On February 7, 2024, the IRS announced it would continue its Pre-Examination Retirement Plan Compliance Program pilot with the Pre-Examination Compliance Pilot 2.0. The pilot program aims to enhance tax compliance for retirement plans by allowing plan sponsors to identify and address issues before their retirement plans are subject to a full-scale examination.

If selected for the pilot program, plan sponsors will receive a notice from the IRS that their retirement plan has been chosen for an examination and that, if they choose to respond, they have 90 days to perform an internal review to determine whether the retirement plan’s documents and operations meet current tax requirements. The plan sponsor will then present their findings in response to the IRS and the IRS will determine whether a full-scale or limited examination is still warranted. The initial Pre-Examination Compliance Program resulted in a 72% response rate from plan sponsors.

In the event a plan sponsor’s internal review reveals an issue in the retirement plan’s documents or operations that is eligible for correction through the Employee Plans Compliance Resolution System (EPCRS), the plan sponsor may make such corrections through either the self-correction program of the EPCRS, which does not incur fees from the IRS, or the voluntary compliance program of the EPCRS, which is subject to the voluntary correction program fee structure. Additionally, if an issue is revealed that is not eligible for correction through the EPCRS, the plan sponsor may still submit a request for a closing agreement to the IRS, and the IRS will use the voluntary correction program’s fee structure to determine the amount owed under the closing agreement, which may result in considerable cost savings when compared to fees and penalties assessed in a full-scale examination that reveals the same issue.

With the continued rollout of the Pre-Examination Retirement Plan Compliance Program, the IRS aims to collaborate with plan sponsors to address discrepancies early, streamline the examination process, and reduce the taxpayer burden resulting from full-scale examinations of retirement plans.

Bottom Line: If you or your organization receives notice of an audit of your retirement plan by the IRS and is provided the opportunity to participate in the Pre-Examination Retirement Plan Compliance Program, expediently conducting an internal review and replying to the notice within the 90-day window could save your organization both time and money.

For more information or any questions regarding plan compliance and operations please contact Matt Secrist or Amelia Trefz.

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Photo of Amelia Trefz Amelia Trefz

Amelia is an associate in Taft’s Indianapolis office and focuses her practice on executive compensation and employee benefits. She has a wide breadth of experience in mergers & acquisitions, negotiating and drafting various commercial contracts, private equity transactions, employment law compliance and executive…

Amelia is an associate in Taft’s Indianapolis office and focuses her practice on executive compensation and employee benefits. She has a wide breadth of experience in mergers & acquisitions, negotiating and drafting various commercial contracts, private equity transactions, employment law compliance and executive compensation matters.

Prior to joining Taft, Amelia was a transactional associate at a well-known New York City firm where she worked with clients clients on complex legal issues related to employment, securities and employee equity, IRS and DOL audits, privacy and confidentiality arrangements, and investigations arising from compensation and employee benefit plans.

Amelia earned her J.D. from Vanderbilt University Law School and her bachelor’s degree, with honors, in marketing from Indiana University. While Amelia was in law school, she was a legal intern for the U.S. Department of Housing and Urban Development in Nashville, TN, where she worked closely with the TN Chief Counsel on legal matters, financial transactions, multifamily insured mortgages and changes in ownership.

Photo of Matthew A. Secrist Matthew A. Secrist

Matthew focuses his practice on employee benefits and executive compensation matters. He is experienced in a wide range of employee benefits matters, including tax qualified retirement plans (401(k) plans, pension plans, employee stock ownership plans (“ESOPs”), etc.), nonqualified deferred compensation plans and arrangements…

Matthew focuses his practice on employee benefits and executive compensation matters. He is experienced in a wide range of employee benefits matters, including tax qualified retirement plans (401(k) plans, pension plans, employee stock ownership plans (“ESOPs”), etc.), nonqualified deferred compensation plans and arrangements, welfare benefit plans, COBRA, HIPAA, and Affordable Care Act issues. Matthew also advises clients regarding compliance with Internal Revenue Code Sections 280G and 409A. His executive compensation experience includes employee fringe benefit plans, stock option plans, supplemental executive retirement plans (SERPs), employment agreements, severance plans, and various other forms of incentive compensation arrangements.

In addition to assisting employers with day-to-day employee benefits-related matters, Matthew has guided employers through cases where the employer participated in a distressed multiple employer welfare arrangement (MEWA) where a court appoints a receiver/independent fiduciary to oversee plan liquidation and payment of employee medical claims. Matthew also counsels clients on employee benefit matters in employer bankruptcies.

Matthew advises tax-exempt entities from formation to termination, and represents clients in controversy proceedings before the IRS and the Department of Labor.