News Archive

"What triggers an IRS audit of a retirement plan? ... Initial steps when an audit notice is received.... What employers can expect during an IRS audit.... Preparing for an audit before it begins.... Common missteps employers should avoid.... Key takeaways for employers facing an IRS audit."  MORE >>

73 pages. "The Department's primary activities during a lapse in appropriations generally will include work for agencies funded by resources other than the annual appropriations ... EBSA would cease all operations not detailed [on page 10] unless funded via previous years appropriations. Among the specific activities that would cease are our regulatory and research activities, audits, compliance assistance, and IT support not dedicated to excepted activities."  MORE >>

"According to IRS records, 25,386 employees separated, took a DRP offer, or used some other incentive to leave. Another 294 employees were sent termination notices due to RIF actions. These departures represent 25 percent of the IRS's [total] workforce ... [A]pproximately 27 percent of tax examiners separated, while 26 percent of revenue agents separated.... Business Units affected by the separations [include]: 569 employees, or 25%, of the Tax Exempt & Government Entities (TE/GE) unit."  MORE >>

"Self-audits can help employee benefit plans avoid potential fines and costly corrections while also ensuring that they are paying benefits in accordance with their governing documents. These audits may be more attractive to plans following the passage of SECURE 2.0, which contains provisions that incentivize retirement plans to identify and correct errors."  MORE >>

"Employee Health Insurance Expense of Small Employers. For taxable years beginning in 2025, the dollar amount in effect under Section 45R(d)(3)(B) is $33,300....

"Cafeteria Plans. For taxable years beginning in 2025, the dollar limitation under Section 125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements is $3,300. If the cafeteria plan permits the carryover of unused amounts, the maximum carryover amount is $660....

"Qualified Transportation Fringe Benefit. For taxable years beginning in 2025, the monthly limitation under Section 132(f)(2)(A) regarding the aggregate fringe benefit exclusion 13 amount for transportation in a commuter highway vehicle and any transit pass is $325. The monthly limitation under Section 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $325....

"Adoption Assistance Programs. For taxable years beginning in 2025, under Section 137(a)(2), the amount that can be excluded from an employee's gross income for the adoption of a child with special needs is $17,280. For taxable years beginning in 2025, under Section 137(b)(1) the maximum amount that can be excluded from an employee's gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for adoptions by the employee is $17,280....

"Medical Savings Accounts. [1] Self-only coverage. For taxable years beginning in 2025, the term 'high deductible health plan' as defined in Section 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,850 and not more than $4,300, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $5,700. [2] Family coverage. For taxable years beginning in 2025, the term 'high deductible health plan' means, for family coverage, a health plan that has an annual deductible that is not less than $5,700 and not more than $8,550, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $10,500."  MORE >>

Jul. 30, 2024. "Audit tips: [1] Determine if the plan permits catch-up contributions. [2] Determine if there is a plan-imposed limit on elective deferrals. [3] Review contributions made to the plan to determine if the limitations imposed by IRC Section 401(a)(30), IRC Section 415(c), and/or the plan's provisions have been exceeded by any participants. [4] Review the ADP test to determine the limit for HCEs. [5] If any of the 'applicable limits' have been exceeded, determine if the participants who made the additional elective deferrals are age 50 or older by the end of the calendar year. [6] Review payroll records to ensure the catch-up dollar limitation has not been exceeded."  MORE >>

23 pages, rev. Mar. 20, 2024. " Issues that arise when examining NQDC include the timing of income inclusion for the employee or service provider, the timing of the deduction for the employer or service recipient, and when deferred amounts are subject to employment taxes."

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"The IRS Employee Plans function has started the second phase of the Pre-Examination Retirement Plan Compliance Program pilot. As a part of this program, plan sponsors are notified by letter that their retirement plan was selected for an upcoming examination.... During the first phase of this program, 100 pre-exam compliance letters were mailed to plan sponsors which resulted in a 72% response rate, indicating plan sponsors are eager to take advantage of this program."

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"While each investigation may be unique and certain techniques will not work in all situations, there are several steps that can be taken to mitigate the burden.... [Establish] a strong rapport with the DOL investigator.... [T]he DOL has shown willingness to work collaboratively to resolve any issues.... The plan sponsor's ability to document efforts will lead to a more expeditious resolution."

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"[1] Regularly update and ensure plan operations are in compliance with current regulations and best practices to remediate areas that might be flagged during an investigation.... [2] Maintain thorough and meticulous records of all plan activities, decisions and rationale.... [3] Ensure that relevant parties are well-trained and updated on the latest in regulations, investigative processes and industry best practices ... [4] Implement robust risk mitigation practices[.]"  MORE >>

"The [DOL] has denied that it planned to increase investigative efforts targeted at brokerage windows following the release last year of a compliance assistance bulletin [which implied] that investigations would extend to plans that offer cryptocurrency through a brokerage window."  MORE >>

"Education and the Workforce Committee Chairwoman Virginia Foxx (R-NC) and Health, Employment, Labor, and Pensions Subcommittee Chairman Bob Good (R-VA) sent a letter to Acting Secretary of Labor Julie Su raising concerns over [EBSA] ... Foxx and Good write: 'Disturbing reports from stakeholders indicate that EBSA is failing to conduct its enforcement in a timely manner, creating unacceptable burdens for retirement plan sponsors and negatively impacting retirement savers, retirees, and their families.' "

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"The Employee Plans Examination Process Guide clarifies the steps in the examination process and introduces resources for retirement plan compliance.... A general explanation of the EP Examination process from the initial contact through conclusion. It explains general examination techniques and procedures used to conduct examinations of qualified retirement plans." [Includes links to relevant IRS publications and forms.]

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"A response to the IRS must be sent, and appropriate action must be taken, within the 90-day window.  Not all errors are eligible to be self-corrected under the principles of ECPRS. Closing agreements reached under the 90-day pre-examination compliance program will include sanctions determined according to the VCP fee structure, which are likely to be significantly less than equivalent Audit CAP sanctions."

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"An investigation by the DOL is a demanding and unwelcome surprise for most plan sponsors. The blueprint for navigating the ordeal may be found in the compliance questions [described in this article]. If you minimize investigation triggers and chart your way to compliance in advance, using the best practices [described], you are much more likely to weather an investigation unscathed."  MORE >>

"The new program gives plan sponsors a 90-day 'heads up' that the IRS intends to examine their retirement plan.... Those who have been through a plan compliance correction know that 90 days is not a lot of time to design and execute a correction procedure -- and with the IRS pilot program, much of that time may be spent reviewing plan documents and operations. It's not clear whether an extension of time to complete the correction is available under the pilot program."  MORE >>

"Like all pilot programs, the IRS will evaluate the program's effectiveness and determine whether it will be a permanent fixture of its compliance strategy. So is this new pre-examination compliance program a good thing or a bad thing for plan sponsors? Will the IRS use this to expand its audit abilities by having plan sponsors do its work for them, or will the program end up reducing the odds of a plan being subject to a full scope audit that could drag on for months or longer?"

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"Before the IRS implemented this pilot program, self-correction was only available to plans under audit in limited circumstances. Plans under audit were not eligible to correct under the VCP program. Thus, the program gives employers an additional chance to identify operational errors and self-correct them after the plan has been targeted for audit."

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"This article discusses nine areas of focus for DOL plan fiduciary investigations that may affect plan service providers, trustees and plan administrators. Plan fiduciaries and their service providers may want to consider a self-review of their ERISA compliance, especially with respect to these nine areas, before investigators come knocking on their door."

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"This presents a potentially valuable opportunity to correct errors not normally eligible for self-correction during an audit at a reduced price, as Audit CAP fees can be significantly higher than the VCP fees (with VCP fees capped at $3,500)."

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"It's not clear what factors the IRS will consider when determining whether to conduct a limited or full scope audit following a plan sponsor's response. However, it stands to reason that a plan sponsor's efforts at good faith compliance with the correction requirements may serve to limit the scope because typically the IRS wishes to promote self-correction efforts."

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"Under the pilot [Pre-Examination Compliance] program, the IRS advises the plan sponsor that it has 90 days to review the plan's compliance.... One of [this firm's] third party administrator clients has already received such a letter from one of their plan sponsors ... The letter specifies the primary issue that the IRS is interested in reviewing ... [but] clearly notes that the sponsor should be reviewing 'any other issues that exist.'... [The] best use of this 90-day window is to act quickly to get someone in to pre-examine the plan for issues that the IRS would discover in an audit if one were to take place, and to propose remedial action if anything untoward is found."  MORE >>

"The pilot program has three key features: [1] Advance notice of an upcoming audit ... [2] 90-Day review period to self-correct errors ... [3] Reduced fees for errors not eligible for self-correction."

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"Although the IRS announcement is not specific, it appears that the pilot program will apply to IRS examinations of both 401(a) and 403(b) retirement plans. The IRS announcement does not state whether all or only some retirement plans selected for audit will be offered the pre-examination pilot program."  MORE >>

"The PBGC's Standard Terminations Q&A states that plans with a participant count of more than 1,050 are selected for audit. Plans with less than 1,050 participants may be randomly selected for audit. Further, plans may be selected for audit if the PBGC has reason to believe that there is a problem or if all plan assets were distributed without filing a Standard Termination Notice (PBGC Form 500)."

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