In the Internal Revenue Service (IRS) Tax Exempt and Government Entities FY 2018 Work Plan, the agency revealed efforts it will be making next year to help sponsors achieve compliance for their employee retirement plans.
The IRS’ Employee Plans (EP) unit will provide online guidance to the public about practices that facilitate the quick closure of voluntary compliance program (VCP) applications—the expectation being that more taxpayers/practitioners will use this information to perfect their applications before submission. Additionally, the EP will focus efforts on analyzing issue and failure trends, to enhance its knowledge management program and to refine outreach and other communications on areas of noncompliance.
The knowledge management program includes issue snapshots and audit tools. The IRS says planned topics include issues involving:
- qualification requirements for defined contribution (DC) church plans;
- the application of new regulations regarding qualified nonelective and qualified matching contributions;
- the availability of single-sum distribution options;
- the use of all three segment rates to credit interest in a cash balance plan; and
- the treatment of excess contributions in simplified employee pension (SEP) plans.
Compliance examinations will include:
- plans that have transferred their assets or liabilities to another plan through a merger or acquisition;
- plans that failed to comply with the gateway test or the exception under Section 1.401(a)(4)-8(b) of the regulations, that failed both the actual deferral percentage (ADP) and actual contribution percentage (ACP) tests, that failed to properly provide timely notice to participants, and/or that failed to provide the required safe harbor contribution to all eligible participants;
- plans that failed to satisfy the minimum age and/or service requirements, that met statutory requirements in form but failed eligibility in operation, and/or that allowed ineligible participant(s) to participate;
- plans that failed to make required distributions under Internal Revenue Code (IRC) Section 401(a)(9), that failed to distribute per plan terms (either in timing or form), and/or that failed to distribute the correct benefit amount;
- plans that failed to properly value all assets at fair market value and/or that failed to properly reflect all plan assets in the name of the trust (e.g., real estate investments);
- plans that failed to satisfy IRC Section 411(b) accrual rules;
- plans that made erroneous allocations of contributions and/or forfeitures due to the use of an incorrect definition of compensation and/or that failed to make all matching contributions per plan terms; and
- plans that failed to withhold the proper amount of elective deferrals per plan terms.
The IRS says it will continue to pursue referrals and claims.
In addition, the agency listed a number of compliance checks that sponsors need to keep in mind. Those include:
- plans with partial terminations;
- plans with nonparticipant loans;
- IRC Section 403(b) plans;
- IRC Section 457(b) plans with excess deferrals;
- SEP plans with required minimum distribution failures; and
- SIMPLE IRA [savings incentive match plan for employees individual retirement account] plans sponsored by more than 100 employees.