July 10, 2012 – A report by the Treasury Inspector General for Tax Administration (TIGTA) suggests that the IRS may shift audit resources from examination of nonbank trustees to auditing more employer-sponsored retirement plans.
A TIGTA report describes findings that nonbank trustees examined by IRS auditors generally had a high level of compliance with tax laws, with mostly minor, correctible errors found. The stepped-up audits of nonbank trustees were triggered in part by the Bernard Madoff ponzi scheme scandal. (The audits of nonbank trustees focused on compliance with tax laws, not securities issues, the report notes.)
The TIGTA report states that the same IRS agents examine both nonbank trustees and employee plans, and given the finding that nonbank trustees generally demonstrated substantial compliance, the Employee Plans unit of IRS would be evaluating whether to alter its audit focus. In explaining this intention to “reevaluate its use of limited resources,” the report notes that audits of retirement plans result in uncovering noncompliance more than 60 percent of the time, and some high-priority examinations result in uncovering noncompliance 80 percent of the time.
Given the emphasis in this report on nonbank trustee compliance vs. employee plan audit outcomes, it seems highly likely that more attention will be paid to retirement plan compliance in the future.
The TIGTA report, titled “Oversight of Nonbank Trustees Has Improved, but Resources Expended on the Program Should Be Reevaluated,”
may be accessed as follows. http://www.treasury.gov/tigta/auditreports/2012reports/201210055fr.pdf