Wednesday, June 12, 2019
Significant Quality Issues Are Being Identified on Employee Plans Examinations, but Feedback Is Not Always Provided to Examiners
According to the Department of Labor, there were more than 693,000 employer-sponsored retirement plans with reported assets of more than $8 trillion in Plan Year 2015. During FYs 2015 and 2016, the Tax Exempt and Government Entities (TE/GE) Division reported that its Employee Plans (EP) function completed nearly 17,000 examinations of employer-sponsored retirement plans. It is important that quality examinations are performed to increase assurances that millions of plan participants will receive their promised retirement benefits.
This audit was initiated to assess how the TE/GE Division selects EP function examination cases for quality review, documents results, and provides feedback to employees performing examinations. During FYs 2015 and 2016, the TE/GE Division met its statistical sampling goals by selecting and quality reviewing more than 700 EP function examinations. Detailed results for more than 30 of the questions relating to the five quality standards were documented. As a result, the TE/GE Division was able to compute an overall examination quality rate of approximately 80 percent for each fiscal year and to provide continual feedback to IRS executives on the quality of EP function examinations. The
TE/GE Division also provided indirect feedback to examiners through quarterly newsletters, lunch and learn sessions, and other methods.
However, the TE/GE Division generally did not provide direct feedback to responsible individual examiners and group managers on the results of quality reviews. We believe that additional feedback was needed because some quality issues were more prevalent for particular examiners and groups. In addition, serious quality issues were identified that were not detected during managerial reviews, suggesting that the TE/GE Division is not providing effective and timely feedback, which is key to improving employee performance.
TE/GE Division personnel stated that they were not providing this type of feedback because quality review processes were primarily designed to compile aggregate results on the quality of examinations and to ensure that the examination program is meeting performance goals. As a result, individual examiners were unaware of quality issues identified on the examinations that they conducted, and such feedback may not improve examination qualityTIGTA recommended that the IRS develop mechanisms for sharing detailed results of quality reviews with the individual examiners and group managers who were responsible for performing the examinations.
In its response, IRS management stated that it is already providing statistical and narrative feedback to area managers, managers, employees, and national level management, and that efforts would be made to share the feedback on a regular basis. We continue to believe that the IRS is missing a valuable opportunity to share detailed results of quality reviews with group managers and examiners who are responsible for performing EP function examinations. Sharing detailed review results would assist in efforts to improve employee performance.
Taxpayers Generally Comply With Annual Contribution Limits for 401(k) Plans; However, Additional Efforts Could Further Improve Compliance
IRS records show that in TY 2014 an estimated 53 million taxpayers contributed almost $255 billion to tax-qualified deferred compensation plans. A popular form of deferred compensation plan, known as the 401(k) plan, permits employees to save for retirement on a tax-favored basis. However, there are rules that limit the amount individuals can contribute to a 401(k) plan each tax year. Individual noncompliance with these rules results in revenue loss to the Federal Government. This audit examined whether IRS processes sufficiently identified and addressed excess contributions to 401(k) plans.
Our analysis of IRS records showed that the vast majority of taxpayers were complying with tax laws designed to limit the annual amount of compensation that can be contributed to 401(k) retirement plans. Nonetheless, we identified two areas in which compliance could be improved: 1) some 401(k) plans did not prevent taxpayers from exceeding the annual limit on contributions, and 2) some taxpayers exceed annual limits when contributing to multiple 401(k) plans.