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:

  • Advance Notice of an Upcoming Audit: Ninety days in advance of starting examinations, the IRS will notify plan sponsors by letter that their retirement plans have been selected for an upcoming audit. It is unclear from the announcement whether this 90-day review period will apply to all retirement plan audits (including those occasioned by a referral from another agency, like the Department of Labor), or only to retirement plans randomly selected for audit.
  • 90-Day Review Period to Self-Correct Errors: Plan sponsors are encouraged to use the 90-day period to review their plan document and operations to confirm compliance with current tax-qualification rules. Plan document and operational errors identified during this 90-day period, if eligible, may be self-corrected by the plan sponsor using the principles of the IRS’s voluntary compliance program set forth in Employee Plans Compliance Resolution System (EPCRS).  The IRS will review any proposed self-correction and documentation to confirm that it agrees with the resolution.  The IRS will then issue a closing letter or conduct a limited or full scope examination.
  • Reduced Fees for Errors Not Eligible for Self-Correction: If, within the 90-day period, a plan sponsor identifies errors that are not eligible for self-correction, it can request a closing agreement from the IRS.  In that process, the IRS will apply the VCP fee structure to determine the sanction amount, rather than the normal Audit CAP fees that would otherwise apply to errors identified in an IRS examination.  Because Audit CAP fees are far more unpredictable and can be significantly higher than the VCP fees, this pilot program provides a valuable opportunity for plan sponsors to get in front of costly errors not eligible for self-correction.

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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Photo of Robert Projansky Robert Projansky

Robert M. Projansky is a partner in the Employee Benefits & Executive Compensation Group and is currently a member of the Firm’s Executive Committee.

Rob has a broad practice advising both multiemployer and single employer clients on all issues related to the legal…

Robert M. Projansky is a partner in the Employee Benefits & Executive Compensation Group and is currently a member of the Firm’s Executive Committee.

Rob has a broad practice advising both multiemployer and single employer clients on all issues related to the legal compliance and tax-qualification of ERISA-covered pension and welfare plans. Rob’s clients include the largest and highest-profile U.S. media and entertainment industry clients, as well as a broad range of Fortune 500 companies.

In the multiemployer context, he serves as counsel to the boards of trustees of a number of large and small funds and frequently assists clients in addressing issues related to the funding of defined benefit pension plans, including zone status, benefit suspensions, special financial assistance and withdrawal liability. He also advises these clients on healthcare compliance, cybersecurity and government investigations. In addition, his practice includes advising corporate clients on their responsibilities related to multiemployer plans, with particular expertise on the impact of multiemployer and collectively bargained plans in corporate transactions.

Rob has extensive experience advising corporate clients regarding general compliance issues and fiduciary compliance matters, including plan asset and prohibited transaction issues. He also has addressed a myriad of issues related to complex plan investments, including negotiation of separately managed and collective investment vehicles for both traditional and alternative investments such as hedge funds, private equity funds and fund-of-funds vehicles.

Rob is described in Chambers USA as “incredibly smart and creative, and a really effective, zealous advocate” who “adroitly communicates complicated ERISA matters to clients in understandable language and well-timed levity.”  He is a widely sought after speaker on topics related to employee benefits, fiduciary, cybersecurity and government investigations and speaks each year at the annual conference and various other conferences sponsored by the International Foundation of Employee Benefit Plans, the largest educational organization in the employee benefits industry. Rob currently serves as one of the nine Advisory Directors on the Board of Directors of the International Foundation.

Photo of Jennifer Rigterink Jennifer Rigterink

Jennifer Rigterink is senior counsel in the Labor Department and a member of the Employee Benefits & Executive Compensation Group.

Jennifer focuses on a diverse array of tax and ERISA issues impacting employee benefits.  Her wide-ranging practice encompasses qualified retirement plans and non-qualified…

Jennifer Rigterink is senior counsel in the Labor Department and a member of the Employee Benefits & Executive Compensation Group.

Jennifer focuses on a diverse array of tax and ERISA issues impacting employee benefits.  Her wide-ranging practice encompasses qualified retirement plans and non-qualified arrangements, health and welfare benefits, and fringe benefit programs.  She counsels single-employer and multiemployer clients on matters pertaining to plan administration, design and qualification, as well as regulatory, legislative and legal compliance.

In recent years, Jennifer has advised employers and plan sponsors with fiduciary and governance matters applicable to defined benefit plans and pension de-risking activities, including lump sum window programs, annuity purchases, and pension plan terminations.

Jennifer frequently counsels clients on health and welfare arrangements, with a particular focus on all matters relating to family building and reproductive health care benefits.  Her experience also includes working with employers and plan sponsors on mental health parity compliance issues.

Prior to joining Proskauer, Jennifer clerked for Judge Jacques L. Wiener, Jr., in the United States Court of Appeals for the Fifth Circuit and Judge Yvette Kane in the United States District Court for the Middle District of Pennsylvania.