IRS Pilots Pre-examination Retirement Plan Compliance Program

The IRS on June 3 announced that it is piloting a pre-examination retirement plan compliance program beginning in June 2022. 

This program will notify a plan sponsor by letter that their retirement plan was selected for an upcoming examination. The letter will give a plan sponsor a 90-day window to review its plan document and operations to determine if they meet current tax law requirements. 

If a recipient of the letter does not respond within 90 days, the IRS says it will contact the recipient to schedule an exam. 

If a Plan Sponsor Finds Mistakes 

If a plan sponsor discovers in their review that mistakes were made in the plan’s documents or operations, the IRS reminds that it may be possible for the plan sponsor to self-correct those mistakes through the Employee Plans Compliance Resolution System (EPCRS) and as described in Revenue Procedure 2021-30.

If a plan sponsor finds mistakes during its review that cannot be self-corrected, the plan sponsor can request a closing agreement. The IRS notes that it will use the Voluntary Correction Program fee structure to determine the sanction amount to be paid under a closing agreement. 

IRS Actions

The IRS says that it will review documentation and determine if it agrees with a plan sponsor’s conclusions and whether any mistakes were appropriately self-corrected. It will then issue a closing letter or conduct either a limited or full scope examination. 

At the end of this pilot, the IRS says that it will evaluate its effectiveness and determine if the program should continue to be part of its overall compliance strategy.