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Retirement Plan Heads-Up: IRS Compliance Initiatives

Posted by Brian Dunfee on Apr 20, 2021 8:00:00 AM

Middle-aged couple planning for retirement in a meeting with a female broker or investment adviser in her officeOn April 5, 2021, the IRS updated its Compliance Program and Priorities for tax-exempt entities, including employee retirement plans.  In this update, they detailed certain areas of specific focus that their agents will be looking at going forward in the near-term.  Below, we have summarized some of the more significant items to be on the lookout for in the event that your plan is selected for an examination.

  • Participant Loans
    • This strategy is to ensure that participant loans comply with the IRC rules on maximum loan balances with a special focus on plans that hold a high percentage of participant loans to total assets of the plan’s trust.
  • Unrelated Business Income
    • Does your plan include self-directed brokerage accounts for use by plan participants?  If so, there is an elevated risk that certain partnership investments held within these accounts may generate unrelated business income (UBI) and be subject to tax reporting.  
  • Partial Plan Termination/Partial Vesting
    • This relates to employers whose Form 5500 filings indicate that the Plan has had a significant decrease in plan participants.  This is especially relevant given the effects of the COVID-19 pandemic on plan sponsor business operations and headcounts.    The IRS will be focused on ensure whether or not a partial plan termination has occurred and its effect on immediate vesting requirements as a result.  
    • If this applies to your plan, working with your ERISA legal counsel can help identify any such partial terminations and what would need to be done to remain compliant with regulations.
  • Defined Benefit Plans and Required Minimum Distributions
    • This strategy is to ensure retirement plan sponsors with IRS Section 401(a)(9) to begin distribution of benefits by April 1 following the calendar year an employee turns age 70 ½.  Failure to make these distributions could results in plan disqualifications as well as a 50% excise tax.  

Keep an eye on Meaden & Moore’s blog for future employee benefit plan content important to your compliance efforts or contact us for more details.

Topics: Tax Planning & Strategies, Accounting and Tax Resource, retirement plan review, COVID-19

Brian Dunfee

Brian Dunfee

Brian Dunfee is a Director in Meaden & Moore’s Assurance Services Group. With 19 years in public practice, Brian has extensive audit experience, especially in the field of employee benefit plan audits. He has a strong understanding of the operations and compliance of many types of employee benefit plans, which he developed through planning, preparing, and supervising those audit engagements.

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