IRS To Increase Scrutiny Of Pension Plans

by Mike Godfrey, Tax-News.com, Washington

31 March 2004

According to reports, the Internal Revenue Service is planning to step up its audit campaign of America’s largest pension funds.

As many retirement plans offer significant tax breaks to firms that sponsor them, the IRS is concerned that some companies and endowments are not administering such tax-exempt vehicles in accordance with regulations, particularly in respect of funding levels, vesting and benefits payments, among other aspects.

It is thought that the emphasis of the IRS program, adopted last October after a pilot scheme in 2001, will be placed on the larger plans, specifically those with 2,500 or more participants.

The IRS indicated through a spokesman that it has divided its staff into six teams located in different parts of the country, which will each aim to complete 10 to 15 audits annually.

However, despite the intensification of the agency’s audit program, industry experts have suggested that the probability of any one firm being targeted remains slight, and the sponsors of some of the largest pension plans, such as General Motors Corp. and Ford Motor Co., have revealed that they have not been contacted by the IRS.

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