Pension Plans: IRS Needs to Strengthen Its Enforcement Program

HRD-91-10 Published: Jul 02, 1991. Publicly Released: Aug 05, 1991.
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Highlights

Pursuant to a congressional request, GAO evaluated the effectiveness of the Internal Revenue Service's (IRS) Employee Retirement Income Security Act of 1974 (ERISA) enforcement program, focusing on recent changes that shifted resources from reviewing plan designs to examining plan activities.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Internal Revenue Service The Commissioner of Internal Revenue should direct the Assistant Commissioner, Employee Plans and Exempt Organizations, to include plan underfunding among the criteria for targeting plans for examination.
Closed - Implemented
IRS directed its field office to devote at least 10 percent of its fiscal year 1992 examination time to returns with minimum funding issues. According to IRS officials, most field offices will meet or exceed the 10 percent. In addition, underfunded plans are targeted in the proposed 1993 work plan, and IRS announced that it will undertake a 2.5 year study on pension plan underfunding.
Internal Revenue Service The Commissioner of Internal Revenue should direct the Assistant Commissioner, Employee Plans and Exempt Organizations, to revise quality assurance procedures so that enough examinations are reviewed to draw statistically valid conclusions about examination quality.
Closed - Implemented
IRS has transferred responsibility for examination review from headquarters to the regional offices. The regions were directed to randomly sample at least 10 percent of the population, which exceeds the number GAO considered necessary to draw statistically valid conclusions.
Internal Revenue Service The Commissioner of Internal Revenue should direct the Assistant Commissioner, Employee Plans and Exempt Organizations, to develop a strategy to determine whether approving nonstandardized plans without detailed review adversely affects plan participants and compliance with ERISA.
Closed - Not Implemented
Due to delays in issuing regulations, the anticipated workload that gave rise to the recommendation has not materialized. While it still could, preliminary indications are that the volume of nonstandardized plans will be less than previously anticipated. IRS believes its procedures are flexible enough to deal with whatever problems arise without implementing the recommendation.

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