An EP agent may find violations that do not affect the qualification of a plan. Most nonqualification failures or violations can be corrected through specific correction methods. An EP agent can solicit either excise taxes or income taxes. Excise Taxes: Generally, examples of violations which will result in excise taxes being assessed are: The employer failing to make the necessary contribution. The employer making contributions greater than the maximum allowed/ deductible amount. The trust failing to make the minimum distributions required by the IRC. The trust having entered into a prohibited transaction. If an Employee Stock Ownership Plan (ESOP) disposes of certain employer securities within three years. Failure to return excess contributions timely in a 401(k) plan. The employer failing to report a reversion upon plan termination. Income Taxes: EP examinations can give rise to additional income taxes on the part of plan sponsors or plan participants. This type of tax adjustment is commonly referred to as a Discrepancy Adjustment.
