This session was led by Ed Salyers, who worked over 30 years with the IRS before opening his CPA firm.
Attendees aware of his experience clearly appreciated his presentation, in which he explained how plan sponsors, administrators, and TPAs should respond if/when the IRS sends a pre-exam compliance letter stating that the plan has been selected for an audit. Ed’s sense of humor also contributed to his advice on how a plan audit should be handled—for example, that the IRS will not be “friendly” if there is not a proper response to the audit notice!
Key insights Salyers shared with attendees included:
- Under the IRS pilot exam program begun in June 2022, the pre-exam compliance letter will explain that the employer’s plan has been selected for audit.
- The employer (and/or the plan administrator) will have 90 days to review the plan document and actual plan operation, with the right to self-correct any failures found.
- If the employer does not respond to the IRS within the 90 days, the plan will be subject to a full audit.
Ed also summarized the type of information that auditors will look for in an audit, advising that employers should ensure that the plan in operation accurately reflects the plan documents. He also recommended that:
- Financial advisors should understand the audit procedures and offer help for the employer’s plan administrators in responding appropriately to the IRS.
- One should review the IRS website on plan administration and correcting operational errors—found at https://www.irs.gov/retirement-plans—as well as IRS Publication 5313, which summarizes the goals of the Tax-Exempt & Government Entities Office to help ensure proper plan administration; it is found at https://www.irs.gov/pub/irs-pdf/p5313.pdf.
The Bottom Line
Ed’s presentation provided meaningful info for the advisors and product provider representatives attending this workshop, to help them in their work with plan sponsor clients on compliance issues.
Edie Russo is a consultant with Equitable.
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