IRS Updates Funding Deficiencies Strategy
On June 11, 2021, the IRS updated the Funding Deficiencies Strategy section of their Employee Plans Compliance Unit (EPCU) webpage. Funding deficiencies generally occur when a defined benefit plan has failed to make the minimum required contributions to sustain the solvency of the plan. The EPCU conducts compliance checks and performs data analysis, focusing on areas of potential noncompliance (such as funding).
The Funding Deficiencies Strategy section of the webpage explains EPCU’s procedure when a funding deficiency is reported on a filed return, such as a Form 5500. When addressing that deficiency, the EPCU contacts fiduciaries to determine whether the funding deficiency was corrected, the required excise tax returns were filed, and appropriate taxes paid. If the minimum required contributions have actually been made, then the EPCU can also assist the fiduciary in identifying and correcting errors in their forms.
This guidance does not provide any new compliance requirements; the EPCU simply indicates their process for addressing issues so that plan fiduciaries are aware of the steps that may be taken to ensure compliance. Any employer who receives a letter from the EPCU should work with their service providers to fully cooperate with the request.
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