IRS schedules another flight for pre-check compliance program
After the successful launch of a pre-examination retirement plan compliance program in 2022, IRS has opened a second phase. The program gives sponsors of plans selected for audit 90 days to review plan documents and operations for compliance with tax law. IRS intends this program to reduce the burden on plan sponsors and the time spent on retirement plan examinations.
How the program works. Under the program, IRS sends letters to plan sponsors selected for audit. A sponsor then has 90 days to review its plan for errors and respond to IRS. (Sponsors that don’t respond are scheduled for an IRS audit.) Sponsors can use IRS’s Employee Plans Compliance Resolution System (EPCRS) to self-correct any identified errors that would be eligible for self-correction outside of an audit. For other errors, the sponsor can request an IRS closing agreement, which may involve sanctions based on EPCRS’s Voluntary Compliance Program fee structure (generally $1,500–$3,500, depending on plan assets). IRS then reviews the sponsor’s documentation to determine if the sponsor’s conclusions and self-corrections (if any) were appropriate. After this review, the agency either issues a closing letter or conducts a limited or a full examination.
Ongoing evaluation of pilot. IRS initially said that once the pilot period ended, the agency would evaluate the program and decide whether to maintain it going forward. The agency reports that 72 of the 100 sponsors that received pre-examination letters responded, indicating to IRS that “plan sponsors are eager to take advantage of the program.” Instead of making a final decision on the program’s future, the agency has opted to offer a second phase of the pilot and will evaluate the program after that phase ends.
Related resources
Non-Mercer resources
- Employee Plan News (IRS, Feb. 7, 2024)
- EPCRS overview (IRS)