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403(b) Plans: IRS Announces 2016 Priorities

In addition to the exempt organization priorities detailed in the previous article, the IRS also included its area of focus for next year related to 403(b) plans. Since the issuance of regulations governing 403(b) plans in 2007, retirement plans of tax-exempt entities have been provided deferential treatment by IRS examiners. The IRS goal is to equalize the regulation of these plans with 401(k) programs. In the clearest signal to date that the transition to equal treatment is nearly complete, the tax-exempt branch of the IRS has announced that part of its 2016 examination priorities will be on 403(b) and Section 457(b) plans.

The TE/GE priority guideline for 2016 notes that these plans “have been selected for increased attention because they have a historical pattern of non-compliance.” The guidelines further note that the IRS will provide its employees with specialized training for examinations throughout 2016.

Also promised in the guidelines is the expanded use of “compliance checks” by the Employee Plans Compliance Unit (EPCU). The EPCU sends these less formal communications to plan sponsors identifying potential issues that may need correction through the IRS voluntary compliance program. While not as ominous as a letter announcing a full examination of a plan or return, a compliance check requires a response, and the issues identified in the letter should be corrected voluntarily (either through an IRS submission or self-correction, if applicable). Ignoring a compliance check may lead to a full audit, where the lower sanctions under the voluntary correction program may not be available. Please contact us for a review of any correspondence received from the IRS.

For more information or questions, please contact Richard Green at or by phone at 844.4WINDES (844.494.6337).
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