IRS Addresses its Upcoming Retirement Plan Audits:

In the June 3, 2022 edition of its Employee Plans News publication, the IRS announced that its Employee Plans division is piloting a “pre-examination retirement plan compliance program” beginning this month. Under the program, the IRS will notify selected plan sponsors by letter that their retirement plan has been selected for review. The letter will give each plan sponsor 90 days to review its plan document and operations and determine if they meet current tax law requirements. If the sponsor fails to respond to the letter within 90 days, the IRS will contact the plan sponsor to schedule an audit.

If the plan sponsor’s review reveals any mistakes in the plan’s documents or operations that the plan sponsor determines are eligible for self-correction under IRS Revenue Procedure 2021-30, the IRS will review applicable documentation and determine if the IRS agrees with the plan sponsor’s conclusion and if the plan sponsor appropriately self-corrected such mistakes. Then, the IRS will issue a closing letter or will conduct either a limited or full scope plan audit. If one or more mistakes are not eligible for self-correction, the plan sponsor will be permitted to request a closing agreement from the IRS. In that case, the IRS will use its Voluntary Correction Program fee structure to determine the sanction, rather than the more punitive fee structure under the Audit Closing Agreement Program.

The IRS states that “Our goal with this program is to reduce taxpayer burden and reduce the amount of time spent on retirement plan examinations. At the end of this pilot, we’ll evaluate its effectiveness and determine if it should continue to be part of our overall compliance strategy.”