The Internal Revenue Service recently announced a new pension compliance pilot program ahead of the review launched in June. If you are a plan sponsor, do not play the ostrich if you receive a pre-review retirement plan notice from the IRS. Failure to respond to the pre-review notice in a timely manner may result in higher legal, accounting and/or auditing fees and the imposition of greater penalties.
Under the new program, you have 90 days to self-verify the plan that is the subject of the screening notice and correct any document or operating errors. Any errors that you identify that cannot be self-corrected under Revenue Procedure 2021-30 (“EPCRS”) can be corrected by requesting a closing agreement.
If the IRS agrees with your corrective action, the fee structure under Rev. proc. 2021-30 for filings under its voluntary compliance program will be used to determine the penalty to be paid under the close-out agreement, thereby avoiding the more onerous fees of the audit close-out agreement program. If the IRS disagrees with your corrective action, or if you do not respond within the 90-day correction period, the IRS will conduct a review.