On February 2, 2022, the Treasury Inspector General for Tax Administration (“TIGTA”) released a report titled “Employee Plans Examination Quality Review Scores Have Declined, and Efforts to Identify Trends and Implement Corrective Actions Could Be Improved.”
As background, the IRS’s Tax Exempt and Government Entities Division’s Employee Plans (“EP”) examination program is responsible for ensuring that retirement plans comply with applicable Internal Revenue Code requirements. From fiscal years 2018 to 2020, the IRS audited over 17,000 retirement plans to determine whether the plans complied with legal requirements. Those audits were subject to a quality review process, to ensure that EP auditors adhere to procedures and to identify areas for improvement. TIGTA recently completed an audit of those quality reviews.
Per TIGTA’s report, “The overall objective of this audit was to determine whether the EP Examinations function is taking adequate corrective actions to address weaknesses identified during quality reviews.” TIGTA notes that “in recent years, this quality review process identified steep declines in the quality of the examinations. From FY 2018 to FY 2020, overall case quality scores for EP Examinations decreased by 23 percent. Scores declined for all three quality measures: Proper Identification, Development, and Resolution of Issues; Timeliness; and Communications…”
Overall, TIGTA recommends that EP implement additional review procedures for its auditors’ retirement plan examinations. That is intended to help ensure that EP examinations are more thoroughly performed with respect to a wide array of areas (e.g., identifying and addressing material issues; assessing compliance penalties within a reasonable timeframe).