IRS Unveils New Pre-Examination Compliance Pilot Program for Retirement Plans

Ever wished you could predict the future? Or at the very least, predict the timing of a retirement plan audit? Well, you may be in luck on your second wish.

Last Friday, the IRS Employee Plans division announced a new pilot program whereby it will notify retirement plan sponsors 90 days in advance that their plan has been selected for upcoming examination.  The pilot program has three key features:

Although it is only a pilot and not (yet) part of the IRS’s compliance program, for as long as it lasts, this pre-examination pilot program marks a potentially helpful new tool for plan sponsors to ensure tax-qualification compliance for retirement plans.

So, what should plan sponsors do next?  The ability to predict the future is valuable only to those who use the information to change their proverbial destiny.  Sponsors and administrators who receive a 90-day pre-examination notice should immediately work with their attorneys and other advisors to conduct a self-audit to identify any compliance issues and address them within the 90-day window.

Of course, given what is involved in conducting a detailed review, identifying errors, coordinating internally and then fully correcting the errors, the 90-day period may feel shorter than it is.  That being the case, it is a good idea for plan sponsors and administrators to consider working with their professionals to conduct self-audits on a periodic basis even in the absence of an impending audit.

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National Law Review, Volumess XII, Number 157