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Great news for plan sponsors! Effective June 2022, the IRS is launching a pilot program that will allow plan sponsors a chance to avoid costly audit sanctions. The program allows plan sponsors to find and correct plan errors in advance of an IRS audit. As outlined in the June 3, 2022 IRS announcement, the pilot program should work something like this:
• The IRS will send the plan sponsor a letter that it was se lected for examination and give the employer 90 days to conduct a self-audit. The letter will identify one or more areas that the IRS is focused on (including specific review procedures for that issue) and also direct the sponsor to review other plan documentation and operations to find plan compliance issues.
• If a plan sponsor finds an error, it may correct the error using principles set forth in the IRS Employee Plans Compliance Resolution System (EPCRS).
• Regardless of whether an error is discovered, the plan sponsor will respond to the IRS within 90 days and provide information regarding the issue identified and its other review procedures.
• The IRS will review the documentation submitted and can choose to: (1) close the examination, (2) conduct a limited-scope audit, or (3) open a full-scope audit of the plan.
The pilot program is designed to reduce the burdens of IRS examinations and encourage plan corrections and compliance.
If you receive a letter from the IRS, contact your TPA and ERISA attorney as soon as possible. The 90-day review period will pass very quickly, so time is of the essence—you’ll want to use every day possible to review the plan and respond to ensure you avoid a broader audit and, if needed, take advantage of the correction opportunities. Your plan partners are here to help, so reach out quickly!