IRS examinations are an extremely important aspect of retirement plans. They can be an expensive, time consuming process, so any changes to make the process easier on the plan sponsors and still ensure plan compliance is vital information. The IRS recently announced a new pilot program under which retirement plan sponsors will be given 90-days notice that their plan has been selected for examination which they may be able to largely avoid by taking certain steps. The new pilot program according to the IRS in the following statement will, “reduce taxpayer burden and reduce the amount of time spent on retirement plan examinations,”

Here are some key features of this pilot program.

Notification Changes

There is an announced change to the notification process to plan sponsors. Under the new pilot program, 90 days before an IRS examination begins, the IRS will notify plan sponsors by letter that their retirement plan has been selected for examination. This notice letter from the IRS triggers a 90-day review period during which plan sponsors may review their plan document and operations to confirm compliance with current tax law requirements.

Which plans does this apply to?

There is a variety of retirement plans and each can have their own issues arise in an examination. For example, In defined contribution plans, the IRS is focusing on code section 415(c) limitation. We suspect that other issues and types of plans will be part of the pilot program, but it is not yet clear if the program will be limited to only certain plans or issues.

Self Correction

The pilot program will allow plan sponsors to identify errors. Then any identified errors may be self-corrected, if eligible, using the principles set forth in the Employee Plans Compliance Resolution System (“EPCRS”), Revenue Procedure 2021-30.

For additional details regarding The IRS’s New Pre-Examination Pilot Program, please click the link below.

We will keep you updated as more information is released!