4.71.20 Employee Plans Large Case Support Examination Procedures

Manual Transmittal

October 24, 2018

Purpose

(1) This transmits revised IRM 4.71.20, Employee Plans Examination of Returns, Employee Plans Large Case Support Examination Procedures.

Background

IRM 4.71.20 provides guidance and information to help agents working Employee Plans (EP) Large Case Support Examination cases.

These procedures are mandatory for all cases that are EP Large Case Support Examination coordinated with Large Business & International (LB&I) and Exempt Organization (EO) Team Examination Program (TEP).

This IRM is intended to provide supplemental information for procedures specific to EP Large Case Support Examinations and it is not intended to replace IRM 4.71.1, Overview of Form 5500 Examination Procedures or IRM 4.71.16, Employee Plans Large Case Examinations.

Material Changes

(1) Added additional content to paragraph (5) of IRM 4.71.20.1, Program, Scope and Objectives.

(2) IRM 4.71.20.1.3, Background, was added.

(3) The email address for Classification’s group mailbox was updated: *Manager EO Classification.

(4) Minor editorial changes were made throughout the document.

Effect on Other Documents

This supersedes IRM 4.71.20 dated November 6, 2017.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(10-24-2018)

Catherine L. Jones
Acting Director, Employee Plans
Tax Exempt and Government Entities

Program, Scope and Objectives

  1. The Employee Plans (EP) examination program was established to ensure:

    1. Compliance with the provisions of Internal Revenue Code (IRC) 401(a).

    2. That taxes related to trust assets are being properly reported.

  2. Purpose: IRM 4.71.20, Employee Plans Examination of Returns, Employee Plans Large Case Support Examination Procedures, contains procedures, guidance and information to help agents working Employee Plans (EP) Large Case Support Examination cases.

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

  4. Program Owner: Director, EP Examinations sets the program for the EP examination program.

  5. Program Authority: EP Examinations’ authority to conduct examinations, resolve issues and determine tax liability is derived from Title 26, Internal Revenue Code, Subtitle F – Procedure and Administration, which includes but is not limited to:.

    1. IRC section 7602 - Examination of books and witnesses, which falls under Chapter 78 - Discovery of Liability and Enforcement of Title.

      Note:

      IRC 7602 provides agents with the authority to:
      * Audit any books, papers, records or other data necessary to complete an audit.
      * Take testimony under oath to secure additional information needed.
      * Issue summons for information necessary to complete an audit.
      * Ask about any offense connected to the administering or enforcing of the Internal Revenue laws.

    2. IRC section 6201- Assessment authority, which falls under Chapter 63 - Assessment.

      Note:

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

  6. This IRM section is authored by EP Mandatory Review. For questions, information or suggestions, contact the manager of EP Mandatory Review.

Authority

  1. EP Examination’s authority to resolve issues is derived from its authority to determine tax liability under IRC 6201. EP Examination is the division designated to determine if a retirement plan is qualified under IRC 401 and the underlying regulations, and therefore, exempt from tax under IRC 501.

Program Controls

  1. Tax Exempt Quality Measurement System (TEQMS) is the quality control system Examinations uses to oversee the examination program. For more information on TEQMS, see IRM 4.71.15.1.3, Program Controls and Program Reports - TEQMS.

  2. All examinations will be done in accordance with the Taxpayer Bill of Rights as listed in IRC 7803(a)(3). Find additional information on the Taxpayer Bill of Rights on IRS.gov.

Background

  1. The Employee Plans examination program’s primary objective is regulatory, emphasizing continued qualification of employee benefit plans (Policy Statement 4-119 and IRM 1.2.13, Servicewide Policies and Authorities, Policy Statements for the Examining Process.) EP selects and examines returns to:

    1. Promote the highest degree of voluntary compliance with the tax laws on plan qualification.

    2. Determine qualified plans’ extent of compliance and the causes of noncompliance with the tax laws.

    3. Determine whether such plans meet the applicable qualification requirements in operation.

  2. Under Policy Statement 4-117, EP agents and managers are:

    1. Given broad authority to consider and weigh conflicting information, data, and opinions.

    2. To use professional judgement according to auditing standards to make findings of fact and apply the IRS’s position on issues of law to determine the correct tax liability.

    3. To exercise this authority to obtain the greatest number of tax determination agreements without sacrificing the quality or integrity of those determinations and to dispose of tax differences at the lowest level. See IRM 1.2.13, Servicewide Policies and Authorities, Policy Statements for the Examining Process.

  3. All examinations are to be conducted according to Policy Statement 1-236, Fairness and Integrity in Enforcement Selection. See IRM 1.2.10, Servicewide Policies and Authorities, Policy Statements for Organization, Finance and Management Activities.

Acronyms, Abbreviations, and Forms

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

    Acronyms and Abbreviations

    Acronym Definition
    AIMS Audit Information Management System
    ARDI Accounts Receivable Dollar Inventory
    CIC Coordinated industry cases (identified by specific activity code)
    CIP coordinated industry program cases ((identified by specific activity code)
    EO Exempt Organizations
    EP Employee Plans
    EPMF Employee Plans Master File
    IC Industry Cases
    IDR Information Document Request
    IDRS Integrated Data Retrieval System
    IRC Internal Revenue Code (Code)
    LB&I Large Business and International Division
    MFT Master File Tax
    NOPA Notice of Proposed Adjustments
    NRU Non-Return Unit
    RCCMS Reporting Compliance Case Management System
    SB/SE Small Business /Self-Employed Division
    TE/GE Tax Exempt & Government Entities Division
    TEQMS Tax Exempt Quality Measurement System
    W&I Wage and Investment

     

    Documents, Forms, and Pubs

    Form Name
    Form 886-A Explanation of Items
    Form 895-EP Notice of Statute Expiration
    Form 941 Employer's Quarterly Federal Tax Return
    Form 990-T Unrelated Business Income Tax Return
    Form 1120 U.S. Corporation Income Tax Return
    Form 1041 U.S. Income Tax Return for Estates and Trusts
    Form 3198-A TE/GE Special Handling Notice
    Form 4564 Information Document Request
    Form 4632 Employee Plans Referral
    Form 4632-A Employee Plans Referral Checksheet
    Form 5330 Return of Excise Taxes Related to Employee Benefit Plans
    Form 5500 Annual Return/Report of Employee Benefit Plan
    Form 5650 EP Examined Closing Record
    Form 5701 Notice of Proposed Adjustment
    Form 5701-A Notice of Proposed Issue/Adjustment
    Form SS-10 Consent to Extend the Time to Assess Employment Taxes

     

Overview of EP Large Case Support Examinations Procedures

  1. These procedures apply to EP Large Case Support Examinations coordinated with LB&I or EO (Exams).

  2. The three types of EP Large Case Support Examinations are:

    1. Deduction Only Support Examinations - restricted to income tax issues.

    2. LB&I Support Examinations Involving Plan Qualification - involve IRC 401(a) plan qualification support, which may include the deduction.

    3. EO Support Examinations Involving Plan Qualification - involve IRC 401(a), IRC 403(b) and IRC 457 plan support, which may include the plan sponsor's deduction for contributions to its retirement arrangement.

  3. Every EP Large Case Support Examination with LB&I or EO (Exam) requires agents to complete and include an audit plan in the EP examination case file, which at a minimum should describe the extent of the EP examination activity.

Definitions

  1. The following terms are used in EP Large Case Support Examinations with LB&I or EO/

    Term Definition
    Benchmark Events target dates or time-lines for specific actions, such as:
    • Case start and completion dates

    • Timing of issuing and responding to Information Document Requests (IDRs) and Notices of Proposed Adjustments (NOPAs),

    • Frequency of case progress meetings and other events.

    Deduction Only Support Examination All EP examination support assignments with LB&I or EO, restricted to an EP agent’s investigation of one or more income tax related issue.
    EO Support Examination All EP support assignments with EO involving at least one IRC 401(a), IRC 403(b) or IRC 457 plan compliance issue, regardless of the scope and whether:
    • The assignment includes the deduction or other income tax analysis.

    EP Audit Plan Written document the EP team coordinator or agent prepares which serves as the audit process map.
    1. Lists the scope, depth, and audit procedures for each issue under examination.

    2. Describes work assignments, exam procedures, time estimates and special instructions.

      Note:

      For Deduction Only Support Examinations with only one EP agent, the EP audit plan may be brief, and it should summarize the scope and depth of the assistance provided.

    Large Case Examination An EP examination of a qualified retirement plan with at least 2,500 participants.
    Large Case Agent an EP examination agent assigned to conduct Large Case examinations.
    Information Document Request (IDR) Form 4564 and all IRS information and records requests regardless of the form used or the format.
    LB&I Support Examination Involving Plan Qualification EP support assignments involving at least one IRC 401(a) compliance issue, regardless of the scope and whether the assignment includes the employer’s or sponsor's deduction for contributions to a qualified plan or other compensation deferral arrangement.
    Taxpayer the legal entity and all related entities or subsidiaries that EP, LB&I or EO considers as the large case taxpayer.
    TEP (Team Examination Program) - The EO examination program designed to address large and complex tax-exempt organizations’ compliance

Overview of Deduction Only Support Examinations

  1. EP support to an LB&I examination is often limited to issues that affect the CIC taxpayer’s income tax liability. In Deduction Only Support Examinations, EP helps LB&I determine whether their taxpayer’s IRC 404 deductions are proper.

  2. The LB&I case manager may want EP's involvement expanded to include other income tax matters.

    Example:

    LB&I may ask EP to help determine the proper income tax treatment of nonqualified deferred compensation plans and develop income recognition and excise tax issues.

  3. The EP agent’s examination activity in Deduction Only Support Examinations is restricted to the investigation of one or more income tax issues.

Deduction Only Support Examinations - Planning and Protocol

  1. LB&I responsibilities in Deduction Only Support Examinations include:

    1. Notifying the LB&I taxpayer of the Form 1120 examination

    2. Apprising the taxpayer of its rights

    3. Engaging the taxpayer in the examination planning process

    4. Explaining the examination process

  2. The LB&I case manager negotiates all case processing benchmark events.

  3. The EP agent assigned to the team assists the LB&I case manager explain EP’s role in the LB&I examination to the taxpayer.

    Exception:

    For EP involvement in deduction only support, the EP agent isn’t required to explain the Form 5500 audit process or the taxpayer rights for examination of any plan that the LB&I taxpayer sponsors because the Form 5500 isn’t under examination.

  4. The EP agent gives the LB&I case manager an EP audit plan in a format consistent with LB&I procedures.

    1. The EP audit plan describes the extent of the EP examination activity.

    2. The EP case file contains a copy of the EP audit plan.

    3. The EP group manager reviews and approves the EP audit plan before the agent submits it to LB&I.

    4. The EP and LB&I case managers approve significant changes to the EP audit plan.

  5. EP agents aren’t responsible for protecting the statute of limitations of a LB&I taxpayer’s qualified plan.

    Exception:

    When the EP agent expands the scope of a Deduction Only Support Examination to include an IRC 401(a) compliance issue, the Form 5500 is under examination and the agent must protect the statute of limitations for the plan(s) placed under examination per established procedures. See IRM 4.71.9, Statute Control Procedures.

  6. For Deduction Only Support Examinations, EP agents use alpha code "PP" for a Form 5500 established on AIMS and the Reporting Compliance Case Management System (RCCMS) to track time charges and examination results.

Deduction Only Support Examinations - Submitting IDRs

  1. Consider these rules when you prepare IDRs:

    1. Submit IDRs according to the agreements between LB&I and the taxpayer, unless EP, the LB&I team leader and the taxpayer negotiate something different.

    2. Limit IDRs to reflect the EP audit plan examination scope. LB&I case managers approve the scope of the EP examination.

      Note:

      Don’t circumvent the LB&I case manager’s authority by issuing requests that exceed the scope of your support obligations.

    3. Include the income tax rationale for requesting information. This helps avoid misunderstandings about the entity or entities under examination.

    4. Avoid submitting IDRs that the taxpayer may construe as having initiated an examination of the plan or entity other than the LB&I taxpayer. These Include requests for an unfunded nonqualified deferred compensation arrangement and inquiries for the nondeductiblity of Chapter 43 excise taxes (IRC sections 4971 through 4980). The former rarely creates a separate audit and the latter never does.

    5. Follow the procedures in IRM 4.71.20.4, Overview of LB&I Support Examinations Involving Plan Qualification, when you open a plan examination, whether inadvertently or by intent.

  2. LB&I team leaders should review IDRs submitted by team members.

  3. The agents should bring any dispute between a team leader and an EP agent as to the need for, or scope of, an IDR to the LB&I and EP group managers for resolution.

Appropriate Records Requests
  1. Avoid inadvertently opening a plan examination. Therefore, limit IDRs to the records of the taxpayer whose return is under examination.

  2. Confine your IDRs to the LB&I taxpayer’s records, and those records relating to tax issues requiring specialized assistance.

  3. Typically, you can resolve EP related income tax issues by reviewing the LB&I taxpayer’s records. Examples of LB&I taxpayer records used in a Deduction Only Support Examination are:

    1. Taxpayer’s copy of a favorable determination letter

    2. Compensation data

    3. Trust reports that verify the receipt of an employer contribution

    4. Deductible limit calculations prepared 404 calculations by plan administrator or the plan actuary

    5. Schedule M-1 or M-3 (Form 1120) detail

    6. Accounting records

    7. Board of Directors resolutions

    8. Verification of ESOP dividends paid directly by the employer

    9. Verification of plan expenses paid directly by the employer

    10. Actuarial valuation reports

    11. Confirmation as to the plan year to which a particular contribution relates.

Inappropriate Records Requests
  1. Don’t request plan administrator or trustee records, unless they are integral to resolving the EP deduction issue (primarily IRC 404). If you don’t limit your IDR to the LB&I taxpayer’s records, the taxpayer or representative may question which entities are under examination.

  2. Don’t request plan records that don’t directly relate to an income tax issue under investigation, as such requests may constitute plan compliance inquiries. See the list below for examples of plan records you shouldn’t request in a Deduction Only Support Examination:

    1. Plan allocation schedules

    2. ADP/ACP nondiscrimination tests

    3. Plan investment records (except to substantiate employer contributions)

    4. Coverage and IRC 401(a)(4) testing

    5. Benefit calculation or distribution records

Deduction Only Support Examinations - AIMS & RCCMS Establishment

  1. EP establishes on AIMS and RCCMS:

    1. Only one Form 5500 return for purposes for charging time for a Deduction Only Support Examination.

    2. Form 5500 for the plan year that corresponds to one of the LB&I tax years under examination, if possible.

    3. A recent plan year rather than an earlier plan year (for statute of limitations purposes).

  2. Establishing a Form 5500 on AIMS and RCCMS for a Deduction Only Support Examinations doesn’t constitute opening the plan for examination.

  3. Use the following procedures when establishing the Form 5500:

    1. Research IDRS to verify that the Form 5500 series return has posted on the EPMF.

      Note:

      If the return hasn’t posted on the EPMF, follow the appropriate procedures in IRM 4.71.1.21, Amended, Substitute and Secured Forms 5500.

    2. Obtain your manager’s approval for the year(s) to be established.

    3. Prepare the Related and Subsequent Year Form 5500 Request Form. See IRM 4.71.20 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the form.

    4. Correctly complete all the information ( the project code, condition code, group number, etc.) on the form or it will be returned. Note in your request that the return has posted to the EPMF.

    5. Use source code 47, EO TEP/LB&I CIP/EPTA (Large Case), and project code 6451, 404 Deduction Only – LB&I Support (Non-International), or project code 6055, 404 Deduction Only - LB&I Support (International), as applicable.

    6. Submit the form to your group manager for approval.

    7. The group manager or designee will email the approved form to Classification's group mailbox at *Manager EO Classification and to the agent.

    8. Save a copy of the approved form (Related and Subsequent Year Form 5500 Request) in the RCCMS Office Documents folder using the RCCMS Naming Convention.

  4. Classification will:

    1. Acknowledge receipt of the request to establish the return (normally within 5 business days).

    2. Mark the return on RICS, establish the return on AIMS and RCCMS and update these systems to the group.

    3. Inform the agent and group manager (normally within 10 business days) that the record has been assigned to the group on AIMS and RCCMS.

      Note:

      AIMS will be in status 10 when there is a full AIMS account.

  5. Follow these special rules for project code 6451 and 6055 examinations:

    Action Explanation
    Update the statute of limitations to alpha code "PP" immediately upon assignment. Don’t use alpha code "FF" because our system won’t capture the Deduction Only Support Examination exam results when we use this alpha code.
    Apply the general statute of limitation procedures in IRM 4.71.9 Statute Control Procedures, and protect the statute of limitations for Form 5500/1041 because the plan is then considered to be under exam. If you expand the scope to include an IRC 401(a) issue and the statute of limitations is still open for that year.
    Use "PP" alpha code for the statute of limitations for that year.

    Note:

    If you open Form 5500 exams in later years for which the statute is still open, follow the general statute of limitation procedures in IRM 4.71.9 and protect the statute of limitations for Form 5500/1041.

    If you expand the scope to include an IRC 401(a) issue and the statute of limitations is not open for that year.
    You don’t have to prepare Form 895-EP for a project code 6451 or 6055 exam when you:
    • update the statute of limitations to alpha "PP"

    • don’t expand the exam scope to include IRC 401(a) issues.

  6. When you expand the examination to include IRC 401(a) compliance issue(s) or other years or other returns, get your manager’s approval to expand beyond the deduction only issue and:

    1. Clearly reflect any decision to expand the examination in the case chronology and in the workpapers.

    2. Charge the case time to the related returns as appropriate.

    3. Update the Forms 5500 project code to 6078, Support to LB&I CIP, (or project code 6052 for international cases) on AIMS and RCCMS.

    4. Follow the procedures in IRM 4.71.20.4, Overview of LB&I Support Examinations Involving Plan Qualification.

Deduction Only Support Examinations - Examination Closing Requirements

  1. Don’t issue a closing letter for Deduction Only Support Examination cases.

  2. Communicate your findings to the LB&I case manager.

    1. LB&I incorporates EP’s results of related income tax adjustments in its examination report.

    2. The EP agent prepares Form 5701 and Form 886-A or other written feedback to address their Deduction Only Support Examination findings and conclusions.

    3. The LB&I case manager communicates any EP issues to the taxpayer as part of the overall LB&I examination report.

  3. Absent any EP related Form 5701, the EP agent prepares a post-examination critique or feedback report to inform LB&I of EP’s findings and includes this report in the EP case file.

  4. To report the total income tax adjustment recommendation, the EP agent includes the amount on line 605 of Form 5650, if required, and in the RCCMS closing record details tab line item titled "Adjustment to SB/SE, W&I, LB&I."

  5. When you establish only one return, don’t restrict the entry on Form 5650 line 605 to only that of the plan year you established on AIMS. To properly capture LB&I support activity, enter the total recommended deduction adjustment (increase or decrease) derived from all EP related code sections, for all corporate tax years, and for all deferred compensation arrangements qualified or otherwise on the one record established.

  6. Except for unusual circumstances, use only three applicable RCCMS disposal codes for Deduction Only Support Examinations:

    1. RCCMS disposal code 107, No Change (AIMS disposal code 02)

    2. RCCMS disposal code 205, Change to a Related Return (AIMS disposal code 04)

    3. RCCMS disposal code 207, Delinquent Related Return Secured (AIMS disposal code 05)

  7. Use disposal code 205, when you make or propose an EP-related adjustment to the deduction claimed on the sponsor's tax return.

    Note:

    Disposal code 205 may be used when you close the support case, regardless of the outcome of subsequent protests, settlements, or court petitions.

  8. When practical, don’t close a Deduction Only Support Examination involving an unagreed EP related deduction issue until after LB&I’s closing conference with their taxpayer.

  9. Use disposal code 207 if you secure Form 5330 to report IRC 4971 or other excise tax.

  10. Don’t use RCCMS disposal code 102, Agreed Tax Change, (AIMS disposal code 03) because you established the Form 5500 on AIMS simply to track time and results. Since EP is working directly with LB&I, LB&I will make any proposed tax adjustments.

  11. Don’t enter an ARDI code on line 42 of the Form 5650 or on the RCCMS closing record because LB&I is responsible for soliciting any tax payments from the CIP taxpayer.

  12. Follow IRM 4.71.12, Case Assembly Guidelines, when you assemble the case for closure.

  13. Include in your case file:

    1. The EP audit plan

    2. Deduction workpapers

    3. Form 5701 (if an adjustment is proposed)

      Note:

      Form 5701 may be prepared by LB&I or by EP.

    4. The EP Revenue Agent Report (or Form 886-A)

      Note:

      This is generally issued as an attachment to Form 5701.

    5. Form 4632 or Form 4632-A.

      Note:

      Form 4632 isn’t always available when the Specialist Referral System (SRS) is used. If it’s not, include the printed or electronic referral in the case file.

    6. Minutes or feedback report from the post-examination critique

  14. Save all applicable forms and workpapers in the RCCMS Office Documents folder using the RCCMS Naming Convention. See IRM 4.71.20 Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits

  15. If there is a paper file, attach Form 3198-A to the outside of the examination file folder for each return.

    1. Check the "CIP/EPTA/TEP" and "Other Instructions" boxes in the Special Features section of Form 3198-A.

    2. Write: "Deduction Only Support Examination – No Closing Letter Required" in the "Other Instructions" line.

  16. If there isn’t a paper case file, don’t prepare Form 3198-A. Add this comment in the RCCMS closing record comment section: "Paperless file, Deduction Only Support Examination and no closing letter required."

Overview of LB&I Support Examinations Involving Plan Qualification

  1. This section applies when you have a Deduction Only Support Examination and decide to audit the plan (open a Form 5500 examination), open a Form 5330 examination, or LB&I requests support for an issue related to plan qualification.

  2. When you initiate an examination for the plan or a related return (usually Form 5330):

    1. Notify the plan sponsor in writing that an EP examination is being conducted.

    2. Conduct an EP specific opening conference with the plan sponsor.

    3. Invite the LB&I case manager and team coordinator to the conference.

    4. Explain the EP examination process to the plan sponsor.

    5. Inform the plan sponsor of taxpayer rights for the plan examination.

      Note:

      Even though LB&I may have apprised the taxpayer (typically the plan sponsor) of their examination rights, you still must inform them of the same for the plan examination.

    6. Solicit the plan sponsor and/or the plan administrator’s active participation in the examination planning process

    7. Protect the plan trust’s statute of limitations per IRM 4.71.9, Statute Control Procedures.

  3. Follow examination procedures in IRM 4.71.16, Employee Plans Large Case Examinations, except use project code 6078 (or 6052 if an international case) on RCCMS and AIMS.

  4. Prepare the appropriate closing letter per IRM 4.71.16.11.3.

LB&I Support Examinations Involving Plan Qualification- Planning and Protocol

  1. LB&I is responsible for:

    1. Notifying their taxpayer of the Form 1120 examination.

    2. Apprising the taxpayer of their rights, engaging the taxpayer in the examination planning process, and explaining the examination process.

  2. EP agents are responsible for fulfilling these same obligations for:

    1. IRC 401(a) compliance

    2. Excise tax examinations

  3. The LB&I case manager negotiates agreements as to benchmark events.

    1. EP agents generally honor LB&I agreements for benchmark events.

    2. Circumstances may require EP to deviate from these agreements to meet EP obligations for IRC 401(a) compliance or other areas that fall within EP jurisdiction.

  4. LB&I and EP may disagree on EP’s request to deviate from LB&I negotiated target dates or examination protocol on IDR deadlines, memoranda windows or deadlines, or case closing dates.

    1. The EP group manager should attempt to resolve any dispute.

    2. If the EP group manager can’t resolve the dispute, he/she will discuss the issue with the EP Area Manager to negotiate a resolution.

LB&I Support Examinations Involving Plan Qualification - Submitting IDRs

  1. The plan sponsor is responsible for maintaining plan records.

    1. The plan sponsor will identify the contact person who will work with EP at the EP opening conference.

    2. The EP contact person may not be the same individual as LB&I’s primary examination contact.

    3. In many cases, pre-established examination protocol may require the agent to deliver EP IDRs through the tax manager or other designated officer.

  2. Limit your IDRs to items needed to verify IRC 401(a) compliance of plans examined within the scope of your support assignment.

Appropriate Records Requests
  1. Although unlikely, a plan year under audit may correspond to an LB&I tax year that isn’t currently under audit.

  2. You may request information for a plan year not under examination when you need it to determine compliance in the year under examination. Examples include:

    1. Prior plan year highly compensated employee (HCE) related information used to determine current year ADP compliance

    2. Prior plan year actuarial valuation reports when analyzing the report for the plan year examined

  3. To avoid initiating an examination of the plan sponsor’s income tax return:

    1. Restrict your IDRs to records relating to IRC 401(a) compliance and other matters within EP’s jurisdiction.

    2. Address IDRs to the plan sponsor's designated contact.

    3. Provide an explanation to the plan sponsor's designated contact and the rationale for requesting specific items of information.

  4. Requests for information relating to compliance within the jurisdiction of EP generally don’t result in an examination of the plan sponsor’s tax return. Examples include:

    1. Minimum funding requirements under IRC 412

    2. Prohibited transactions under IRC 4975

    3. Other Chapter 43 excise tax liabilities

  5. Requests for prior or subsequent year information solely needed to apply the relief provisions of EPCRS don’t constitute an examination of those plan or corporate tax years.

Inappropriate Records Requests
  1. Don’t request records from the plan sponsor, trustee or plan administrator unless they’re:

    1. Integral to plan administration

    2. Related to IRC 401(a) compliance or other matters within EP jurisdiction

    3. Related to plan(s) or plan year(s) currently under examination

      Note:

      You may request information for a plan year not under examination when you need it to determine compliance for the exam year.

LB&I Support Examinations Involving Plan Qualification - AIMS & RCCMS Establishment Procedures

  1. You may examine related or subsequent year returns when the examination reveals recurring issues or transactions that may adversely affect the plan’s qualified status or the trust's exemption for the examination year assigned.

  2. Discuss the issue(s) with your manager who will decide whether to examine the related or subsequent year returns.

  3. Follow the following procedures when you examine a related or subsequent year Form 5500 series return:

    1. Research IDRS to verify that the Form 5500 series return has posted on the EPMF.

      Note:

      If the return hasn’t posted on the EPMF, follow the procedures in IRM 4.71.1.21.

    2. Prepare the Related and Subsequent Year Form 5500 Request form and forward it to your manager for approval. See IRM 4.71.20 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits.

    3. Use source code 47, EO TEP/LB&I CIP/EPTA (Large Case).

    4. Use project code 6078, Support to LB&I (Non-International) (or project code 6052, Support to EO TEP/LB&I (International), if the case is international).

      Note:

      Don’t use project code 6068 (Referrals) for EP examination support to LB&I.

    5. Complete all the information on the form or it will be returned to the group. Note in your request that the return has posted to the EPMF.

    6. Your group manager/designee emails the approved form to Classification’s group mailbox: *Manager EO Classification

    7. Classification acknowledges receipt of the request for the return (normally within 5 business days).

    8. Classification informs the agent and group manager (normally within 10 business days) that the record has been assigned to the group on AIMS and RCCMS.

LB&I Support Examinations Involving Plan Qualification - Statute Protection Safeguards

  1. You are responsible for protecting the statute of limitations in accordance with IRM 4.71.9, Statute Control Procedures, for any return you open for examination.

LB&I Support Examinations Involving Plan Qualification - Closing Requirements

  1. Coordinate issuing plan examination closing letters with the LB&I case manager.

  2. Closing letters are issued in one of two ways:

    1. LB&I issues the plan closing letter(s) concurrent with its report.

    2. EP issues the plan closing letter(s) in the usual manner.

  3. If LB&I issues the closing letter:

    1. Send the undated letter to the LB&I case manager.

    2. Place a copy of the letter in the EP case file.

      Note:

      Notate on the copy as follows: "LB&I Support Case –Closing Letter(s) Forward to:_____________ (name, title and address of LB&I case manager) on _______ (date)."

  4. If EP issues the closing letter(s):

    1. Date and issue the letter to the taxpayer.

    2. Forward a dated copy of the letter to the LB&I case manager.

    3. Notate on the file copy of the letter: "LB&I Support Case – Original closing letter sent to taxpayer on ________ (date). Copy of closing letter(s) forwarded to _____________ (name, title and address of LB&I case manager) on ________ (date)."

  5. If there is a paper case file, attach Form 3198-A to the outside of the examination file folder for each return. Check the "CIP/EPTA/TEP" box in the Special Features section of the Form 3198-A.

  6. If there is no paper case file, you don’t have to prepare Form 3198-A. Add the following comment in the comments section of the RCCMS closing record: "Paperless file, closing letter issued to taxpayer or closing letter issued through LB&I."

  7. Follow normal closing procedures in IRM 4.71.16.12.3, Closing the Large Case Examination and IRC 4.71.1.22.1, Closing Procedures for Agreed Form 5500 Examinations.

Overview of EO Support Examinations Involving Plan Qualification

  1. This IRM section lists procedures for EP agents providing support in EO TEP examinations.

  2. Most EO examination support involves an EP agent examining one or more of these EO-maintained deferred compensation arrangements:

    1. Qualified plans under IRC 401(a)

    2. Eligible deferred compensation plans under IRC 457(b)

    3. Tax-sheltered arrangements under IRC 403(b)

  3. Follow the procedures of IRM 4.71.20.4, LB&I Support Involving Plan Qualification, when examining one of these types of arrangements except substitute "EO" for "LB&I" as the entity being supported.

  4. Protect the statute of limitations according to IRM 4.71.9, Statute Control Procedures, for any taxable plan trust.

  5. Although relatively infrequent, you may encounter an EO Deduction Only Support Examination when the EO TEP examination includes:

    1. Related taxable entities

    2. Form 990-T

    3. Organizations that lose their exempt status

    4. Taxability of nonqualified deferred compensation plans

  6. If the scope of EP examination involvement is restricted to income tax issues involving the returns or scenarios in IRM 4.71.20.5 (5), follow the procedures of IRM 4.71.20.3, Deduction Only Support Examinations, except coordinate with EO instead of LB&I.

EO Support Examinations Involving Plan Qualification - AIMS and RCCMS Establishment

  1. The procedures to establish the case on AIMS and RCCMS depends on the type of deferred compensation arrangement under examination.

  2. Follow these procedures when you examine a related or subsequent year Form 5500 series return:

    1. Research IDRS to verify that the Form 5500 series return has posted on the EPMF.

      Note:

      If the return hasn’t posted on the EPMF, follow the appropriate procedures in IRM 4.71.1.21, Amended, Substitute and Secured Forms 5500.

    2. Prepare the Related and Subsequent Year Form 5500 Request form and forward it to your manager for approval. See IRM 4.71.20 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits.

    3. Use source code 47, EO TEP/LB&I CIP/EPTA (Large Case).

    4. Use project code 6045, Support to EO TEP (Non-International) (or project code 6052, Support to EO TEP/LB&I (International), except as provided in IRM 4.71.20.5.1 (3).

    5. Correctly complete all the information on the form or it will be returned to the group. Note in your request that the return has posted to the EPMF.

    6. The group manager/designee emails the approved form to Classification’s group mailbox: *Manager EO Classification

    7. Classification acknowledges receipt of the request for the return (normally within 5 business days).

    8. Classification informs the agent and group manager (normally within 10 business days) that the record has been assigned to the group on AIMS and RCCMS.

  3. Agents supporting an EO Team Examination may use project codes 6040, IRC 403(b) Plans - Large Case, 6041, IRC 457(b) Plans - Large Case, 6045, Support to EO TEP (Non-International), or 6052, Support to EO TEP/LB&I (International), as directed by the project coordinator.

  4. When your examination activity is limited to providing deduction only support on a related taxable entity, related Form 990-T or other tax return, use project code 6451, 404 Deduction Only – LB&I Support (Non-International), or 6055, 404 Deduction Only - LB&I Support (International).

EO Support Examinations Involving Plan Qualification - Non-Return Units

  1. IRC 457 plans and IRC 403(b) annuity arrangements aren’t always required to file a Form 5500.

  2. Follow the Non-Return Unit (NRU) procedures in IRM 4.71.17, Non-Return Unit Examinations, when establishing IRC 403(b) and IRC 457 examinations on Non-Master File AIMS and RCCMS.

  3. For inventory control purposes, it’s crucial that the EP group establish (through Classification) any NRU examination in conjunction with an EO TEP examination support assignment on RCCMS.

  4. Managers will ensure the RCCMS record reflects the following codes or information:

    1. Use MFT code 74 to track cases on RCCMS & Non-Master File AIMS.

    2. Use Activity code 370.

    3. Use Source code 47, TEP/CIP/EPTA Large Case.

    4. Use project code 6040, 6041, 6045, or 6052 as applicable.

    5. Follow IRM 4.71.20.5.3, EO Support Examinations Involving Plan Qualification - Statute Protection Safeguards, to enter the statute date of the related Form 941 as the statute of limitations date in the IRC 403(b) or IRC 457(b) RCCMS record.

EO Support Examinations Involving Plan Qualification - Statute Protection Safeguards

  1. EO is responsible for:

    1. Protecting the employment tax statutes of limitations of its taxpayers.

    2. Issuing closing letters for employment tax examinations.

  2. EP examination activity for EO support usually relates to IRC 403(b) and IRC 457 examinations. Since these are NRU examinations, they don’t have statute of limitations. Agents must protect the statute of limitations of the related tax return.

  3. For IRC 403(b) and IRC 457(b) examinations establishment on AIMS and RCCMS:

    1. Reflects the statute of limitations date for the Form 941 for the last quarter of the tax year examined.

      Note:

      The last quarterly Form 941 is due by January 31 of the subsequent year and has a three-year statute of limitations date starting on April 15.

    2. The group manager approves the establishment and control of the related Form 941 return.

  4. The EP agent will:

    1. Protect the Form(s) 941 statute of limitation(s), when EO has not protected these returns, regardless of establishment on AIMS or RCCMS.

    2. Coordinate the protection of employment tax statutes with the EO team coordinator.

    3. Keep a copy of the Form SS-10 in the EP case file regardless of whether another business function secured it.

  5. Follow the procedures in IRM 4.71.9.7, Monitoring the Statute Date on a Non-Return Unit (NRU) Case, for protecting the statute of limitations for NRU cases.