Retirement plan compliance isn’t one-size-fits-all—and it’s rarely predictable. From operational missteps to testing issues to full-blown IRS examinations, plan sponsors can face a wide range of challenges that require experience, precision, and a steady hand.
That’s where our Compliance Consulting team comes in.
Plan sponsors can engage EGPS for one-time consulting projects, bringing in our team of experts to solve complex compliance issues and guide employers through high-stakes situations. Here’s one real-world example.
The Scenario: An IRS Examination Notice Arrives
Every qualified retirement plan has the potential to be selected for an IRS examination. Sometimes plans are chosen at random based on Form 5500 data. Other times, specific information reported on the return triggers a closer look.
Regardless of the reason, receiving an IRS examination notice can be intimidating. Plan sponsors are rarely equipped with the experience or resources needed to respond efficiently, and managing an audit internally can quickly become overwhelming.
EGPS has guided employers through the IRS examination process dozens of times. While most examinations take time and attention, they often conclude favorably—though not every case is simple.
In this case, EGPS was engaged to provide compliance consulting support during an IRS audit of a defined benefit plan.
How Our Compliance Consulting Team Gets to Work
Responding to an IRS examination requires more than simply submitting documents. It takes a deep understanding of plan operations, testing rules, and how different plans interact with one another.
Our role is to:
- Manage the audit process from start to finish
- Coordinate and review requested documentation
- Communicate directly with the IRS
- Identify and address compliance issues before they escalate
The Discoveries: When One Plan Affects Another
During the review in this specific scenario, the IRS identified that an incorrect definition of compensation had been used to calculate participant benefits for the year. On its own, this issue did not create a defined benefit plan failure. But as is often the case in compliance, the impact didn’t stop there. Because the defined benefit plan and the employer’s profit sharing plan were tested together on a combined basis, the compensation issue had broader implications.
As a result:
- The IRS expanded the examination to include the profit sharing plan
- Additional nondiscrimination testing was required
- A corrective contribution was needed for a small number of individuals
The correction itself was relatively simple and cost-effective—but the case didn’t there.
Additional Complications
Since the audit involved a testing failure, it was classified as a demographic failure. Unfortunately, the plan was also outside the timeframe for self-correction. This meant the IRS imposed sanctions under its Audit Closing Agreement Program (Audit CAP).
Not an ideal scenario—but one our team knows how to navigate.
The Outcome: Expertise That Makes a Difference
While the sanction could not be eliminated entirely, our Compliance Consulting team worked closely with the IRS to:
- Present the facts clearly and accurately
- Demonstrate good-faith compliance efforts
- Significantly reduce the proposed penalty to a more reasonable amount
The result was a fair resolution and a clear path forward for the plan sponsor.
The Bigger Picture: Compliance Support When You Need It
EGPS provides IRS audit support for both our plan administration clients and for employers whose plans are administered elsewhere and simply need expert help navigating this time-consuming and complex process.
This is just one example of the wide range of compliance issues our team handles every day. If you’re curious about the other compliance projects we tackle, fill out the form below and we’ll send you more information.
