On June 3, the IRS Employee Plans function announced it is piloting a pre-examination retirement plan compliance program. Under this program, the IRS will notify a retirement plan sponsor by letter that its plan has been selected for an upcoming examination. The sponsor will be given a 90-day window to review its plan’s document and operations to determine if they meet current tax law requirements. Any mistakes revealed during the review can then be self-corrected by the sponsor using the voluntary correction program (VCP) under the IRS Employee Plans Compliance Resolution System (EPCRS).
If a plan sponsor cannot self-correct a mistake, it can request a closing agreement from the IRS to settle the issue. The sanction amount the sponsor would need to pay under the closing agreement would be determined using the VCP fee structure, which currently has a maximum user fee of $3,500. VCP fees are generally significantly lower than sanctions imposed under an IRS audit, so plan sponsors that receive a pre-examination letter would likely benefit from participating in the pilot program correction opportunity.
The IRS will review the sponsor’s documentation to determine whether it agrees with the sponsor’s conclusions and that any defects have been “appropriately corrected.” The IRS will then issue a closing letter or conduct either a limited-scope or a full-scope examination.
A sponsor that doesn’t respond within 90 days can expect an IRS examination.
| Title | File Type | File Size |
|---|---|---|
| Insider July 2022 | .2 MB |
