Treasury
Inspector General for Tax Administration
Office of Audit
THE
EMPLOYEE PLANS FUNCTION HAS IMPROVED THE PROCESS FOR SELECTING RETIREMENT PLANS
FOR EXAMINATION
Issued on May 10, 2011
Highlights
Highlights of
Report Number: 2011-10-050 to the Acting
Internal Revenue Service Commissioner for the Tax Exempt
and Government Entities Division.
IMPACT ON TAXPAYERS
The primary objective of
Employee Plans function examinations is to determine if retirement plans are
operating in accordance with the tax‑exempt qualification provisions of
the Internal Revenue Code and within the terms of the plan document. If a retirement plan is not in compliance,
the Employee Plans function works with retirement plan
officials to resolve examination issues and bring the retirement plan back into
compliance. The Employee Plans function has improved its ability to
select examinations that identify noncompliance, as evidenced by an increase in
the percentage of examinations where noncompliance with the Internal Revenue
Code has been detected. Ensuring that plans comply with all
applicable statutes and regulations provides plan participants with greater
assurance that promised benefits will be available upon retirement.
WHY TIGTA DID THE AUDIT
TIGTA initiated this audit in response to a
request from the Internal Revenue Service to review the Employee Plans
function’s selection methodology for risk‑based targeted
examinations. Our overall objective was
to determine whether the Employee Plans function’s processes for selecting
examination cases allow for emerging issues to be considered and take into
account the risk of noncompliance for the retirement plan universe.
WHAT TIGTA FOUND
TIGTA determined that the Employee Plans
function’s methods for selecting examinations have evolved over the years and
examinations are now identifying a larger percentage of retirement plans that
are noncompliant. Identifying
noncompliance through the examination program ensures that Employee Plans
function resources are being used wisely, and reduces the burden on plan
sponsors and administrators by focusing on retirement plans most likely to have
compliance issues.
The Employee Plans function has accomplished this improvement by
developing methods for selecting examination cases that allow for emerging
issues to be considered, while taking into account the risk of noncompliance
for the retirement plan universe. For
example, the most productive examinations (those that identify retirement plans
that are noncompliant) have been the result of special projects, abusive
transactions, and referrals. Over the
past five years, these three areas have consistently identified the
highest degree of noncompliance. In
addition, the Employee Plans function’s risk‑based examinations are
becoming more productive based on historical results of examinations from
particular market segments.
WHAT TIGTA RECOMMENDED
TIGTA made no
recommendations in this report. Tax
Exempt and Government Entities Division management reviewed the report before
it was issued and offered clarifying comments and suggestions, which have
been taken into account.
READ THE
FULL REPORT
To view the report,
including the scope and methodology, go to:
http://www.treas.gov/tigta/auditreports/2011reports/201110050fr.html.
Email Address: TIGTACommunications@tigta.treas.gov
Phone
Number: 202-622-6500
Web Site: http://www.tigta.gov