuracy and completeness of their Form 5500 and other filings. The EPCU webpage lists current, completed, and approved future compliance projects and provides links to final reports on completed projects, which plan sponsors and their advisors might find useful in their voluntary compliance efforts. For more information, see EBIA’s 401(k) Plans manual at Sections XXXI.E (“Completing the Form 5500”) and XXXII.B.14.c (“EPCU Compliance Check Program”).
Contributing Editors: EBIA Staff.