4.71.6 Employee Plans Referrals

Manual Transmittal

May 19, 2017

Purpose

(1) This transmits revised IRM 4.71.6, Employee Plans Examination of Returns, Employee Plans Referrals.

Background

IRM 4.71.6 contains the procedures for processing referrals related to employee plans exams.

Material Changes

(1) IRM 4.71.6.1, Program, Scope and Objectives, and the subsections thereunder, were revised to meet the new internal controls requirements.

(2) This IRM incorporates the changes resulting from the reorganization within TE/GE, moving Classification out of EP Examinations into Compliance Planning & Classification. As a result, what was "EP Classification" is now "Classification" . The mailing address and email mailbox is the same for Classification as it was for EP Classification.

(3) Minor editorial changes, including revisions to reflect plain language requirements, were made throughout the document.

Effect on Other Documents

This supersedes IRM 4.71.6 dated January 19, 2016.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(05-19-2017)


Robert S. Choi
Director, Employee Plans
Tax Exempt and Government Entities

Program, Scope and Objectives

  1. Purpose: IRM 4.71.6, Employee Plans Examination of Returns, Employee Plans Referrals, provides the basic examination procedures that will enable Employee Plans (EP) agents and their managers to:

    1. Make referrals on issues found during an examination.

    2. Process examination referrals received from other sources.

  2. Audience: This IRM provides procedures for agents, managers, and support staff in EP Exam.

  3. Program Owner: Director, EP Examination sets the program for the EP examination program.

  4. Program Authority: EP Examination’s authority to resolve issues is derived from its authority to make determinations of tax liability under IRC 6201.

Background

  1. EP Examination’s authority to resolve issues is derived from its authority to make determinations of tax liability under IRC 6201.

Acronyms and Forms

  1. This manual uses the following acronyms and references the following forms.

    Acronyms

    Acronym Definition
    AIMS Audit Information Management System
    CAS Computer Audit Specialist
    CCR Case Chronology Record
    CPA Certified Public Accountant
    CPG Compliance Planning Group
    DOL Department of Labor
    EBSA Employee Benefit Security Administration
    EFU Exam Functional Unit
    EIN Employer Identification Number
    EP Employee Plans
    EO Exempt Organizations
    EPD EP Determinations
    ERISA Employee Retirement Income Security Act
    FSLG Federal, State of Local Governments
    GE Governmental Entities Division
    IDRS Integrated Data Retrieval System
    IRC Internal Revenue Code (Code)
    IRM Internal Revenue Manual
    ITG Indian Tribal Governments
    LB&I Large Business and International Division
    LDC Lead Development Center
    OPR Office of Professional Responsibility
    PBGC Pension Benefit Guaranty Corporation
    RCCMS Reporting Compliance Case Management System
    RICS Returns Inventory and Classification System
    RS Referral Specialist
    SB/SE Small Business /Self-Employed Division
    SB/SE PSP SB/SE Planning and Special Programs
    SRS Specialist Referral System
    TE/GE Tax Exempt & Government Entities Division
    W&I Wage and Investment Division


    Forms and Pubs

    Form Name
    Form 886-A Explanation of Items
    Form 1040 U.S. Individual Income Tax Return
    Form 1120 U.S. Corporation Income Tax Return
    Form 4632 Employee Plans Referral
    Form 4632-A Employee Plans Referral Checksheet
    Form 4632-C Employee Plans Referral Checksheet-For FSLG-IRC 403(b)/457 and Social Security Alternative Plans
    Form 5346 Examination Information Report
    Form 5464 Case Chronology Record
    Form 5500 Annual Return/Report of Employee Benefit Plan
    Form 5666 TE/GE Referral Information Report
    Form 6212-A Examination Referral Checksheet A
    Form 6212-B Examination Referral Checksheet B
    Form 6229 Collateral Examination
    Form 6533 Examination Referral Worksheet
    Form 8484 Report of Suspected Practitioner Misconduct
    Form 14242 Report Suspected Abusive Tax Promotions or Preparers


Overview of Employee Plans Referrals

  1. This IRM describes the referral procedures between EP and:

    1. EBSA of the DOL

    2. PBGC

    3. EO

    4. EP Determinations (EPD)

    5. GE

      Note:

      GE referrals can come from ITG or FSLG.

    6. LB&I, SB/SE or W&I, (collectively referred to as EFUs)

    7. Office of Professional Responsibility (OPR)

  2. When dealing with referrals, this section covers the responsibilities of:

    1. Classification

    2. EP exam agents

    3. EP exam group managers

  3. Classification is responsible for controlling and processing referrals that are either initiated by EP or made to EP.

  4. Unless stated otherwise in this IRM, the group manager or designee will send approved referrals to Classification via email or through the regular mail.

    1. Email: send to Classification's group mailbox: tege.ep.classification@irs.gov.

    2. Mail: send to Classification at:


      IRS - Classification
      9350 Flair Drive, 4th Floor
      El Monte, CA 91731-2885

  5. If EP agents/managers send a direct referral to another EFU, they must also send a full copy of the referral to Classification.

    Example:

    EP exam makes a referral directly to an SB/SE agent doing a concurrent exam. The EP agent must also send a copy to Classification.

  6. EP receives referrals from EFUs and TE/GE functional divisions on Form 4632 or Form 5666 and from DOL on Form 6212-A:

    Referral from Prepared on
    EFU Form 4632 (with Form 4632-A) or
    Form 5346,
    EO Form 5666
    GE (other than those in para 10) Form 5666
    FSLG for 403(b) plans or 457 arrangements Form 4632 (with Form 4632-C)
    EBSA Form 6212-A
  7. EP makes referrals to IRS groups and government agencies on these forms.

    Referral to Prepare on
    EBSA Form 6212-B See IRM 4.71.6 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 6212-B.
    EFUs, EPD, EO, GE or EP (for a future year) Form 5666. See IRM 4.71.6 Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 5666.
    EFUs, when a coordinated exam is needed Form 6229 See IRM 4.71.6 Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 6229.
    PBGC Form 6533 See IRM 4.71.6 Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits for an example Form 6533.
    OPR, when a complaint is being made about an attorney, CPA, enrolled agent, enrolled actuary or an enrolled retirement plan agent. Form 8484
    SB/SE Area Planning and Special Programs Office, when a complaint is being made about an unenrolled return preparer’s conduct. Form 5666
  8. When you need help from an IRS specialist outside of EP, use the Specialist Referral System (SRS). See IRM 4.71.6.11, EP Group Procedures – Specialist Referral System (SRS).

Classification Procedures for the Referral Specialist (RS)

  1. Classification is responsible for controlling and processing referrals that are either initiated by EP or made to EP.

  2. The RS in Classification will:

    1. Promptly review the referral.

    2. Complete the IDRS research to determine exam potential and if there is a related EP exam or determination case open.

    3. Enter all referral information onto a database: taxpayer name, EIN, type of referral, tax period(s), date received, disposition and date of disposition.

    4. Forward all referrals made to EBSA on Form 6212-B to the EBSA Regional Director by the last day of the workweek in which Classification received the referral.

    5. Forward Form 6229 with all relevant attachments to the appropriate SB/SE PSP Territory Manager within 5 days of receipt.

  3. If you (the RS) determine that an exam is warranted:

    1. Determine the year to be examined

    2. Initiate AIMS control

    3. Obtain a RICS return

    4. Assign and forward the RCCMS activity to the EP group

  4. If the referral is a Form 5666 or Form 4632 (with checksheet 4632-B) referral:

    1. Contact the originator, when appropriate, within 30 workdays of the date that the Form 5666 was sent to Classification.

    2. Return a copy of the referral to the originator noting the action taken.

  5. If the referral is from DOL (EBSA), contact the originator within 30 workdays of the date Form 6212-A was sent to Classification. Complete the "Action Taken" block on Form 6212-A and return Part Two of the form to EBSA.

  6. When an exam initiated as the result of a referral from EBSA is closed, forward a copy of Form 6212-A to the EBSA Regional Director with comments in the "Remarks" section briefly stating the results of the exam.

    1. If excise tax under IRC 4971 or IRC 4975 is being assessed, list the amount of tax.

    2. If the IRS doesn’t propose or assess excise taxes, list the reasons in the "Remarks" section of Form 6212-A.

  7. If the referral is received on Form 4632 (with checksheet 4632-A) or 5346 from an EFU, contact the originator within 30 workdays of the date the referral was sent to Classification. Return a copy of the referral to the originator with the action taken, annotated on the form.

  8. If the referral is received on Form 4632 (with checksheet 4632-C) from FSLG, immediately log in the referral and forward it to the analyst in EPP responsible for IRC 403(b) and IRC 457 arrangements.

  9. If you determine that an exam is warranted but the referral is for a future year or resources aren’t available to conduct the exam, place the referral in suspense.

    Note:

    Future year referrals held in suspense are reviewed periodically to ensure that the exam is done as soon as possible.

  10. If you determine that an exam isn’t warranted, dispose the referral as follows:

    1. Return a copy of Form 5666, annotated with the action taken, to the originator within 30 workdays of the date the referral was sent to Classification.

    2. Include in the record keeping system an explanation of the reason the referred case was not selected for exam.

      Note:

      Classification keeps the original Form 5666 referral for three years in a system of records.

    3. Annotate on the Form 6212-A not selected for exam the reason for not examining it and notify the originator within 30 workdays of the date the referral was sent to Classification. Select the appropriate "Action Taken" block on Form 6212-A and return Part Two of the form to EBSA.

      Note:

      Classification keeps Part One for three years in a system of records that permits Form 6212-A to be retrieved.

    4. Annotate Form 4632 (with checksheets 4632-A, 4632-B, or 4632-C, as applicable) or Form 5346 not selected for exam accordingly and return a copy to the applicable EFU within 30 workdays of the date the referral was sent to Classification.

      Note:

      Classification keeps the referral for three years in a system of records.

Group Procedures – Referrals Received From Classification

  1. When a group receives a referral, the manager should immediately assign the case to an agent.

  2. The agent will contact the EFU agent, EP Determination Specialist, EO agent, GE agent, FSLG agent, ITG agent or EBSA investigator within 30 workdays of the group's receipt of Form 4632 (with checksheet 4632-A, 4632-B, or 4632-C, as applicable), Form 5346, Form 5666 or Form 6212-A if the related case is being held open in the EFU or in EBSA.

    Note:

    The agent should periodically update the related examiner or investigator of the EP exam status and results.

  3. If a related exam is open in EO, GE, FSLG, EBSA, or an EFU, or determination is open in EP Determinations, make every attempt to resolve every issue within 90 days of your group’s referral receipt. If the case is not closed within 90 days, the EP group manager should contact the referring group manager to update them on the status of the exam.

  4. Agent: Once you resolve the referral:

    1. Prepare a brief exam report on EP's findings on the referred issue. Use Form 886-A, Explanation of Items, or a memo.

    2. Send the exam report and a copy of the referral (Form 4632 or Form 6212-A) directly to the agent/investigator if they have a related exam open and are anticipating an update. Send a copy of the exam report and the referral to Classification.

    3. Notify the EP Determination Specialist of the issue(s)’ resolution, if they have a related open determination case and are expecting an update

    4. Document Form 5464.

    5. Save a copy of the exam report and referral package in the RCCMS Office Documents folder using the RCCMS Naming Convention.

EP Group Procedures – Referrals from Other Sources

  1. Occasionally EP groups receive referrals directly from:

    • Other agencies (e.g., DOL)

    • Other TEGE functional units ( EO or FSLG)

    • Individual taxpayers

    • Agents from an EFU

  2. The group should send referrals they receive to Classification at the address in paragraph (4) of IRM 4.71.6.1.3, Overview of Employee Plans Referrals.

  3. If the referring entity doesn’t prepare a referral form, the receiving group should prepare the applicable referral form and send it to Classification.

    Example:

    An EP group receives a referral from a taxpayer. The agent or group should prepare Form 5666 and send it to Classification.

  4. If your group decides to examine a return based on a referral received directly from an entity or individual, note that on the referral form when you send to Classification.

  5. Don’t begin any compliance activity for a referral unless you received it from Classification or Classification has approved it.

EP Group Procedures – Making Referrals Within EP

  1. Complete Form 5666 and submit it to your group manager for approval for referrals you make to other EP groups. Fully explain the issue(s) and specify the related Code section(s).

  2. Make sure the group manager signs item M on Form 5666. See IRM 4.71.6 Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 5666.

  3. The group manager or designee emails or regular mails the approved Form 5666 referrals to Classification.

    1. Email: send referrals to Classification's group mailbox: tege.ep.classification@irs.gov.

    2. Mail: send referrals to Classification. See paragraph (4) of IRM 4.71.6.1.3, Overview of Employee Plans Referrals, for the address.

Emerging Issue Referrals

  1. EP has an Emerging Issue Compliance Planning Group (CPG) to evaluate leads on potential emerging issues when a qualified plan is involved. These issues may involve abusive transactions or other non-compliance.

  2. Refer emerging issues to the CPG.

    1. Make referrals to the CPG on TEGE Connect at Employee Plans Abusive Tax Avoidance Transactions.

    2. On the EP Abusive Tax Avoidance Transactions page in the "Emerging Issues" area, select "Report an Emerging Issue" and open the form.

    3. Complete the form. Enter the date, your contact information and the description of the issue.

    4. Select "Submit by email."

      Note:

      Microsoft Outlook opens a new message to the TE/GE-EP-Emerging Issues mailbox with the form data attached.

    5. Click "Send."

      Note:

      Check your Outlook to make sure the email was sent.

Promoter Referrals

  1. When you or your manager become aware of a practitioner who may be promoting an abusive transaction, make a referral to the LDC on Form 14242. See IRM 4.71.6 Exhibit 5 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 14242.

  2. Send completed LDC Referral Forms through encrypted email, regular mail or fax to the LDC.

    1. Email the LDC at *ldc.

    2. Mail to the LDC at:


      LDC
      24000 Avila Road
      Mail Stop 5040
      Laguna Niguel, CA 92677

    3. Fax the LDC at 877 477 9135.

  3. Notify your manager and their Area Emerging Issues Coordinator when you make a referral to the LDC.

    Note:

    The Employee Plans Abusive Tax Avoidance Transactions page Emerging Issues section page has a link contact information for the "Emerging Issues Area Contacts."

EP Group Procedures – Making Referrals to Exam Functional Units

  1. Refer income tax issues not within the scope of Form 1040/1120 Discrepancy Adjustments to an EFU on Form 5666. See IRM 4.71.6 Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 5666.

    Note:

    See IRM 4.71.4.2, Referrals to an Examination Functional Unit (EFU), for a list of issues outside the scope of Form 1040/1120 Discrepancy Adjustments.

  2. Prepare Form 5666 and include:

    1. A clear description of the issue and the amount of unreported income and/or tax consequences.

    2. Your name as the referring agent, legibly printed on item L.

    3. Your group manager's signature and date on item M.

    4. A copy of the applicable RTVUE or BRTVU print and any other relevant IDRS research attached.

  3. Refer income tax issues on Forms 1041 resulting from a proposed plan revocation or disqualification to an EFU on Form 5666.

  4. If it’s urgent that SB/SE or LB&I conduct a coordinated exam of a related Form 1120, Form 1065 or Form 1040, prepare Form 6229. See IRM 4.71.6 Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 6229.

    1. Write a description of the issues in the "Narrative" section of the form.

      Note:

      You may also prepare and attach a Revenue Agent Report.

    2. Explain the extent to which you’re requesting SB/SE or LB&I involvement in the "Narrative" section of the form.

    3. Email or regular mail the Form 6229 (and attachments, if any) to your group manager for approval.

    4. Once approved, the group manager sends Form 6229 (and attachments, if any) to the Area Manager for review and approval.

    5. The Area Manager signs the upper right-hand side of the paper version of Form 6229 in the box containing "From TEGE Territory/Area___Manager."

  5. Send Form 5666 and Form 6229 to Classification, unless you are working directly with another agent in the EFU. If the agent is working directly with the EFU, send the referral directly to the EFU and a copy to Classification. See paragraph (4) of IRM 4.71.6.1.3, Overview of Employee Plans Referrals, for the address.

  6. Save a copy of the Form 5666 or Form 6229 in the RCCMS Office Documents folder using the RCCMS Naming Convention.

  7. After making the referral, hold the case open until you receive feedback from the EFU or 20 workdays, before you close the case.

EP Group Procedures – Making Referrals to DOL

  1. Complete Form 6212-B for all full scope and focused EP exams involving plans under DOL jurisdiction. See IRM 4.71.6 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 6212-B.

    Note:

    DOL doesn’t have jurisdiction of plans that only provide benefits to owners and their spouses. However, if you determine that a plan covering only one participant (or participant and spouse) should cover additional people, make a referral to DOL.

  2. For full scope or focused EP exams which include trust assets as an identified issue, complete the Form 6212-B based on your:

    1. Review of financial information on: the Forms 5500 or 5500-SF, related schedules, RICS return attachments and taxpayer provided information.

    2. Identification of large, unusual and questionable items.

    3. Examination of a plan’s books and records.

  3. For focused EP exams that don’t include trust assets as an identified issue, complete the Form 6212-B based on your:

    1. Pre-audit review of the financial information on: the Forms 5500 or 5500-SF, related schedules and RICS return attachments.

    2. Identification of large, unusual and questionable items.

      Note:

      Your limited financial review may not offer sufficient evidence to ask more questions and include trust assets as an additional focused exam issue. If this is the case, "NA" is an appropriate response on Form 6212-B. However, answer "Yes" or "No" when there is evidence that allows you to determine if either applies.

  4. Make a referral to EBSA when a question on Form 6212-B is answered in the right hand column or when you’re proposing plan revocation/non-qualification.

  5. When you make a referral to EBSA, send these items to Classification at the address in paragraph (4) of IRM 4.71.6.1.3, Overview of Employee Plans Referrals.

    1. Two copies of Form 6212-B.

      Note:

      Include a concise summary of the issue you are referring on Line 12 "Remarks" section.

    2. Any relevant information about the referred issue, including a copy of the Revenue Agent’s Report (RAR) if there is an unagreed IRC 4971 issue, IRC 4975 issue or a proposed revocation.

      Note:

      The attachments you include with Form 6212-B won’t be sent to DOL-EBSA but kept by Classification. When Classification receives DOL-EBSA’s written request, they release relevant information as required by IRC 6103(l)(2).

  6. Select the "DOL Participation Requested" block on Form 6212-B only when DOL-EBSA’s joint participation is needed and for all unagreed cases involving IRC 4971 or IRC 4975 excise tax.

  7. Hold any exam for which Form 6212-B is referred open until you receive a response or 30 days from the date sent to Classification, if earlier.

  8. Save a copy of the Form 6212-B in the RCCMS Office Documents folder using the RCCMS Naming Convention.

  9. Document/write in the CCR whether IRS made a referral to EBSA.

  10. IRS delays action in a case when, as a result of a referral of a checksheet between the agencies, the EBSA Regional Office advises the Manager, Classification, in writing that they’ve referred the case to the DOL National Office.

    1. IRS doesn’t take further case action until the EBSA notifies the Classification Unit of their final action in the case.

      Exception:

      IRS works the case when:

      • Collection of a tax is in jeopardy.

      • The statute of limitations expires soon.

      • Plan assets or the plan participants’ interests must be protected.

    2. If IRS must work a case, the IRS will immediately notify DOL of the action by calling them and confirming in writing within five workdays.

EP Group Procedures – Making Referrals to Pension Benefit Guaranty Corporation (PBGC)

  1. Complete Form 6533 for all EP exams of plans subject to PBGC jurisdiction. See IRM 4.71.6 Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 6533.

  2. Most defined benefit pension plans are covered by PBGC insurance. ERISA section 4021(b) lists plans that aren’t covered. Defined benefit plans not covered include:

    1. Plans offered by professional service employers (i.e., doctors and lawyers) that have never had more than 25 active participants.

    2. Plans outside the United States for nonresident aliens.

    3. Plans established exclusively for one or more substantial owners.

    4. Church plans, as defined by IRC 414(e), unless the plan has made an election under IRC 410(d) to be covered and has notified PBGC that it wishes to be covered.

    5. Plans sponsored by federal, state and local governments.

  3. When you determine a referral to the PBGC is warranted per Form 6533, send the referral to:


    Pension Benefit Guaranty Corporation - Chief Negotiating Actuary
    Corporate Finance and Negotiations Department
    1200 K Street, NW, Suite 270
    Washington, DC 20005-4026

  4. Send a copy of the Form 6533 to Classification with a note stating when you sent the original referral to PBGC. See paragraph (4) of IRM 4.71.6.1.3, Overview of Employee Plans Referrals, for the address.

  5. You don’t have to hold the case for any length of time after you make a referral.

  6. Save a copy of Form 6533 in the RCCMS Office Documents folder using the RCCMS Naming Convention.

EP Group Procedures - Art Appraisal Services

  1. You must make a referral to Art Appraisal Services when a return you are auditing includes art or cultural property valued at $50,000 or more. Refer as soon as possible during your exam but no later than 30 days after you identify the issue.

  2. Make a referral to Art Appraisal Services through the Specialist Referral System (SRS). See IRM 4.71.6.11, EP Group Procedures – Specialist Referral System (SRS).

  3. You may, at your discretion, also request help in valuing items of art valued under $50,000. Refer to IRM 4.48.2.2, Criteria for Requesting Art Appraisal Services Assistance, for information on obtaining values on items valued at less than $50,000.

EP Group Procedures – Specialist Referral System (SRS)

  1. Use the SRS to request specialized assistance on EP exams.

  2. Through SRS, agents can request help online at SRS home page. This automatically notifies the appropriate Specialist Manager (in LB&I, SBSE, W&I, CAS, EO, or GE).

    1. The Specialist Manager may accept or reject the request.

    2. If accepted, the manager assigns a specialist to help you on the case.

  3. Use the SRS to request help from:

    • Computer Audit Specialist (CAS)

    • Economist

    • Employment Tax (LB&I)

    • Employment Tax (SB/SE)

    • Employment Tax (TE/GE)

    • Engineering

    • Exempt Organizations

    • Federal, State & Local Government

    • Financial Products

    • Indian Tribal Government

    • International

    • Tax-Exempt Bonds

  4. See these links on the SRS home page:

    1. Create Referral Link– use to request a specialist’s services and one will be assigned to your case

    2. Create Consultation Link– use to submit a question to a specialist as an informal way to receive answers to your questions

    3. FAQ Link– use to find other resources or research sites for a specific specialty.

      Example:

      Find links to the employment tax home page or a bulletin board forum for the specialty in which you are interested.

Referrals to Correct Master, Prototype and Volume Submitter Plan Language

  1. When you determine that a pre-approved Master & Prototype or Volume Submitter plan has erroneous language, don’t request an amendment; accept the language as previously approved.

  2. Make a referral to the Pre-Approved Plan Coordinator. See IRM 4.71.6 Exhibit 4 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the Pre-Approved Plan Referral Form.

  3. Submit these items with the referral:

    1. A copy of the plan sections in question

    2. A copy of the opinion letter or advisory letter

  4. Mail the referral to:

    Internal Revenue Service
    Pre-Approved Plan Coordinator
    550 Main St.
    P.O. Box 2508, Room 5106
    Group 7521
    Cincinnati, OH 45201