4.71.16  Employee Plans Team Audit (EPTA) Program

Manual Transmittal

July 24, 2013

Purpose

(1) This transmits revised IRM 4.71.16, Employee Plans Examination of Returns, Employee Plans Team Audit (EPTA) Program.

Background

The procedures herein are mandatory for EPTA examinations.

General program agents should reference the processes and procedures described in this IRM as an audit tool for conducting examinations of large case Taxpayers and support activity with LB&I and EO.

This IRM section is intended to provide supplemental information for procedures specific to EPTA cases. It is not intended to replace the EP Examination IRM 4.71.1.

Material Changes

(1) Section 4.71.16.9.3, covering the analysis of the Taxpayer's Internal Controls, has been added.

(2) Completed forms and letters are posted as Exhibits on the Mandatory Review section of the Employee Plans web page at IRM 4.71 - Employee Plans Examination Exhibits.

Effect on Other Documents

This supersedes IRM 4.71.16 dated June 7, 2012.

Audience

TE/GE, Employee Plans

Effective Date

(07-24-2013)


Robert Choi
Director, Employee Plans
Tax Exempt and Government Entities Division

4.71.16.1  (07-24-2013)
Overview

  1. Employee Plans Team Audit (EPTA) is directed at the largest qualified retirement plans. Such plans have participant populations that exceed 2,500 in the aggregate and are generally selected by the EPTA Case Selection Committee (CSC).

  2. Teams will generally conduct focused examinations of large and complex employee plans.

  3. Teams will evaluate and analyze the plan sponsor's Internal Controls, systems and processes to assist with the identification of areas for examination, such as eligibility, participation, coverage, vesting, assets, distributions, accruals, forfeitures, and other related areas.

  4. The EPTA agent will always verify that the plan is qualified in form for all years under examination; therefore the EPTA agent will review the plan document and all amendments in effect for the year(s) under exam.

  5. These EPTA procedures and guidelines promote uniformity and consistency in the administration of EPTA examination activities.

  6. These procedures and guidelines will assist the EPTA Case Manager and EPTA Team Coordinator with his or her responsibilities regarding the examination and will help to orient prospective EPTA Team members to EPTA Team examination concepts and techniques.

  7. This IRM section is intended to provide supplemental information for procedures specific to EPTA cases. It is not intended to replace the EP Examination IRM 4.71.1.

4.71.16.2  (07-24-2013)
Definitions and Acronyms

  1. Case Identification Specialist (CIS) is responsible for identifying the EPTA universe of cases to be reviewed by the EPTA CSC as part of the case selection process.

  2. EPTA Engagement Agreement is a written document containing agreements with the Taxpayer, information for Service personnel and the estimated completion date for conclusion of the examination. Preparation of the EPTA Engagement Agreement is optional unless required by the Case Manager. See Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits for an example of an EPTA Engagement Agreement.

  3. EPLC - Employee Plans Large Case

  4. EPCU – Employee Plans Compliance Unit

  5. EPTA – Employee Plans Team Audit

  6. EPTA Case Manager is the EPTA Group Manager. He or she is responsible for organizing, controlling, and directing EPTA field revenue agents in conducting EPTA examinations.

  7. EPTA Case Selection Committee (CSC) is composed of two Area Managers, three EPTA Group Managers, a Field Actuary and the EPTA Analyst. The CSC uses an objective process to select cases that will be examined by the EPTA groups.

  8. EPTA Audit Plan is a written document containing work assignments, examination procedures, time estimates, and special instructions.

  9. EPTA Examination File is all documents prepared and secured during the course of an examination. Examples of examination file documentation include:

    1. The closing letter

    2. Revenue Agent Reports (RARs) including specialists reports

    3. Closing agreements (Form 906)

    4. Self-Correction Program (SCP) Checksheet

    5. Correspondence and correspondence log

    6. Information Document Request (IDRs) and IDR log

    7. IDR responses

    8. Plan documents and amendments

    9. Forms 5500

    10. Databases

    11. Checksheet for Employee Plans Compliance Activities (CECA Checksheet)

    12. Examination workpapers

    13. Minutes of conferences held with the Taxpayers or representatives

  10. EPTA Analyst is responsible for ensuring that the EPTA program is conducted consistently throughout all EP Examination Areas.

  11. EPTA Team consists of the EPTA Case Manager, the EPTA Team Coordinator, and any of the following additional EPTA Team members as needed: EPTA specialist(s), Computer Audit Specialists (CAS), the Area actuary, EP Counsel, and other revenue agents working under the direction of the EPTA Case Manager.

  12. EPTA Team Coordinator is an EPTA Team member who, in addition to being responsible for specific examination assignments, performs coordinating duties in planning and executing a team examination.

  13. ESAIN – Employee Plans Standard Audit Index Numbers

  14. Focused Examination is a process used in the EPTA program to determine if the plan(s) is operating in accordance with the provisions of the Internal Revenue Code by examining pre-selected issues, placing emphasis on evaluating the overall compliance level of the plan using specific factors, and pursuing the examination to a point where it can be reasonably assured the plan is qualified.

  15. IDR - Information Document Request (Form 4564)

  16. IDR Log - A document used to track the status of IDRs issued. See Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of an IDR Log.

  17. Internal Controls are defined as the Taxpayer's policies and procedures to identify, measure and safeguard plan operations and avoid material misstatements of plan information.

  18. Opening Conference is a meeting of the EPTA team and Taxpayer personnel to discuss such matters as Internal Controls, coordination, accommodations, and the general scope of the examination. This meeting may also include personnel from Large Business and International (LB&I), Exempt Organizations (EO), or Federal, State and Local Governments (FSLG).

  19. Planning Meeting is a meeting or meetings involving at least the EPTA Case Manager, EPTA Team Coordinator, and EPTA Team member(s) to discuss the scope of the examination and to review the case. At the conclusion of the meeting or meetings, the EPTA Case Manager and the EPTA Team Coordinator will determine those areas that will be included in the EPTA Audit Plan. The LB&I Team Coordinator, EO Team Examination Program (TEP) Coordinator, Support Specialist Manager(s), etc. may also be invited to these meetings at the discretion of the EPTA Case Manager.

  20. Pre-contact Analysis is a study of available information for the purpose of tentatively establishing the scope and depth of the examination including matters to be discussed or clarified at the opening conference. When supplemented by information gained at the opening conference it will form the basis for construction of the EPTA Audit Plan.

  21. Risk Analysis is a process by which the potential benefit to be derived from examining an issue or a return is compared to the cost of resources required to perform the examination. The accuracy and reliability of the information in the Internal Control systems and processes are important factors to be considered when completing a risk analysis.

  22. Status Meetings are scheduled meetings with the Taxpayer to discuss case progress, items pending and time line for completion.

  23. Support Specialists are actuaries, commodity and financial products agents, engineers, excise tax agents, economists, international examiners, CAS, Exempt Organizations agents, Tax-exempt Bonds agents, Indian Tribal Government specialists, and any other specialists as necessary. Use of the Automated Specialist Referral System (SRS) is required, if available.

  24. Support Specialist's Manager participates in the responsibility of managing the activities of the specialist(s) assigned to the EPTA Case Manager's case, but the primary responsibility and final concurrence still rests with the EPTA Case Manager.

  25. Taxpayer refers to a business, person or trust that is associated with a qualified retirement plan or plans with an aggregate plan population of 2,500 or more. This would include Multiemployer plans (MAP) and IRC 403(b)/457 plans for which EPTA has examination responsibility. There are three potential Taxpayers in an EPTA examination: the sponsoring employer, the trust, and the plan participants or their beneficiaries.

  26. Team Examination is the examination of a plan or plans of the Taxpayer and is conducted by a team managed by an EPTA Case Manager.

  27. Technical Advisor is a specialist with nationwide responsibilities for a "Designated Issue."

  28. TE/GE – Tax Exempt and Government Entities

4.71.16.3  (06-07-2012)
Identification of EPTA Taxpayer

  1. An EPTA examination is an examination of an entity that meets the EPTA examination universe criteria as defined by the Case Selection Committee.

  2. The factors below, while not all-inclusive, are considered by the Case Selection Committee when selecting a Taxpayer for examination:

    1. Emerging issues

    2. Market segment impact

    3. SEC/other information

    4. Resource location

    5. Referral information

    6. Field input

    7. Tax shelter information

    8. Media attention

    9. Impact on plan participants

    10. Input from the EPCU

4.71.16.4  (06-07-2012)
EPTA Jurisdiction

  1. The Employee Plans (EP) examination program was established to ensure compliance with the qualification provisions of the Internal Revenue Code (IRC). See IRM 4.71.1.2.

  2. Under this program, returns within EP’s jurisdiction may include, but are not limited to:

    1. Form 5500 series return, Annual Return/Report of Employee Benefit Plan

    2. Form 5330, Return of Initial Excise Taxes Related to Employee Benefit Plans

    3. Form 990-T, Exempt Organization Business Income Tax Return for unrelated business income

    4. Form 1040/1120 discrepancy adjustments

  3. Under this program, Non-return Units for IRC 403(b)/457 plans will also be examined.

4.71.16.5  (06-07-2012)
Coordination with LB&I, EO, and FSLG

  1. The EPTA Case Manager should contact the responsible LB&I, EO, or FSLG Manager when a selected case has been assigned to an EPTA agent for examination.

  2. The EPTA Case Manager may include the LB&I, EO or FSLG Manager or Team Coordinator during the pre-planning stages of the EPTA examination to enlist their participation in the EPTA planning process.

4.71.16.6  (06-07-2012)
Responsibilities of the EPTA Case Manager

  1. The EPTA Case Manager is responsible for the activities of all members assigned to each EPTA examination. The EPTA Case Manager must be personally involved in the progress of the examination.

  2. The primary responsibilities of the EPTA Case Manager include but are not limited to the following:

    1. Coordinating and planning the examination with the LB&I Team Manager/EO Case Manager, if necessary

    2. Consulting with the EPTA Team Coordinator to determine which plans and plan years are to be examined.

      Note:

      These decisions will depend on program objectives, agent availability, and Taxpayer resources.

    3. Taking an active role in the examination including visits, as necessary, while the EPTA examination is in process

    4. Facilitating and approving the development and scope of the examination, the EPTA Engagement Agreement, if prepared, the EPTA Audit Plan, and all substantial changes to the Audit Plan and examination procedures

    5. Conferring with EPTA Team Coordinator and EPTA Team members, on a continuing basis, to determine the progress of the examination

    6. Consulting with the EPTA Team Coordinator when problems develop such as delays in responses to information requested

    7. Participating in meetings with the Taxpayer

    8. Reviewing workpapers and reports of each EPTA Team member at various points during the examination process and at the completion of the examination

    9. Ensuring that the Team Coordinator has obtained appropriate disclosure authorization from the Taxpayer

    10. Approving expansion of issues in the EPTA Audit Plan and/or expanding to other years and related returns

    11. Reviewing and approving Notices of Proposed Adjustments

    12. Reviewing and approving the closing letter(s)

4.71.16.7  (07-24-2013)
Responsibilities of the EPTA Team Coordinator

  1. The selected returns are assigned to the EPTA Team Coordinator.

  2. The responsibilities of the EPTA Team Coordinator include but are not limited to the following:

    1. Coordinating the day-to-day activities of the examination

    2. Protecting the statute of limitations

    3. Coordinating the assignments of EPTA Team members (including specialists assigned to the plan examination)

    4. Coordinating the correspondence between EPTA Team members and the Taxpayer (including assistance to Team members and specialists with IDR follow-up and timely involvement of all levels of management, if necessary)

    5. Coordinating with the CAS to ensure timely receipt of records needed to conduct the examination, including record retention agreements, if necessary

    6. Reviewing Form 4764-B proposed by EPTA Team members (including specialists), as necessary

    7. Approving Form 5701-A (see Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 5701-A) proposed by EPTA Team members (including specialists) prior to EPTA Case Manager approval

    8. Ensuring that the EPTA Case Manager, EPTA Team members and as applicable LB&I, EO, or FSLG are advised of developing issues

    9. Serving as the focal point for the prompt and orderly flow of information

    10. Preparing the EPTA Audit Plan

    11. Preparing a write-up of the history of the company, owners and plans

    12. Coordinating the review of the Internal Controls and preparing an analysis identifying the strengths and weaknesses in the systems and processes to be considered when preparing the audit plan

    13. Advising and assisting EPTA Team members in complying with agreements and understandings reached at the opening conference

    14. Timely informing the EPTA Case Manager of any problems regarding Taxpayer or EPTA Team member relations

    15. Receiving and reviewing EPTA Team member information document requests (IDRs) in order to ensure uniformity, clarity, and avoidance of duplication (this includes coordinating the issuance of the IDRs with the LB&I, EO, or FSLG Team Coordinator)

    16. Maintaining files of retained copies of all IDRs and making timely follow-ups

    17. Maintaining the IDR Log (see Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of an IDR Log)

    18. Participating in the development and resolution of issues

    19. Assimilating all EPTA Team members’ workpapers into one overall EPTA Case

    20. Obtaining proper disclosure authorization and/or Form 2848, Power of Attorney and Declaration of Representative, signed by an authorized official of the Taxpayer

    21. Drafting the closing letter(s) for EPTA Case Manager's approval

4.71.16.8  (07-24-2013)
Planning the EPTA Examination

  1. The planning process is one of the most important case activities.

  2. The Taxpayer should be involved in the planning process.

  3. The EPTA Case Manager will take an active role in assisting the EPTA Team Coordinator in this process.

  4. The EPTA Case Manager should consider other matters such as the prevailing economic factors.

  5. The EPTA Case Manager and the EPTA Team Coordinator should evaluate the need for support assistance when planning the examination.

  6. Examination or issue priorities should be established through a process which compares the potential benefits to be derived from examining an issue to the resources required to perform the analysis. This process is referred to as a "risk analysis."

  7. If the Taxpayer is engaged in an issue identified for specialization and coordination (e.g., abusive tax avoidance transaction (ATAT) issues), the EPTA Team Coordinator should contact the designated specialist to seek advice and assistance in identifying the coordinated issues to be developed and the noncompliance areas to be probed.

  8. The EPTA Case Manager and EPTA Team Coordinator should become familiar with the Taxpayer’s business operations. They should review and document the analysis of the following for the purposes of determining staffing requirements, specialists needed, and the general approach to the examination:

    1. Plan returns

    2. Prior EPTA Examination File (Historical File)

    3. Other planning sources (see IRM 4.71.16.8.5 below)

  9. Upon completion of the preliminary review, the EPTA Team Coordinator should summarize the following items:

    1. The issues which should take priority in the examination

    2. The overall scope and approach to the examination

    3. The specialists and non-specialists members needed

    4. The estimated completion date

  10. The EPTA Team Coordinator should notify all specialists who will be involved in the examination and advise them about:

    1. The date, time, and place of any scheduled meeting(s)

    2. The scheduled starting date of the examination

    3. The description of data available for review

  11. The EPTA Team Coordinator should consider the results of the Internal Control analysis when selecting the issues to be examined.

4.71.16.8.1  (07-24-2013)
Selection of Plans to Be Examined

  1. The EPTA Case Identification Specialist (CIS) maintains a list of the RICS return(s) selected by the Case Selection Committee.

  2. EPTA Case Managers are provided a listing of corporate, MAP, 403(b), and 457 Taxpayers that have been selected for examination in their geographic area.

  3. EPTA Case Managers, working in close coordination with the CIS, review their listing of Taxpayers as well as other factors and information available and determine the next Taxpayer to be assigned to an EPTA Team for examination.

  4. The EPTA Team Coordinator will research Plan information from available sources (FreeERISA, the Taxpayer's web site, IDRS, the EBSA web site, etc.) and request RICS returns from the CIS.

  5. Based on the review of available information and discussions between the EPTA Team Coordinator and the EPTA Case Manager, the plan(s) and year(s) to be examined will be selected.

  6. The EPTA Case Manager will contact the CIS and request the plan(s) and year(s) to be assigned to the group on the Reporting Compliance Case Management System (RCCMS) and AIMS.

4.71.16.8.2  (06-07-2012)
Review of Returns in the Planning Process

  1. The EPTA Case Manager and EPTA Team Coordinator should review related returns to ascertain:

    1. The size and complexity of the case

    2. Comparison of items for the year to be examined with like items in prior and subsequent years as appropriate

    3. Location of subsidiaries of the primary Taxpayer(s)

4.71.16.8.3  (06-07-2012)
Review of the Prior EPTA Examination (Historical) File

  1. When there has been a previous EPTA examination, the prior exam file can provide information for planning the current examination.

  2. The prior EPTA Examination File can be obtained from the Federal Records Center and in some cases from the RCCMS Case Library.

  3. Review of the prior EPTA Examination File may include the following documents:

    1. Closing letter

    2. RARs including specialists' reports

    3. Closing agreement

    4. SCP Checksheet

    5. Correspondence

    6. Plan document and amendments

    7. Forms 5500

    8. CECA checksheets

    9. Examination workpapers

    10. Minutes of the prior examination closing conference

4.71.16.8.4  (06-07-2012)
Requesting Support Staffing

  1. EPTA Case Managers and EPTA Team Coordinators should evaluate the need for support assistance when planning the examination.

  2. The EPTA Case Manager's or Team Coordinator's first contact with a support group to obtain a staffing commitment is through use of the Specialist Referral System (SRS). This request should be forwarded to the appropriate support group as soon as the need is determined.

  3. It is important to bring the Computer Audit Specialist (CAS) into the planning process as early as possible. By doing so, the CAS may provide some excellent planning tools. The CAS should be requested using the SRS.

  4. Assistance from the Area actuary or TE/GE Area Counsel will be requested when the need is determined.

4.71.16.8.5  (06-07-2012)
Other Planning Sources

  1. The EPTA Case Manager and EPTA Team Coordinator may wish to consult other sources such as:

    1. The Taxpayer's web site (organizational structure, business activities, etc.)

    2. Trade associations

    3. Published media reports

    4. Governmental agency audit reports (e.g., SEC reports and EBSA investigation reports)

    5. IDRS and EDS research

    6. Accurint

    7. Yk1

    8. The EPTA Analyst

    9. Other EPTA Case Managers and Team Coordinators who have examined similar entities

4.71.16.8.6  (06-07-2012)
Time Planning

  1. The EPTA Case Manager and EPTA Team Coordinator will estimate the duration of the audit based on the following factors:

    1. Scope and complexity of examination areas selected

    2. Location and availability of records

    3. Extent of computer assisted examination techniques

    4. Coordination with LB&I, EO, or FSLG

    5. Experience of the EPTA Team Coordinator and EPTA Team members

    6. Travel time (on-site vs. support)

    7. Taxpayer's staffing and cooperation

4.71.16.8.7  (07-24-2013)
Financial Interests and Disclosure

  1. The EPTA Case Manager will ensure that each EPTA Team member on the EPTA examination (including specialists, support audit examiners, and audit accounting aides) are aware of and understand the statute requiring disclosure of any financial interest or conflicts, which might create a real or apparent conflict of interest.

  2. At the start of every examination, each EPTA Team member will report any financial interests that are potential conflicts of interest.

    1. For this purpose the EPTA Financial Interest Disclosure Form is utilized. See Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the EPTA Financial Interest Disclosure Form.

    2. A separate form must be completed and signed by each EPTA Team member.

    3. See Policy Statements P-4-6 and P-4-7 found in IRM 1.2.13.

  3. The EPTA Case Manager will:

    1. Review each Financial Interest Disclosure form;

    2. Determine whether or not a potential conflict of interest may exist; and

    3. Sign each form.

  4. In instances where a potential conflict of interest may exist:

    1. The EPTA Case Manager and the applicable EPTA Team member will complete Form 6782, Certification of Financial Interest in a Work Assignment. As an example, a potential conflict of interest may exist if the EPTA Team member owns publicly traded securities of the Taxpayer valued at more than $15,000. See the instructions to Form 6782.

    2. If the EPTA Case Manager determines that a financial interest (as defined in the Standards of Ethical Conduct for Employees of the Executive Branch, 5 C.F.R. part 2635, subpart D) does not exist, the EPTA Team member will remain on the team.

      Note:

      A key factor in this determination is whether or not the EPTA Team member's work on the case will cause others to question the Team member's impartiality and independence.

    3. If the EPTA Case Manager determines that a financial interest does exist, the EPTA Team member will not be permitted to work on the case.

    4. The EPTA Case Manager may seek legal advice from the Deputy Ethics Official if they need assistance in making their determination. In such cases, the EPTA Case Manager will remove the Team member from the case until a determination granting an exemption for financial interest is approved.

  5. The EPTA Case Manager will certify to his/her respective Area Manager that there is no conflict of interest with respect to their personal financial interest using the EPTA Financial Interest Disclosure Form (see Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the EPTA Financial Interest Disclosure Form).

  6. In instances where a potential conflict may exist, the EPTA Case Manager will follow the disclosure procedures and complete the certification form discussed in the Handbook for the Rules of Conduct.

4.71.16.9  (07-24-2013)
Conducting the EPTA Examination

  1. This section describes the following elements of the EPTA Examination:

    1. Notice of Examination

    2. Opening Conference

    3. Internal Controls

    4. EPTA Engagement Agreement

    5. EPTA Audit Plan, and

    6. EPTA Workpapers

4.71.16.9.1  (07-24-2013)
Notice of Examination

  1. The "Notice of Examination Letter" will be signed by the EPTA Team Coordinator and delivered to the Taxpayer early in the audit process, either before or with the initial IDRs.

  2. In most cases, the "Notice of Examination Letter" identifies the specific plan(s) under examination. See Exhibit 4 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a "Notice of Examination Letter."

  3. If it is not possible to identify the plan(s) initially under examination, the "Notice of Examination Letter" would only identify the Taxpayer and the year(s) under examination. See Exhibit 5 at IRM 4.71 - Employee Plans Examination Exhibits for an example of this letter.

    Note:

    The risk of not identifying the plan is that the Taxpayer is still eligible to make a voluntary submission to the Employee Plans Compliance Resolution System (EPCRS).

4.71.16.9.2  (07-24-2013)
Opening Conference

  1. The opening conference is a face-to-face meeting with authorized employees of the Taxpayer. The purpose of the opening conference is to:

    1. Discuss the case selection process

    2. Verify the Taxpayer’s size, dispersion, and any and all related entities

    3. Verify the address where books and records are maintained

    4. Discuss the accounting system and compliance with Rev. Proc. 98-25, IRB 1998-19

    5. Arrange for review of information to be available at start of examination

    6. Arrange for flow of communications from EPTA Case Manager and EPTA Team to Taxpayer and vice versa

    7. Establish agreements as to accommodations for the team including such items as locked file cabinets

    8. Establish agreement that issues will be raised, discussed, and resolved as the examination progresses

    9. Establish agreement that the Taxpayer will prepare its protest to identified unagreed issues during the course of the examination

    10. Establish agreement regarding security of IRS and Taxpayer documents maintained on the Taxpayer's premises during the examination

    11. Establish agreement for response time frames of Information Document Requests (IDRs), Notices of Proposed Issues/Adjustments, etc.

    12. Discuss the scope and depth of the examination

    13. Plan a meeting with the Taxpayer and appropriate staff to discuss the Taxpayer's Internal Controls, processes and procedures for plan operations

    14. Provide an estimated completion date for the examination.

  2. The EPTA Team Coordinator will obtain a written agreement that lists the names and titles of those individuals who have the authority to provide information and enter into agreements to avoid potential miscommunication or inadvertent disclosure.

    1. This agreement may be obtained either at the Opening Conference or during the planning stages of the examination.

    2. This agreement must be signed by an authorized official of the Taxpayer.

    3. If the agreement is obtained for an individual other than an employee(s) acting within the scope of their employment, such form should be similar to Form 8821, Tax Information Authorization, and all of its restrictions.

    4. Since the use of the EPTA authorization form is limited, it is necessary, therefore, to obtain a properly completed Form 2848, Power of Attorney and Declaration of Representative, to address adjustments (including questions and requests for specific additional information) and issues.

  3. The EPTA Case Manager should ensure that:

    1. Taxpayer personnel designated to furnish information to EPTA Team members are those best qualified to give complete first-hand information; and

    2. the roles of EPTA Case Manager, EPTA Team Coordinator and EPTA Team members are fully explained, including who has authority to secure information and discuss issues.

  4. After concluding the opening conference, all pertinent information developed and agreements reached will be summarized in the written minutes of the meeting.

4.71.16.9.3  (07-24-2013)
Internal Controls

  1. An analysis of the Taxpayer’s Internal Controls is an important part of conducting an EPLC examination.

  2. EPTA agents will be responsible for examining the Internal Controls of the plan sponsor, taking appropriate actions and recording the results of their analysis in their case file.

  3. With respect to the administration of a qualified plan’s operations, Internal Controls are a system of procedures employed by a Taxpayer and the plan’s administrator to:

    1. Ensure and promote the reliability and accuracy of the information used by such plan for its administration and calculation of benefits as defined in the written plan document,

    2. Ensure that such plan complies in operation with the applicable provisions of the Plan and with the applicable Internal Revenue Code sections, and

    3. Safeguard plan participant benefits and the trust assets from fraud, waste and abuse.

  4. These systems and processes support plan operations and include:

    1. The process for keeping plans qualified in form under IRC 401(a)

    2. Day to day operations of the plans (both qualified and non-qualified plans)

    3. Payroll systems used to capture compensation data for benefit and testing purposes (e.g., allocations)

    4. Human Resources and Benefits Departments (e.g. eligibility)

    5. Process for determining pension expenses and deductions

    6. Trust investment strategies

    7. Distribution responsibilities

    8. End of year testing responsibilities

  5. In the early stages of the EPLC examination, an appropriate analysis will be completed to determine the level of Internal Control within the various systems and processes used by the Taxpayer to administer their plans and capture data.

  6. The objectives of the analysis of Internal Controls include:

    1. To obtain an understanding of the various systems utilized by a Taxpayer in the administration of their qualified retirement plan processes

    2. To understand how these systems work independently and how they interact with each other

    3. To verify the level of accuracy of the data input into the various systems

    4. To assist in the development of the audit plan

  7. An effective analysis of Internal Controls will help the EPTA agent:

    1. Identify vulnerabilities in the plan sponsor's Internal Controls of their systems and processes

    2. Develop an audit plan that includes potential areas of non-compliance

    3. Obtain a confidence level in how well the Internal Controls are working in operation

    4. Revise the preliminary review and formulate an audit plan for the focused examination

    5. Expand or limit the scope of the examination

  8. Suggested methods and types of analysis include:

    1. Interview key personnel who exercise control over the various systems and processes.

    2. Complete an analysis of the information secured through interviews, Internal Control Questionnaires and other resources.

    3. Perform limited testing on systems and processes as appropriate.

    4. Expand testing on areas identified for potential non-compliance.

4.71.16.9.4  (06-07-2012)
The EPTA Engagement Agreement

  1. The EPTA Engagement Agreement has a twofold purpose.

    1. One is to formalize the groundwork for an examination, which will be consistent with the concepts of the EPTA Program.

    2. The other is to prevent misunderstandings of commitments made and agreements reached.

  2. The EPTA Engagement Agreement is optional. As an alternative to the EPTA Engagement Agreement, all agreements can be discussed at the opening conference and documented in detail in the opening conference minutes. See Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the EPTA Engagement Agreement.

4.71.16.9.4.1  (06-07-2012)
Preparation of the EPTA Engagement Agreement

  1. The EPTA Engagement Agreement, if prepared, should be completed before any substantial amount of examination work is accomplished.

  2. The pre-contact analysis, the preliminary survey of the Plan Sponsor’s records, and the opening conference provides the information necessary for the preparation of the EPTA Engagement Agreement.

  3. The EPTA Engagement Agreement, if prepared, should be completed following the opening conference and should clearly identify, in writing, the agreements reached with the Taxpayer.

  4. Acknowledgment regarding the matters covered and agreements reached at the opening conference is best evidenced by the signatures of both the EPTA Case Manager and the elected officer, or his/her delegate, of the Taxpayer in spaces provided in the EPTA Engagement Agreement.

4.71.16.9.4.2  (06-07-2012)
Commitments and Content of the EPTA Engagement Agreement

  1. Taxpayer and Service commitments regarding examination activities should be realistic. Every effort should be made to meet these commitments, particularly in the following areas:

    1. Date that the EPTA team can be expected to begin field work on the examination

    2. Location where examination activities are to be carried out

    3. Records to be provided

    4. Space and equipment required

    5. Requests for information and

    6. Requests for statute extensions

  2. In seeking commitments from the Taxpayer, EPTA Case Managers should make certain that the individual they are dealing with:

    1. Is an elected corporate officer, trustee, or delegate, who can provide information and enter into agreements regarding examination procedures, and

    2. Will be responsible for notifying primary individuals in the Taxpayer’s organization of the arrangements affecting them.

  3. Regarding lines of communication, the EPTA Case Manager should make certain that:

    1. The agreement reached identifies individuals within the Taxpayer’s organization who are authorized to furnish information to EPTA Team members, who may discuss tax matters, to whom adjustments may be proposed, and who may approve adjustments to tax returns, and

    2. Taxpayer personnel designated to furnish information to EPTA Team members are the best qualified persons to give complete first-hand information. This may include persons responsible for preparing the documents to be examined.

4.71.16.9.5  (07-24-2013)
EPTA Audit Plan

  1. The purpose of the EPTA Audit Plan is to provide information for each EPTA Team member regarding their specific assignments, the role of the EPTA Case Manager and Team Coordinator, scope of the examination and, when necessary, special examination techniques.

  2. With this information, EPTA Team members will be in a position to make the best use of their time.

  3. EPTA Team members will know what their role is in the examination, how to proceed with the assignment and, if called for, what information to develop for other EPTA Team members.

  4. Form 4764 (EPTA), EPTA Audit Plan, or similar computer generated form, should be used. See Exhibit 9 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 4764 (EPTA).

4.71.16.9.6  (07-24-2013)
Workpapers

  1. The workpapers and reports should be standardized for easy collating into a single file or report.

  2. Procedures for labeling and controlling electronic data should be stated.

  3. The same workpaper standards that apply to general program examinations, apply to EPTA examinations with the exception that Form 5772, EP/EO Workpaper Summary, will not be utilized. See Workpaper quality standards IRM 4.71.1.15.1.

4.71.16.9.6.1  (07-24-2013)
Workpaper Indexing

  1. To assist in indexing the workpapers consistently, the system most commonly used is the Employee Plans Examination Standard Audit Index Number (E-SAIN) system. See Exhibit 8 at IRM 4.71 - Employee Plans Examination Exhibits for a list of ESAIN numbers with descriptions.

  2. In addition to using E-SAIN to index workpapers, this E-SAIN system may also be used for:

    1. Making work assignments for the Audit Plan

    2. Developing standard examination procedures (commonly done on Form 4764-B (EPTA)) (see Exhibit 7 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 4764-B (EPTA)) and

    3. Organizing Information Document Requests (IDRs)

  3. The EPTA Case Manager can approve a method of indexing workpapers that is equivalent to E-SAIN in appropriate circumstances but this system must be used consistently by all EPTA Team members assigned to the case.

4.71.16.10  (06-07-2012)
Monitoring the EPTA Examination Progress

  1. This section describes the roles of the EPTA Case Manager and the EPTA Team Coordinator in the examination process.

4.71.16.10.1  (06-07-2012)
Role of EPTA Case Manager

  1. Monitoring the EPTA examination progress is a necessary function of the EPTA Case Manager.

  2. The primary monitoring techniques are visits and meetings with EPTA Team members and the Taxpayer.

  3. Visits, whether on-site at the primary examination location or at any other location, should be planned with the following objectives in mind:

    1. Determine that communications are open

    2. Evaluate the effectiveness of the EPTA Engagement Agreement (if prepared) and the EPTA Audit Plan, making necessary adjustments when appropriate

    3. Check on progress

    4. Identify problems

    5. Provide instructions for corrective action

    6. Evaluate personnel and

    7. Help resolve issues

  4. EPTA Case Managers should maintain a case file which contains the information necessary to stay informed regarding the status of the case. Examples of items that may be included in the file are as follows:

    1. EPTA Engagement Agreement, if prepared

    2. Form 4764, EPTA Audit Plan (see Exhibit 9 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 4764, EPTA Audit Plan)

    3. List of Support Specialists involved in the examination

    4. Minutes from Status Meetings, and

    5. Status report of the examination

  5. EPTA Case Managers are encouraged to maintain any other data that is useful in managing a case.

  6. A risk analysis should be considered at various intervals during case processing to properly assess the viability of issues and appropriateness of the resources being used. The format and timing of the risk analysis is determined by the Case Manager.

  7. The EPTA Case Manager will regularly communicate with the EPTA Team Coordinator to monitor the progress of the examination.

4.71.16.10.2  (07-24-2013)
Role of the EPTA Team Coordinator

  1. The EPTA Team Coordinator is the first EPTA Team member selected by the EPTA Case Manager.

  2. During the examination, the EPTA Team Coordinator is the focal point for communication with the EPTA Team members.

  3. The EPTA Team Coordinator is responsible for planning the examination including the analysis of the Internal Controls.

  4. The EPTA Team Coordinator is responsible for the coordination of EPTA Team member responsibilities for the examination.

  5. The EPTA Team Coordinator is responsible for regularly reporting the issues found and the progress of the examination to the EPTA Case Manager.

  6. The EPTA Team Coordinator is responsible for meeting with the Taxpayer to discuss issues and the progress of the examination.

4.71.16.10.3  (06-07-2012)
Visits

  1. On-site visits and meetings are important elements of the EPTA Case Manager's meaningful involvement in the case. EPTA Case Managers should avoid delegating this responsibility to others.

  2. During visits, specific areas that may be addressed are:

    1. Determining whether examination areas are being worked in priority order and whether modifications to the Audit Plan altering the scope and depth of the examination are appropriate and timely

    2. Reviewing progress on action items generated during previous reviews

    3. Reviewing examination areas in process and discussing with the EPTA Team Coordinator the need to expand, contract, or redirect examination activity

    4. Reviewing examination areas not in process and determining what, if any, impact subsequent events have had on their potential for adjustment

    5. Reviewing Form 5701-A, Notice of Proposed Issue/Adjustment, for completeness and accuracy prior to issuing

    6. Reviewing Form 4764-B, EPTA Examination Plan, and other workpapers related to examination areas that are in-process and those that are completed to ensure that the audit trail is well documented and issues are being properly developed

    7. Reviewing Information Document Request (IDR) turnaround time

  3. There are several types of visits, depending on the stage of examination. These include:

    1. Planning visits to develop the EPTA Engagement Agreement, if prepared, and the EPTA Audit Plan

    2. Monitoring visits with the EPTA Team members and the Taxpayer while the examination is underway

    3. Status Meetings

    4. Problem-solving visits with the EPTA Team members and/or Taxpayer and

    5. Visits with EPTA Team members to develop uniform presentation of proposed issues to the Taxpayer

  4. In visiting an examination site, the EPTA Case Manager may need to periodically meet with appropriate levels of company management to discuss the progress of the examination and to resolve any potential problems.

4.71.16.10.4  (06-07-2012)
Information Document Request (IDR) Process

  1. The IDR process gives the EPTA Team a structured process to use when gathering information during an examination.

  2. During the opening conference, the EPTA Case Manager and the EPTA Team will discuss the process for IDR management and collaborate with the Taxpayer concerning IDR response times and alternatives. The resulting agreement will be included in the opening conference minutes and/or the EPTA Engagement Agreement.

  3. The EPTA Team Coordinator should maintain an IDR log to monitor IDR status and follow up when an IDR response is delinquent. See Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the IDR Log.

  4. The Taxpayer should be contacted to discuss problems that exist and reasons for the delay.

    1. If necessary, the EPTA Case Manager should be involved.

    2. These discussions should be documented for future tracking.

  5. Actions to be taken subsequent to these discussions could include:

    1. Evaluating other means or sources for obtaining the requested or needed information

    2. If necessary, preparing and issuing a follow-up IDR to the delinquent IDR. The response date for the follow-up IDR should be a reasonable date based on discussions with the Taxpayer. In many instances, the follow-up IDR should have either the original IDR attached or incorporate the original IDR language.

  6. If the responses to requests for information continue to be delinquent, consider serving a summons where pursuit of the issue is necessary and insufficient facts exist to develop or resolve the issue. The EPTA Team Coordinator should consult with Area Counsel for guidance in the preparation and issuance of the summons.

4.71.16.10.5  (06-07-2012)
Documentation of Management Actions

  1. Significant EPTA case management activity may modify the approved EPTA Audit Plan and should be documented in the case file. Examples of significant modifications are:

    1. Expansion of the examination which will require a significant increase in planned time

    2. Contraction of the examination with a significant reduction in planned staff time

    3. A redeployment of personnel

    4. A change in emphasis of areas to be examined even though the overall planned time is not significantly changed and

    5. Any other unusual areas not previously identified

4.71.16.10.6  (06-07-2012)
Delinquent Returns Secured

  1. EPTA Team members are responsible for securing and processing:

    1. Delinquent Forms 5330 in accordance with the procedures in IRM 4.71.5

    2. Delinquent Forms 990-T in accordance with the procedures in IRM 4.71.10

    3. Delinquent Forms 5500 in accordance with the procedures in IRM 4.71.1.21

4.71.16.11  (07-24-2013)
Completing the EPTA Examination

  1. When an individual EPTA Team member completes his or her portion of the examination, the following actions are required:

    1. Prepare Form 5701-A or other report and discuss any pending proposed issues with the EPTA Team Coordinator and EPTA Case Manager to obtain his or her concurrence.

      Note:

      Issues should be raised throughout the examination in accordance with agreements reached during the opening conference or contained in the EPTA Engagement Agreement (if prepared).

    2. Discuss proposed issues directly with the appropriate Taxpayer official per the protocol list discussed during the opening conference (generally with the EPTA Team Coordinator or the EPTA Case Manager present).

    3. Complete his or her portion of the workpapers and forward to the EPTA Team Coordinator.

    4. Report case time to the EPTA Team Coordinator if the case is not ready to close.

    5. When all EPTA Team members have completed their examination segment and the case is closed, each EPTA Team member will close the case on their individual WebETS (Form 6490).

  2. The workpapers should support the conclusions reached in each segment of the exam. See IRM 4.71.1.15.

  3. All supporting workpapers will then be forwarded to the EPTA Team Coordinator for assimilation into the final examination case file.

  4. Forms 5701-A or other EPTA Team member reports must be included as a part of the examination case file.

  5. After the EPTA Team Coordinator completes and assembles the examination case file, he or she will forward it to the EPTA Case Manager for review.

  6. When examining a Taxpayer in conjunction with LB&I, EO, or FSLG, a closing coordination memorandum or report should be prepared by the EPTA Team Coordinator (see Exhibit 10 at IRM 4.71 - Employee Plans Examination Exhibits for a sample Report to LB&I), and forwarded to the appropriate LB&I, EO, or FSLG Case Manager when the case is closed. This memorandum may include the following:

    1. A summary of the examination results

    2. Plans for any future examinations, if any

    3. A copy of closing letter(s)

    4. A copy of a closing agreement and

    5. Any other information needed or requested by LB&I, EO, or FSLG

4.71.16.11.1  (06-07-2012)
Closing Conference

  1. The purpose of the closing conference, if held, is to discuss the results and the effectiveness of the EPTA examination.

  2. Those attending the closing conference typically include the EPTA Team Coordinator, any designated EPTA Team member, and any individual designated by the Taxpayer.

  3. Minutes of the closing conference should be prepared and made part of the EPTA Examination File.

4.71.16.11.2  (06-07-2012)
Review of the EPTA Case

  1. The EPTA Case Manager is responsible for review of:

    1. The case for compliance with Large Case TEQMS

    2. The case for compliance with IRM procedures are followed

    3. Closing documents

    4. Exam closing letter(s)

  2. Managers of specialty groups will be responsible for issue development and documentation of any separate specialty reports issued.

4.71.16.11.3  (06-07-2012)
Closing the EPTA Examination

  1. Closing letter(s) should be prepared for each return and each non-return unit (NRU) examined.

    1. Closing letter(s) for an EPTA case are the same as for any other EP examination.

    2. Closing letter(s) should be mailed at the group level or hand delivered.

      Note:

      Comments indicating the date the letter was mailed or delivered should be included on Form 5464, Case Chronology Record.

    3. The Team Coordinator should coordinate with LB&I, EO, and FSLG on the issuance of the closing letter(s).

    4. The EPTA Case Manager should document the review of closing letter(s) on the file copy of the closing letter(s) or on Form 5464, Case Chronology Record.

  2. Prepare Form 6212-B on all examined cases that are subject to Title I of ERISA (see section 4 of ERISA).

    1. If a referral to DOL is warranted, send the original Form 6212-B to EP Classification in El Monte, California in accordance with IRM 4.71.6.7 and save the referral in the Office Documents folder within the RCCMS activity.

    2. If a referral is not warranted, save the referral in the Office Documents folder within the RCCMS activity.

  3. Prepare Form 6533 for all EP examinations of plans that are subject to PBGC.

    1. If a referral to PBGC is warranted, send the original Form 6533 to EP Classification in accordance with IRM 4.71.6.8, and save the referral in the Office Documents folder within the RCCMS activity.

    2. If a referral is not warranted, keep the original in the Office Documents folder within the RCCMS activity.

  4. For "agreed" Form 5500 exams with fewer than 180 days remaining on the statute of limitations, the following paper documents must be in individual red folders for each year with a completed Form 10329 stapled on front and mailed to the address listed in paragraph (9) when the case is closed:

    1. Form 895 (as required by paragraph 2 of IRM 4.71.9.3)

    2. Form 5500

    3. Form 872-H (if secured)

    4. Form 2848 or Form 8821 (if secured and if a copy is not saved in the RCCMS Office Documents folder)

    5. Form 5650

      Note:

      Prepare Form 5650 in accordance with IRM 4.71.1.22.2.

    6. Closing letter

    7. Form 906 (closing agreement)

    Note:

    Form 10329 (stapled on the front of each case file) must list not only the return in the folder but also all related exams.

  5. For "agreed" Form 5500 exams with 180 days or more remaining on the statute of limitations, the following paper documents must be in individual folders for each year with a completed Form 10329 stapled on front and mailed to the address listed in paragraph (9) when the case is closed:

    1. Form 895 (if required to be prepared in accordance with paragraph 2 of IRM 4.71.9.3, and a copy is not saved in the RCCMS Office Documents folder)

    2. Form 5500 (if secured and if a copy is not saved in RCCMS)

    3. Form 872-H (if secured)

    4. Form 2848 or Form 8821 (if secured and if a copy is not in the RCCMS Office Documents folder), and

    5. Form 906 (closing agreement)

    Note:

    If there is no Form 872-H or Form 906 and the other forms listed are saved in RCCMS (or are not applicable), there would be no paper case file.

  6. Until RCCMS is able to process Non Master File (NMF) updates and closing actions directly to AIMS, the following paper documents must be in individual folders for Non-Return Unit (NRU) examinations:

    1. Form 5650

    2. Form 5596 (for cases being surveyed), and

    3. Form 5595 (to update status to 51)

  7. Copies of all workpapers, forms and letters generated by the EPTA agent must be saved in the RCCMS Office Documents folder using the RCCMS Naming Convention to the extent possible.

  8. Portions of the EPTA Examination File that cannot be saved in RCCMS must be maintained in hard copy or saved on a secured CD.

    Note:

    The EPTA Case Manager will forward the items in paragraph (8) to Special Review if the case is selected for review; otherwise, the EPTA Case Manager will forward these items to the Federal Records Center.

  9. Close all agreed EPTA exams (including NRUs) to ESSP (the EP Closing Unit) as follows:

    1. Great Lakes, Gulf Coast and Pacific Coast Areas close cases to:

      Note:

      If the EPTA exam involves related Forms 5330, the entire EPTA case will be closed to Brooklyn at the address listed in paragraph b).

      IRS
      Attention: Closing Unit
      31 Hopkins Plaza
      Room 1432
      Baltimore, MD 21201

    2. Mid-Atlantic and Northeast Areas close cases to:

      IRS
      Attention: ESSP Manager
      10 Metrotech Center
      625 Fulton Street, 3rd Floor
      Brooklyn, NY 11201-5400

  10. "Unagreed" examinations should be processed as follows:

    1. "Unagreed" Form 5500 exams must be processed in accordance with IRM 4.71.3.

    2. "Unagreed" Form 5330 exams must be processed in accordance with IRM 4.71.5.9.

    3. "Unagreed" Form 990-T exams must be processed in accordance with IRM 4.71.10.9.5.

4.71.16.12  (06-07-2012)
Record Retention Requirements

  1. IRM 1.15.23.1 and Exhibit 1.15.23-1, Records Control for Tax Administration Examination, Item #42 B states that Coordinated Examination Case files must be retired to the Federal Records Center 4 years after the date of closing and should be destroyed 15 years from the date of closing. Closing is defined as when the case is posted on AIMS to status 90 but also includes procedures for processing the agreed portion of workpapers when Appeals or Area Counsel does not want them.

  2. It is important that appropriate procedures be established to permit the retrieval of prior EPTA Examination Files (Historical Files) from the Federal Records Center.

    1. For example, it may be necessary to obtain previously closed files in the event that an EPTA Examination case is post reviewed by Treasury Inspector General for Tax Administration (TIGTA) or the Governmental Accounting Office.

    2. In addition, Taxpayers may file claims with respect to various federal tax issues previously closed at the Examination or Appeals levels and retrieval of the documents may be necessary.

4.71.16.12.1  (06-07-2012)
Record Retention Procedures

  1. Contact should be made with the Information Resources Coordinator (IRC) located within the EPTA Case Manager’s geographical location. The IRC is responsible for providing assistance on records issues.

  2. IRM 1.15.4 provides detailed procedures for the retirement of IRS records, including packing records, making cartons, shipping records, and instructions for the completion of various forms.

  3. This reference should be consulted when necessary but ordinarily Area personnel should use the designated IRC as the primary source of information.

4.71.16.13  (06-07-2012)
Assessment of Specialist Team Members Performance

  1. At the conclusion of each EPTA examination involving personnel from a supporting area, the EPTA Case Manager will consider whether written comments regarding the EPTA Team members' work should be submitted to the appropriate manager.

  2. The performance assessment of a detailed EPTA Team member should be presented in narrative form.


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