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The New IRS Pre-Examination Retirement Plan Compliance Program

On June 3, 2022, the IRS announced a pilot pre-examination retirement plan compliance program beginning in June 2022. Under the pilot program, the IRS will notify a qualified retirement plan sponsor by letter that their retirement plan has been selected for an upcoming examination.

The retirement plan sponsor has 90 days to review retirement plan documents and operations for compliance with Code requirements and respond to the IRS. A retirement plan sponsor that receives a letter notifying of an upcoming IRS examination should strongly consider taking advantage of the IRS’s pilot program. If the retirement plan sponsor has questions, a name and phone number for the person at the IRS to contact will be provided in the letter. If the retirement plan sponsor does not respond within the 90-day window, the IRS will contact the retirement plan sponsor to schedule an examination of the retirement plan.

To take advantage of the program, the retirement plan sponsor must provide the IRS with information showing either compliance or correction. The retirement plan sponsor’s response should show one (or more, if applicable) of the following:

  • The retirement plan is fully compliant with the issue the IRS has raised
  • The retirement plan was not compliant, but the issue is being or has been corrected
  • The retirement plan sponsor has identified and has corrected or is proposing to correct issues other than those raised by the IRS

The IRS will review the information. If the IRS agrees with the retirement plan sponsor’s assertion that the retirement plan is compliant with the issue raised or that full and proper self-correction is possible (and has been completed or is in process), the IRS will issue a closing letter with no further contact. For mistakes that are not eligible for self-correction, the retirement plan sponsor may request a closing agreement, which will require payment of a sanction amount determined using the Voluntary Correction Program (VCP) fee structure.

If, however, the IRS disagrees with the correction method, the retirement plan sponsor has requested a closing agreement in relation to the identified issue (i.e., self-correction is not permitted), or the retirement plan sponsor has identified other compliance issues, the IRS will determine whether to move forward with the examination (either on a full or limited scope).  

The IRS’s stated goal with the pilot program is to reduce taxpayer burden and reduce the amount of time spent by retirement plan sponsors and the IRS on retirement plan examinations. At the end of the pilot program, the IRS intends to evaluate the pilot pre-examination retirement plan program’s effectiveness and determine if the program should continue to be part of the IRS’s overall compliance strategy.

Seeking more information about whether or not your retirement plan operations and documents adhere to IRS Code requirements? Connect with experienced retirement plan consultants and actuaries at Wakins Ross to learn more about our retirement plan services.

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