In June 2022, the U.S. Internal Revenue Service (IRS) launched a pre-examination pilot program for retirement plans that could help employers avoid costly penalties. The program aims to reduce the burden of, and time spent on, retirement plan audits, which are typically a time-consuming endeavor for plan sponsors. The program ultimately should be good news for plan sponsors in terms of both financial penalties and, presumably, a more efficient audit process.
Under this program, the IRS will notify retirement plan sponsors that their plan will be subject to an upcoming audit. Plan sponsors will then have a 90-day window to review, identify, and—in certain circumstances—correct any plan document or operational compliance errors they discover. Plans that do not respond within the 90-day window will be subject to a full examination, so it is important for employers to quickly identify and address any issues.
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