Late last month, the IRS issued a memo to its examiners regarding the process for handling information document requests (IDRs) in retirement plan audits. The new process, which was established in hopes of streamlining the examination process, identifies when to prepare, issue and follow-up on IDR requests.
In the past, the IRS and plan sponsors worked together to manage IDR response times and deadlines to accommodate unique circumstances and scheduling conflicts. But all that has changed. Moving forward, IDR deadlines will be triggered alongside the first audit notification letter. About 10 days later, plan sponsors can expect to receive a follow-up phone call.
As you can imagine, this new process is anticipated to be particularly frustrating to plan sponsors, who may have a hard time adhering to these new stricter guidelines, especially if aren’t entirely clear on the expectations and consequences on the line.
“These new procedures appear to be aimed at instilling more discipline into the examination process,” said Robert Toth, an attorney with Toth Law and Applied Pension Professionals, in a recent blog post. “The problem, as tends to be the problem with many such structured business process improvement efforts, is that-as good as they may appear to the designer on paper-they often leave little room for the actual business experience. Examinations can be difficult; data can be hard to find, subject to interpretation and dispute; people can be hard to find; business conditions can be difficult; and IDRs have been a dynamic tool used throughout the examination process to establish (or even disprove) an examiners position. Discretion and flexibility in the process is necessary, to both reward and to impose accountability.”
To learn more about the new process for handling IDRs in retirement plan audits or to learn about options that will protect plan sponsors from landing in this type of stressful situation, email the retirement plan services team at Rea & Associates.
By Paul McEwan, CPA, MTax, AIFA (New Philadelphia office)
Check out these articles for more helpful retirement plan insight:
When Fiduciaries Fail To Put Participants First, The Legal System Takes Notice