IRS Newsletter Discusses Current Compliance Program for Retirement Plans:

On February 7, 2024, the IRS published its Employee Plans News newsletter to explain that the IRS has started the second phase of its pilot Pre-Examination Retirement Plan Compliance Program (the “Program”). Under the Program, the IRS notifies plan sponsors via a letter that their retirement plan has been selected.

The letter gives plan sponsors 90 days to review their plan’s document and operations, to determine if they meet current tax law requirements. If a plan sponsor does not respond within 90 days, the IRS will contact it to schedule a plan examination. Also, during a plan sponsor’s 90-day review period:

  • If compliance issues are discovered and they are eligible for the IRS’s Self-Correction Program, the IRS will review the plan sponsor’s documentation and determine if the plan sponsor appropriately self-corrected any issues. The IRS will then issue a closing letter or conduct either a limited or full-scope plan examination.
  • If compliance issues are discovered but they are not eligible for the Self-Correction Program, the plan sponsor can request a closing agreement. In that case, the IRS will use the Voluntary Correction Program fee structure to determine the sanction amount.

The newsletter goes on to state that during the Program’s first phase, 100 pre-exam compliance letters were mailed to plan sponsors. The 72% response rate indicates that “plan sponsors are eager to take advantage of this program.” Further, the IRS’s goal for the Program is to “reduce taxpayer burden, reduce the amount of time spent on retirement plan examinations and encourage self-correction.” The newsletter concludes by noting that the IRS will continue to evaluate the Program’s effectiveness and determine if it should continue to be part of the IRS’s prospective, overall compliance strategy.