The Internal Revenue Service’s Employee Plans function is testing a new pre-exam retirement plan compliance program, starting this month, to shorten the time it takes for exams.
The IRS said in an email Friday that it will notify plan sponsors by letter if their retirement plan is selected for upcoming review. The letter will give the plan sponsor a 90-day window to review the document and their plan’s operations and see if they meet current tax law requirements. If a plan sponsor does not respond within 90 days, the IRS will then contact them to schedule an examination.
Pension plan sponsors will have the opportunity to correct any errors themselves. If the review reveals errors in plan documents or operations, they may be able to correct the errors themselves using IRS correction principles. voluntary compliance program (EPCRS), described in Revenue Procedure 2021-30.
“If you find errors on your exam that aren’t eligible to be self-corrected, you can request a closure agreement,” the IRS said. “We will use the voluntary correction program fee structure to determine the amount of penalty you pay under a closing agreement. »
The IRS said it would review the plan documentation and determine whether it agreed with the proponent’s conclusions and appropriately self-corrected any errors. It will then issue a closure letter or perform a limited or full review.
“Our goal with this program is to reduce the burden on taxpayers and reduce the time spent on pension plan reviews,” the IRS said. “At the end of this pilot project, we will assess its effectiveness and determine whether it should continue to be part of our overall compliance strategy.”