Enforcement, Pre-Approved Plans Among IRS 2016 Priorities

The Employee Plans unit will be issuing more compliance checks and reviewing submissions for pre-approved plan documents.

In an announcement about the Internal Revenue Service (IRS) Tax Exempt and Government Entities (TE/GE) Division priorities, the IRS says it anticipates starting several new compliance check projects in fiscal year 2016.

The Employee Plans (EP) unit will focus resources into specialty program casework, focusing on EP Team Audit (EPTA)/Large Case, multiemployer plans, and Internal Revenue Code Section 403(b) and 457(b) plans. The IRS says these areas have been selected for increased attention because they have a historical pattern of non-compliance and also allow for greater coverage of the retirement plan participant universe. The remaining resources will be applied towards cash balance plans, 401(k) plans, and employee stock ownership plans (ESOPs).

According to the announcement EP will continue to select various plan types (profit sharing, money purchase, 401(k), defined benefit) from within its Risk Assessment program, while continuing to pursue taxpayer and interagency referrals, reported funding deficiencies, and non-bank trustee investigations. Additional project work will be supplemented by the Learn, Educate, Self-correct, Enforce (LESE) program, the Individual Retirement Arrangement (SEPs, SARSEPs, SIMPLEs) program, and the Form 5500-EZ (one participant plan) program.

EP will also use the Employee Plans Compliance Unit (EPCU) to identify areas with the greatest potential for non-compliance in plan operation and form. The IRS says that through compliance checks, the EPCU can establish a greater presence in the retirement plan community in a manner that reduces the cost to the IRS, while limiting the burden of each taxpayer contact (see “Understanding the IRS Employee Plans Compliance Unit“).The agency anticipates starting several new compliance check projects in 2016, based on analytical reviews of current data, past projects, law changes, and recently released guidance.

NEXT: Plan document reviews


In 2016, the EP Determinations unit will continue work on individually-designed and pre-approved plans. The agency says it anticipates greater than 24,000 individually-designed plan case receipts and greater than 1,500 defined benefit pre-approved plans. This is in addition to the 403(b) pre-approved plan submissions that were received in mid-2015. Some people in the 403(b) industry expect the IRS to issue approvals for 403(b) plans in 2016, while others say they will more likely come in 2017.

The IRS says managing inventory will be challenging due to anticipated above-normal receipts and the need to review lead plans for two pre-approved plan programs.

The IRS expanded its pre-approved plans program to include defined benefit plans with cash balance plan features and defined contribution plans with employee stock ownership plan (ESOP) features. It also extended to October 30, 2015, the deadline for submitting on-cycle applications for opinion and advisory letters for pre-approved defined benefit plans for the plans’ second six-year remedial amendment cycle. 

In addition, April 30, 2016, is the deadline for employers using pre-approved retirement plan documents to sign an updated version of their 401(k), profit-sharing or other defined contribution retirement plans.    

In an announcement in which the agency said it needs to more efficiently direct its limited resources, the IRS announced that effective January 1, 2017, the scope of the determination letter program for individually designed plans will be limited to initial plan qualification and qualification upon plan termination. However, at least one industry group ha asked the IRS to reconsider closing the program for large plans.