The Employee Plans Office of the Internal Revenue Service (the “IRS”) announced a new pre-examination program for retirement plans to begin as of June 2022. The pilot program is designed to reduce the amount of time and resources the IRS expends on plan audits, while affording plan sponsors the opportunity to identify and correct errors.
Under the program, the IRS will send plan sponsors 90-day advance notice that their retirement plan has been selected for examination. The plan sponsor is permitted 90 days to self-audit its plan documents and operations. Failures identified by the plan sponsor may be self-corrected using the Employee Plans Compliance Resolution System (“EPCRS”). If a failure is ineligible for self-correction under EPCRS, the plan sponsor can request a closing agreement from the IRS. The IRS will apply the Voluntary Correction Program fee schedule with respect to this review, which can be more favorable than the fees under the IRS Audit Closing Agreement Program.
The plan sponsor must report the findings of its self-audit to the IRS. Based on its review of the plan sponsor’s conclusions, the IRS will issue a closing letter or conduct a limited or full scope examination. Failure to answer the 90-day advance notice will trigger an examination.
More information about the pre-examination pilot program can be found here.