Benefitsblog

Plan Information or Pre-Audit Preparation Packets?

As part of a pilot program, the IRS is providing Plan Information Packets to businesses that have adopted an IRA-based retirement plan "in order to promote a better understanding of the requirements for these plans." Three types of IRA-based plans have been selected for this pilot program:

• SIMPLE IRAs
• SEP IRAs
• SARSEP IRAs

Using employee and employer tax information to determine probable IRA-based plan sponsors, plan information packets will be provided to "100 probable SIMPLE IRA plan sponsors in the greater Los Angeles Area" and "100 probable SARSEP sponsors in the greater Boston Area." In addition, the Service will be distributing plan information packets on SEPs.

The packets will include:

• A contact letter telling each recipient how they were selected to receive the information, what is enclosed and how to get further information.
• A checklist developed especially for SIMPLE IRA plans.
• Publication 4224, Retirement Plan Correction Programs brochure.
• A postage-paid Postcard asking for anonymous feedback on the information packet and information that would make plan operations easier.

(The foregoing links are links to information in the SIMPLE IRA packet. You can access the SEP IRA packet here and the SARSEP IRA packet here.) The IRS is urging business owners to review the checklists and to correct errors under the Employee Plans Compliance Resolution System ("EPCRS").

Note: It is nice to think of the IRS as "helping" employers in this program since there does seem to be a big push for the IRS to provide training and guidance to employers. However, being "selected" to receive an information packet in this program likely brings little comfort to employers. Employers should, with the help of their advisers as needed, carefully review the checklists enclosed in the packets and make sure that their plans are in compliance. After attending the Mid-Atlantic Pension Liaison Group Meeting in Philadelphia in October where the IRS emphasized its audit focus and specifically mentioned how it intends to audit SARSEPs, one might tend to think that these packets should, instead, be re-named "Pre-Audit Preparation Packets." In other words, maybe it is not the time to be singing, "We got a packet, we got a packet, we got a packet, hey--hey--hey--hey." (To the tune of "We got a dollar . . ." from the Little Rascals.)

Posted by B. Janell Grenier at November 7, 2003 07:35 AM