IRS to Pilot Retirement Plan Compliance Program
The IRS recently announced that beginning this month, its Employee Plans division will be pilot-testing a new pre-examination retirement plan compliance program in an effort to reduce the amount of time needed for exams.
The IRS will notify plan sponsors by letter if their plan is selected for an examination. The letter will allow the sponsor a 90-day period to review their plan’s document and operations to determine if they meet current tax law requirements. If a sponsor does not respond within 90 days, the IRS will contact them to schedule an exam.
The IRS stated that if the review reveals mistakes in the plan’s documents or operations, the sponsor may be able to self-correct the mistakes using correction principles in the IRS’s voluntary compliance program (EPCRS), described in Revenue Procedure 2021-30. If the sponsor finds mistakes that are not eligible to be self-corrected, they can request a closing agreement. The IRS will use the Voluntary Correction Program fee structure to determine the sanction amount to be paid under a closing agreement. Then, the IRS will review the plan’s documentation and determine whether it agrees with the sponsor’s conclusions and that it appropriately self-corrected any mistakes. It will then issue a closing letter or conduct a limited or full-scope examination.