EP Examination Process Guide - Section 6 - Resolution of Issues and Closing the Examination - Technical Assistance & Advice - Nonqualification Issues
An EP agent may find violations that do not affect the qualification of a plan. Most
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.
- 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.