In its June 3, 2022, Employee Plan newsletter, the IRS announced a 90-day pre-examination compliance pilot program for retirement plans. Set to begin immediately, plan sponsors may receive a letter notifying them that their retirement plan has been selected for an upcoming examination.
Plan sponsors are given 90 days to review their plan documents and operation for compliance and correct errors. If mistakes are found, it may be possible to self-correct them using the IRS’ EPCRS (Employee Plans Compliance Resolution System), which includes the following elements:
The IRS states that mistakes in operating your retirement plan can often be self-corrected without filing a form with the IRS or paying a fee. Eligible operational failures include:
Document failures aren’t eligible for self-correction. A document failure occurs when you don’t have your plan document up-to-date or if your plan document doesn’t fully comply with the tax law.
If, during the review, mistakes are found that are not eligible for self-correction, a closing agreement can be requested. The IRS will use the Voluntary Correction Program fee structure to determine the sanction amount to be paid.
Upon reviewing your documentation, the IRS will determine whether it agrees with your conclusion. The IRS will conduct a limited or full-scope examination if it does not. If it does, a closing letter will be issued.
This pilot program aims to reduce the amount of time the IRS spends examining retirement plans. At the end of the pilot, the IRS will evaluate its effectiveness and determine if it should become part of its overall compliance strategy.
Mistakes can happen, so it's essential to monitor your plan proactively. Your retirement plan advisor is an excellent resource for helping you with plan compliance. Contact us with any questions about qualified retirement plans.
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