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Employee Plans News - March 20, 2012 - Follow-up on Learn, Educate, Self-Correct and Enforce Projects

Employee Plans Examinations has identified two Learn, Educate, Self-Correct and Enforce projects for future follow-up or “Enforce” action. These projects involved examining returns with self-identified:

Investments in real estate and participant loans
This LESE project involved plans with less than $5 million in assets, investments in real estate, and either participant loans or a Schedule D (DFE/Participating Plan Information). Its results showed that in the plans reviewed:

  • 25% had at least one prohibited transaction.
  • 25% had real estate investments that weren’t valued at fair market value.

Problems with loans included:

  • not following the plan loan provisions,
  • not having a bona fide loan (no loan document and/or payments),
  • not having a provision for loans in the plan document, but allowing participant loans, and
  • not prohibiting loans to the employer and/or related entities.

Defaulted loans or uncollectible leases
The second LESE project focused on plans that indicated they had loans or leases that were in default or uncollectible. Over 10% of the plans reviewed had prohibited transactions.

We found issues in both projects with:

  • not properly valuing assets at fair market value, and
  • not timely amending the plan for law changes.

Another potential LESE project follow-up focuses on Form 5500 returns filed with invalid NAICS codes (returns using a four-digit code after the codes were expanded to six digits).

Read the complete reports for these and other LESE projects on our LESE page.

Page Last Reviewed or Updated: 07-Feb-2014