IRS Sets 2021 Retirement Plan Compliance Priorities

The IRS’ Tax Exempt and Government Entities Compliance Governance Board has approved the following to be prioritized and resourced, primarily through examination.

• Review worker classifications to ensure that employees are not misclassified and retirement plans satisfy coverage requirements
• Review small exempt organizations that sponsor retirement plans with focus on plan investments and whether there are any prohibited transactions between the plan and its participants
• Review one-participant plans to determine if there are operational or qualification failures, income and excise tax adjustments, or plan document violations
• Review required minimum distributions in large defined benefit plans to ensure compliance with Internal Revenue Code Section (IRC Sec.) 401(a)(9)
• Determine if earned income and plan allocations are correct for self-employed individuals, particularly those that file Schedule C, Profit or Loss from Business (Sole Proprietorship)
• Review participant loans to ensure compliance with rules under IRC Sec. 72(p)

The IRS will also continue to pursue compliance programs described in its 2020 program letter and will use its webpage to periodically share updates concerning these initiatives.