On the heels of the Department of Labor’s (DOL) Audit Quality Study report issued May of 2015, the Internal Revenue Service (IRS) is forming the Employee Plans Audit Team (EPTA) whose responsibility will be to review internal compliance controls for large employee-sponsored retirement plans. The IRS defines a large plan as those plans having at least 2,500 participants.
The increase in compliance reviews in 2016 is a result of what the IRS calls a “historical pattern of non-compliance.” While large plans comprise a small portion of total employer-sponsored plans, large plans account for a significant percentage of total participants and assets in all plans, approximately 60% and 70%, respectively. On average, the EPTA will review approximately100 plans per year. The EPTA has not indicated how many it will review as part of its increased focus.
Large plan sponsors aren’t the only ones under increased scrutiny - 403(b) and 457(b) as well as multiemployer plans will also be subject to further review. The EPTA will limit its review to internal plan compliance controls. Upon the results of its review, the EPTA will determine if any further audit is required. Plan sponsors should not ignore a compliance review, as it may lead to a full audit.
Additionally, the DOL and IRS announced that they will form a joint partnership in which they will examine Form 5500 filings for the 2011 plan year to determine if there were any late filings or plans that didn’t file.
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