Treasury
Inspector General for Tax Administration
Office of Audit
THE EMPLOYEE PLANS FUNCTION SHOULD
CONTINUE ITS EFFORTS TO OBTAIN NEEDED RETIREMENT PLAN INFORMATION
Issued on September 20, 2011
Highlights
Highlights of Report Number: 2011-10-108 to the Acting Internal Revenue Service
Commissioner for the Tax Exempt and Government Entities Division.
IMPACT ON TAXPAYERS
Beginning in January 2010, retirement plan sponsors
were no longer required to report certain information on annual returns that are
processed by the Department of Labor and provided to the Internal Revenue
Service. The Employee Plans (EP)
function’s effectiveness will be reduced because it will no longer receive
detailed information on the operational and financial activities of plans,
which was used to identify the characteristics of noncompliant plans for
examination. Focusing on those plans
most likely to be noncompliant is important because bringing plans back into
compliance through examinations provides plan participants with greater
assurance that promised benefits will be available upon retirement.
WHY TIGTA DID THE AUDIT
TIGTA initiated the audit because EP function personnel expressed concerns that
the lack of previously available information was affecting the EP function’s
ability to achieve its tax administration responsibilities. The overall objective of this review was to
determine whether the EP function’s ability to achieve its tax administration
responsibilities has been significantly affected by a reduction of previously
available information from employer‑sponsored retirement plans annual
return filings.
WHAT TIGTA FOUND
Through discussions with EP function personnel, TIGTA determined that
information no longer required to be filed was used by the EP function to help
identify abusive transactions, identify funding or minimum coverage
requirements issues, and conduct special projects to identify potentially
noncompliant retirement plans. While it
is too early to tell the full impact on the EP function, it is clear through
discussions with EP function personnel that the lack of this information
will have an impact on the EP function’s ability to effectively focus on
specific indicators of noncompliance when selecting retirement plans for
examination.
As TIGTA’s audit
work concluded, the EP function was taking actions to mandate electronic filing
of its returns and schedules, which could allow the EP function to pursue
obtaining additional retirement plan information as part of annual returns. However, EP function officials are concerned
that it may take a long time before additional information is required to be
filed due to differences in the regulatory approval processes between the
Internal Revenue Service and the Department of Labor.
WHAT TIGTA RECOMMENDED
TIGTA recommended that the Director, EP, Tax Exempt
and Government Entities Division, 1) continue to evaluate the information the
EP function needs, while exploring its regulatory and legislative options
for the mandatory electronic filings of annual returns from employer-sponsored
retirement plans, and 2) coordinate with the Department of Labor on the development
of a timetable for implementing changes to the annual return filings to obtain
the information to meet its tax administration responsibilities.
In response to the report, IRS officials agreed with
the recommendations. They plan to
annually evaluate their needs from annual filings, continue to work with the
Tax Exempt and Government Entities Counsel and the Office of Benefits Tax
Counsel to explore legislative options for mandatory electronic filing of
annual returns, and work with the Department of Labor to develop a timetable
for implementing periodic changes to the content of
annual returns.
READ THE
FULL REPORT
To view the report, including
the scope, methodology and full IRS response, go to:
http://www.treas.gov/tigta/auditreports/2011reports/201110108fr.html.
Email Address: TIGTACommunications@tigta.treas.gov
Phone
Number: 202-622-6500
Web Site: http://www.tigta.gov