IRS Updates Information About Retirement Plan Examinations

Two updated publications from the IRS discuss the employee plans examination process and appeal procedures.

The Internal Revenue Service (IRS) has updated Publication 1-EP, “Understanding the Employee Plans Examination Process,” and Publication 1020, “Appeal Procedures Employee Plans Examinations.”

In “Understanding the Employee Plans Examination Process,” the agency discusses how retirement plans may be selected for examination and what areas may be reviewed. According to the publication, the most common areas of review include:

  • Eligibility, participation and coverage—Are eligible employees properly participating?
  • Vesting—Have service and vesting been properly credited?
  • Discrimination—Do contributions, benefits, rights or features improperly favor highly compensated employees?
  • Top-heavy requirements—Have minimum contributions and benefits, and accelerated vesting been provided?
  • Contribution and benefit limits—Are contributions and benefits within applicable limits?
  • Funding and deductions—Are contributions correct and timely made, and are deductions within applicable limits?
  • Distributions—Are distributions correctly calculated, properly made, and timely and accurately reported?
  • Trust activities—Is the trust operated for the exclusive benefit of participants and according to fiduciary standards?
  • Plan and trust documents—Does the form of the plan and trust meet the tax law?
  • Returns and reports—Were federal returns and reports timely and accurately filed?

The publication also identifies the steps in the examination process and the correction programs available through the IRS.

In “Appeal Procedures Employee Plans Examinations,” the IRS explains what plan sponsors can do if they disagree with a proposed disqualification of their qualified retirement plan by the agency, as well as what plan sponsors must do if they agree to a proposed plan disqualification.