In June 2022, the Internal Revenue Service announced a new pilot pre-examination retirement plan compliance program.
So, what exactly does this mean? If you are a plan sponsor, now is the time to get up to speed on what this new pilot pre-examination retirement plan compliance program means – and figure out what response is necessary.
Basically, the program will send notice to plan sponsors via a letter letting them know their retirement plan was selected for examination.
And plan sponsors will need to respond to a pre-examination notice, should you receive one, or face fees for an audit (or other sanctions).
The new program allows for 90 days to conduct a self-audit of the plan – meaning its plan document and operations will need to be reviewed to see if they meet current tax law requirements.
If there isn’t a response, the IRS will reach out to schedule an exam.
In the review process, if the plan sponsor finds mistakes in the plan document or operations, there is a possibility to self-correct those via the Employee Plans Compliance Resolution System, or EPCRS.
Can’t self-correct the errors? The plan sponsor does have options, including requesting a closing agreement.
The IRS has said it will use the Voluntary Correction Program fee structure when determining the sanction amount under a closing agreement.
Finally, the IRS has said it will review documentation from plan sponsors to determine if it agrees with conclusions. The IRS will also ensure that mistakes were appropriately self-corrected.
At the end of the process, the IRS will send a closing letter or conduct either a limited or full-scope examination.
Once the pilot program ends, the IRS will evaluate it to determine effectiveness and see if it should become a part of the agency’s overall compliance strategy.
At the end of this pilot, the IRS says that it will evaluate its effectiveness and determine if the program should continue to be part of its overall compliance strategy.
Do you still have questions about retirement planning options, or how your small business can participate?
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