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February 14, 2024

By: Melanie N. Aska

On February 7, 2024, the IRS announced the second phase of its Pre-Examination Retirement Plan Compliance Program. As part of this pilot program, the IRS sends pre-examination letters to retirement plan sponsors notifying them that the IRS has selected their plans for an upcoming compliance examination (audit).

The IRS unveiled the first phase of this Program in June 2022. During the first phase, the IRS sent 100 pre-examination compliance letters to retirement plan sponsors, generating a 72% response rate.

According to the IRS, the goal of the Program is to reduce taxpayer burden, reduce the amount of time spent on retirement plan examinations, and encourage self-correction of plan mistakes. At the end of the second phase of the Program, the IRS will evaluate its effectiveness and determine if it should continue to be part of the IRS’s overall compliance strategy.

The pre-examination letters the IRS sends to retirement plan sponsors under the Program give them a 90-day window to review their plan’s document and operations to determine if they meet current tax law requirements. If the plan sponsor does not respond to the IRS within that 90-day window, the IRS will contact the plan sponsor to schedule a compliance examination.

If a plan sponsor reviews its retirement plan’s document and operations and finds mistakes, it may be able to self-correct them using the correction principles in the IRS’s Employee Plans Compliance Resolution System (EPCRS) guidance, currently set forth in Revenue Procedure 2021-30. The IRS will review the plan sponsor’s documentation and determine if the IRS agrees with the plan sponsor’s conclusion that it appropriately self-corrected any mistakes. The IRS will then issue a closing letter or conduct either a limited or full scope examination of the plan sponsor’s retirement plan.

On the other hand, if a plan sponsor reviews its retirement plan’s document and operations and finds mistakes that it cannot self-correct using EPCRS, then it can request a closing agreement with the IRS. The IRS will use the Voluntary Correction Program (VCP) fee structure to determine the sanction amount the plan sponsor will pay under the closing agreement, instead of the markedly higher sanctions the IRS assesses under its Audit Closing Agreement Program (Audit CAP), which otherwise governs when retirement plan mistakes are found after the IRS begins a plan examination. 

The Upshot: If you receive a pre-examination letter from the IRS about your retirement plan, promptly notify employee benefits counsel, review your plan’s documents and operations to find any mistakes, determine whether any mistakes you find may or may not be self-corrected, and respond to the IRS within the required 90-day window.

If you have any questions about this news alert, please contact Melanie N. Aska at or 617.457.4131.

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