Compliance News | June 8, 2022
On June 3, 2022, the IRS announced a new pilot pre-audit program for retirement plans beginning this month. Under the program, the IRS will send letters to plans advising them that they have been selected for an examination and have 90 days to self-review the plan’s documentation and operation and make corrections. If the plan does not respond within the 90-day period, IRS will audit the plan.
The IRS currently has both a corrections program, the Employee Plan Compliance Resolution System (EPCRS), and an audit program. Once a plan is selected for audit, EPCRS is no longer available for correction. However, under the pilot program, which will begin this month, plans will be given 90 days after they receive a letter to address mistakes in plan documents and in operation.
EPCRS’s self-correction program will be available. If a mistake cannot be self-corrected, an IRS closing agreement under EPCRS will be available based on the voluntary compliance program (VCP) fees rather than the normal closing agreement fees.
If the plan does respond within 90 days, the IRS will review the submitted documentation, determine whether it agrees and enter into a closing agreement. If the IRS does not fully agree that appropriate corrections have been made, the IRS will conduct either a limited or full scope examination.
The IRS views the program as a way to reduce the taxpayer burden and the amount of time that the IRS spends on examinations. To date, the IRS has just issued an announcement of the pilot program but not provided full details.
Ninety days is a short amount of time in which to do a review. Plan sponsors may wish to do preliminary reviews in case they get a 90-day letter or become subject to a regular IRS examination. Segal can help plans do that review. We can also assist plans that get 90-day letters from the IRS.
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.
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