In September, the Tax Exempt/Government Entity division of the IRS announced their 2018 compliance program. Their “compliance strategies” for examining retirement plans during the next year target plans with the following attributes:
- Mergers/Consolidations. Plans with transferred assets due to a merger or acquisition.
- Discrimination. Plans that have failed the “gateway” test or the ADP (elective deferrals) or ACP (matching) nondiscrimination tests.
- Disclosure. Plans that fail to provide timely notices to employees, including a safe harbor notice.
- Safe Harbor. Plans that failed to provide the required safe harbor contribution to all eligible participants.
- Coverage. Plans that failed to satisfy minimum age and/or service requirements, met the requirements in their document, but failed in operation of the plan, or plans that allowed ineligible employees to participate.
- Distributions. Plans that failed to make required minimum distributions, plans that permitted improper hardship withdrawals or that distribute an incorrect benefit amount.
- Contributions. Plans that made erroneous allocations of contributions or improper use of forfeitures due to utilization of an incorrect definition of compensation. Also, plans that failed to make matching contributions per the plan terms.
- Trust Investments. Small plans that failed to properly value all assets at fair market value and/or failed to properly register plans in the name of the trust.
- Compensation. Plans that failed to properly allocate contributions and forfeitures due to using an incorrect definition of compensation.
- Elective Deferrals. Plans that failed to withhold the proper amount of elective deferrals per participant elections.
- Nonprofit Plans. 403(b) plans will be examined for compliance with Universal Availability and plans with participants that have utilized the special 15-year catch-up contribution. Also, Section 457(b) plans with excess deferrals.
In addition to the above issues, the IRS indicated that they will extensively use “Compliance Checks” targeting 403(b) and 457(b) plans, plans with partial terminations and plans with non-participant loans. These information requests require only a mailed-in response but can result in an expanded audit. If you have any concerns over your plan’s compliance with any of these audit issues, please contact our office.
For questions or more information, please contact Richard Green at firstname.lastname@example.org or 844.4WINDES.