The threat of an IRS audit can often send a Plan Sponsor into panic mode. This is especially the case for plans in the tax-exempt and government markets. For years these types of retirement plans went without many guidelines and were able to stay ‘under the radar.’ However, in the past 10 years a lot has changed for these retirement plans. New regulations from the IRS (including the upcoming 2020 deadline for the pre-approved prototype document) have Plan Sponsors wondering if they can pass an audit from the IRS if presented with one.

Here at ADMIN, we specialize in plans with a complex level of design, as well as plans who struggle with maintaining compliance. Through our years of experience, we have narrowed down the ‘hot buttons’ that a plan can face during an IRS audit. In this two-part series we will share our insights on what the IRS is looking for when auditing your plan and how you can ensure you past their test!


What it is: A plan document is a written legal document that defines the provisions of the retirement plan.

Why it’s important: The plan document acts as the guidelines for the retirement plan and the overall compliance of the plan is largely based on participants operating within the terms in the document. For years there weren’t many rules or regulations surrounding the plan documents for 403(b) retirement plans; however, that has since changed. These new rules have made it more difficult for plans to self-administer their retirement plan. The IRS has also set a deadline for their new 403(b) Pre-Approved Plan Prototype Document which has put the pressure on plans to revise their existing document by March of 2020.

TPA Assistance: A good TPA will be sure to design a plan document that works with the needs of your organization. Your plan document should define provisions while also ensuring added retirement benefits for your employees. For 403(b) plans facing the 2020 deadline, a TPA will be able to adopt the plan onto the new pre-approved prototype document smoothly and on time. (Please note: while a plan is not required to adopt the newpre-approved prototype document, not doing so will subject the plan to a meticulous inspection of the plan document in the event of an IRS audit. The pre-approved prototype document excuses a plan from this analysis.) A TPA will also be able to administer any amendments (IRS regulated or plan directed) to the existing plan document.

What it is: Universal Availability (UA) is a rule under the IRS that requires employers to let employees make elective deferrals (if they wish to do so) within the company’s 403(b) plan. The premise behind the rule is to ensure that all eligible employees are benefiting from the 403(b) Plan equally.

Why it’s important: Universal Availability is a requirement by the IRS; therefore, failure to provide this meaningful notice to your employees can result in a possible Plan or Operational failure of the IRS audit. It is important to note that most IRS audit failures are a result of a plan not complying with Universal Availability.

TPA Assistance: A valuable TPA will aid in the process of providing the meaningful notice to the employees by both reminding the Plan Sponsor when UA is due and in providing sample notifications that the Sponsor can use to distribute to their staff. For example: ADMIN Partners reminds Plan Sponsors twice throughout the year that UA is required and provides example notifications for them to utilize. ADMIN also provides plans with a (optional) checklist that we keep on file in the event the plan undergoes an IRS audit. (Sponsors are required to maintain proof of the notice provided to employees each year.)