What Is an IRS 401(k) Examination?

An IRS 401(k) examination is a review by Employee Plans of the plan's books, records, written terms and actual operation to determine whether the plan continues to satisfy federal tax-qualification rules. The strategic deadline is often earlier than the first audit meeting: once the EPCRS examination cutoff is reached, VCP is unavailable and self-correction becomes more limited.^[1][4][5]

That timing rule turns an ordinary-looking IRS notice into a compliance decision point.

This Is Not the Annual CPA Audit

Many larger ERISA plans have financial statements audited by an independent qualified public accountant as part of the Form 5500 reporting process.

That is not what this article means by:

IRS examination.

A CPA financial-statement audit focuses on whether the plan's financial statements are fairly presented under the applicable accounting and audit framework.

Employee Plans examines federal tax compliance.

The records can overlap.

The legal purpose does not.

This Is Also Not a DOL Investigation

401(k) oversight is divided between agencies.

The IRS has primary jurisdiction over:

• tax-qualified status
• Internal Revenue Code requirements
• qualification-related plan operation.^[3]

The Department of Labor has primary jurisdiction over areas such as:

• fiduciary standards
• ERISA reporting and disclosure
• plan-asset handling
• other Title I requirements.^[3]

The same fact can interest both agencies.

Late transmission of participant deferrals is a good example.

But an IRS plan examination and a DOL investigation are separate proceedings.

Employee Plans Is the IRS Enforcement Function for Qualified Plans

The IRS describes Employee Plans Examinations as the enforcement arm for statutory and regulatory requirements affecting qualified retirement plans.^[2][3]

The Service uses centralized case selection and review to focus examination resources on areas it considers to present higher compliance risk.^[2]

Selection does not establish that the plan violated anything.

It establishes that the IRS has chosen to test compliance.

What Does the Agent Actually Examine?

A 401(k) review can connect four layers:

plan document → employer and employee data → actual transactions → qualification testing.

A mismatch at any link can produce an issue.

Plan Document

The agent can review:

• basic plan document
• adoption agreement
• amendments
• restatements
• board resolutions
• summary plan materials
• determination or opinion letters where relevant.

The question is:

What was the plan legally supposed to do during the year under review?

INV-112 covers plan document failures.

Form 5500 and Plan Records

plan examinations commonly involve the Form 5500 series and underlying plan records.^[1][7]

The IRS can reconcile reported information against:

• trust records
• participant accounts
• contribution records
• payroll
• census information.

A Form 5500 is not just an isolated annual filing.

It can become the map for the examination.

Payroll and W-2 Data

Current Employee Plans procedures specifically identify internal-control checks such as reconciling:

• Forms W-2 to plan census data
• payroll contributions to plan deposits
• Form 5500 to plan records.^[7]

For a 401(k), payroll is where many operational failures begin.

Employee Census

A census can reveal:

• missed entrants
• rehire errors
• HCE/NHCE classifications
• service problems
• controlled-group omissions
• compensation inconsistencies.

The agent can compare employees who existed with employees who actually appeared in plan administration.

That is often more revealing than reviewing account balances alone.

Eligibility and Entry

Typical questions include:

• Who satisfied age and service?
• Which employees entered?
• On what date?
• Were long-term part-time rules applied?
• Were rehires handled correctly?
• Did an excluded class remain legally excludable?

INV-094, INV-095 and INV-097 address parts of that framework.

Compensation

Compensation errors can affect:

• elective deferrals
• employer match
• profit sharing
• ADP/ACP
• Section 415
• deductions.

The agent may compare payroll codes with the plan's actual compensation definition.

INV-098 covers the underlying issue.

Deferrals and Contributions

Records can be tested for:

• elective deferrals
• Roth deferrals
• match
• QNECs
• QMACs
• nonelective contributions
• profit sharing
• forfeiture use.

The examination can ask both:

Was the amount correct?

and:

Was it handled in the manner the plan and Code require?

Contribution Limits

Likely technical checkpoints include:

• Section 402(g) elective deferral limits
• Section 415 annual additions
• plan-level contribution limits
• employer deduction rules.

INV-099, INV-100 and INV-104 cover these separately.

Nondiscrimination and Coverage

Testing can include:

• ADP
• ACP
• Section 410(b)
• Section 401(a)(4)
• top-heavy rules
• related aggregation questions.

A problem in the employee population can therefore expand beyond one participant.

INV-087 through INV-089 and INV-113 cover the major testing frameworks.

Vesting, Forfeitures and Distributions

The agent can test whether:

• vesting service was credited correctly
• forfeitures occurred under plan terms
• forfeitures were used properly
• distributions were permitted
• required consents were obtained where applicable
• required minimum distributions occurred.

These issues connect participant records to plan qualification.

Loans

Participant loans can raise:

• plan-term issues
• Section 72(p)
• repayment
• deemed distribution
• prohibited transaction questions.

A loan file that looks routine operationally can create both qualification and participant-tax issues if the statutory rules were not followed.

Internal Controls Matter During the Examination

Current IRS procedures tell Employee Plans agents to evaluate controls such as:^[7]

• Form 5500 reconciliation
• W-2-to-census reconciliation
• payroll-to-plan contribution reconciliation
• use of a TPA
• segregation of payroll approval duties
• payroll-system limit controls
• compensation-definition reconciliation.

This matters for two reasons.

Controls help explain:

why the failure occurred.

They also matter under EPCRS.

A sponsor relying on SCP needs established compliance practices and procedures.

What Starts the Examination in Current Procedure?

Current TE/GE instructions require the initial examination contact to be:

in writing

using:

Letter 6031 — the TE/GE opening examination letter.^[6]

The letter generally identifies:

• plan
• plan number
• plan year or years
• examiner contact information
• appointment or response details.

The operating manual also instructs examiners not to telephone first; the written opening comes before the follow-up call.^[6]

The Initial IDR Often Arrives With the Letter

The IRS uses:

Form 4564 — Information Document Request

to request records and written responses.^[1][6]

Current IRS procedure says it is a best practice to send the initial IDR with Letter 6031.^[6]

That means the sponsor can receive:

notice + document request

at essentially the same time.

The IDR Is Where the Audit Becomes Concrete

An opening notice tells the sponsor:

you are being examined.

The IDR tells the sponsor:

what the agent wants to prove or disprove.

A request may seek items such as:

• governing plan document
• amendments
• payroll
• employee census
• contribution records
• trust statements
• testing
• distributions
• loans
• committee or administrative records.

Read the request by issue.

Do not treat it as a box of unrelated documents.

Build a Response Matrix Before Sending Records

For each requested item, track:

This catches inconsistencies before the IRS does.

Do Not Send Contradictory Data Without Reconciling It

Suppose:

• payroll shows 212 employees
• census shows 198
• Form 5500 participant count suggests another number.

The right move is not:

send all three and hope the agent understands.

Reconcile:

• terminations
• excluded employees
• leased employees
• controlled-group employees
• data timing.

Then explain the remaining difference.

Form 2848 and Form 8821 Are Not the Same

A sponsor may use:

Form 2848 — Power of Attorney and Declaration of Representative

to authorize a qualified representative to act before the IRS.^[1][6]

A Form 8821 generally authorizes a designated person or organization to:

• inspect
• receive confidential tax information.

It does not give the same representation authority.^[1]

If counsel or a CPA will advocate the sponsor's position, use the correct authorization.

The EPCRS Examination Cutoff Is Broader Than the Meeting Date

This is the most important technical section.

Revenue Procedure 2021-30 gives Under Examination its own defined meaning. It includes a Form 5500-series review and other plan examinations.^[4]

The definition goes further.

A plan is included once the sponsor or authorized representative has received:

verbal or written notification

of an impending Employee Plans audit or a referral for one.^[4]

Do not anchor the cutoff to:

• first onsite visit
• first IDR response
• first substantive issue discussion.

Current Procedure and the EPCRS Definition Use Different Language

There is an apparent tension worth handling carefully.

EPCRS text

The 2021 procedure says verbal or written notification can create under-examination status.^[4]

Current TE/GE examination instructions

The current operating manual says the first examination contact must be written using Letter 6031 and instructs examiners not to call first.^[6]

The practical conclusion is:

expect a written opening under current normal procedure, but do not turn the form of contact into a loophole in the EPCRS definition.

If unusual notice or a referral has already occurred, get advice before assuming VCP remains open.

Why the Exact Date Matters

Before the cutoff:

• SCP may be available
• VCP may be available.

After that point:

VCP is unavailable.^[4]

Current self-correction rules also become narrower.^[5]

A date on one IRS communication can therefore change the correction route.

The Examination Cutoff Closes VCP

Revenue Procedure 2021-30 states the rule directly:

once the plan or sponsor meets the procedure's defined examination status, VCP is not available.^[4]

This is why a known difficult problem should be evaluated before IRS contact.

Waiting for certainty can eliminate the program that provides certainty.

Example: Error Found Two Weeks Before IRS opening notice

Sponsor identifies a complex compensation error:

August 3

Counsel begins evaluating VCP.

The opening letter arrives:

August 17

No VCP filing was made.

The sponsor cannot assume it still has the voluntary filing route because:

"we found the problem first."

Discovery date is not the VCP filing rule.

Once the cutoff is reached, VCP closes.

SCP requires a separate analysis.

Expanded SCP Can Survive Only With the Right Pre-Exam Facts

SECURE 2.0 broadened self-correction.

Notice 2023-43 says an eligible inadvertent failure generally loses expanded SCP after the examination cutoff unless, before that point, the sponsor had demonstrated:

a specific commitment to implement self-correction.^[5]

The current standard focuses on actions.

Not just knowledge.

What Can Show a Real Pre-Examination Commitment?

The determination is facts and circumstances.^[5]

Strong evidence can include:

• affected population identified
• correction method selected
• calculations started or completed
• TPA correction project opened
• corrective funding approved
• payroll configuration scheduled
• participant notices drafted
• corrective amendment in process.

The file should show active pursuit of the specific correction.

What Is Not Enough?

Notice 2023-43 says two things are not enough by themselves:^[5]

• completion of an annual compliance audit
• a general statement that failures will be corrected when discovered.

That is a sharp line.

"We have a policy of fixing errors"

is not the same as:

"We had begun fixing this error."

Do Not Manufacture the Timeline After IRS Contact

If examination notice arrives while a correction is partially underway:

preserve what actually existed.

Keep:

• dated emails
• vendor tickets
• spreadsheets
• committee approvals
• funding requests
• amendment drafts.

Do not:

• backdate documents
• rewrite meeting minutes
• create retroactive evidence of activity that did not occur.

The chronology is a legal fact.

Insignificant Failures Have a Separate Rule

Current guidance preserves SCP for an insignificant failure even after the audit has begun and even when the IRS discovers the problem itself.^[5]

That does not mean:

small dollars = insignificant.

The older EPCRS significance analysis uses facts and circumstances such as:

• percentage of plan assets/contributions involved
• number of participants
• duration
• reason
• correction history.^[4]

An Examination Can Reach Another Plan Through Aggregation

The EPCRS examination definition contains a trap for employers with multiple retirement plans.^[4]

If one examined plan is aggregated with another plan to satisfy:

• Section 401(a)(4)
• Section 410(b)

the other plan can also inherit examination status.

That can affect correction options even though the second plan did not receive its own opening letter.

Other Shared Qualification Tests Can Also Pull In Another Plan

For qualification requirements such as:

• Section 401(a)(30)
• Section 415
• Section 416

a second aggregated plan can be treated as under examination with respect to the shared failure.^[4]

The effect can be issue-specific.

Example: Section 415 Aggregation

Plan A and Plan B are aggregated only for Section 415.

Plan B is already being examined.

Plan A has a Section 415 failure.

Under the EPCRS definition, Plan A can inherit that status for:

that Section 415 failure.^[4]

But a separate Plan A vesting failure does not automatically inherit the same status merely because of the Section 415 aggregation.^[4]

That distinction can determine whether VCP remains open for the unrelated issue.

The Average Benefits Test Has a Specific Carveout

Revenue Procedure 2021-30 says that, for its Under Examination definition, aggregation does not include merely considering benefits under various plans for the:

Section 410(b)(2) average benefits test.^[4]

That is a narrow technical exception.

It prevents the examination definition from expanding simply because other plans enter that particular average-benefits analysis.

Determination-Letter Review Can Also Trigger Examination Status

A plan sponsor can voluntarily submit certain determination-letter applications.

That does not make the process harmless for EPCRS timing.

If the reviewing Employee Plans agent notifies the sponsor of possible failures, the plan can enter examination status for those matters even without a conventional audit notice.^[4]

This can arise with applications such as:

• Form 5300
• Form 5310
• other applicable determination submissions described by the procedure.

Example: Terminating Plan Application

Sponsor files Form 5310 seeking a determination on plan termination.

During review, the agent raises:

possible partial termination failure.

For EPCRS purposes, the issue can enter examination status even though the sponsor never received a standard field-exam Letter 6031.^[4]

That can change correction options.

Sponsor Identification Before Agent Identification Matters

The 2021 EPCRS procedure contains a specific determination-review rule.

To preserve VCP availability for a failure in that context, the sponsor or representative must identify the failure:

in writing

to the reviewing agent before the agent recognizes or raises it.^[4]

Timing and documentation are therefore critical.

A Compliance Check Is Different

Employee Plans Compliance Unit contacts are designed to review compliance indicators without conducting a formal examination.

Current IRS guidance states that a compliance check is:

not an examination.^[10]

That distinction matters because a compliance check does not itself produce the same EPCRS cutoff.

The IRS specifically notes that plan errors found during a compliance check can still potentially be corrected through EPCRS because the check is not an examination.^[10]

Example: Compliance Check Finds a Form 5500 Problem

EPCU asks about plan reporting.

Sponsor discovers during the response that:

• eligibility coding also excluded five employees.

The compliance check itself does not automatically close:

• SCP
• VCP.

The sponsor should evaluate and correct promptly before the matter is referred for examination.

A Compliance Check Can Become an Examination Later

Do not confuse:

not currently an examination

with:

cannot lead to one.

Compliance-check materials can identify an unresolved issue that is later referred for examination.

Once that transition occurs, EPCRS timing can change.

The opportunity is:

use the compliance-check stage to diagnose and correct, not to wait.

A Discrepancy Adjustment Is Also Different

An plan examination can uncover facts affecting:

• Form 1040
• Form 1120.

The IRS can use a:

discrepancy adjustment

to address certain related income-tax items without opening a separate examination of that income-tax return.^[9]

Examples include:

• unreported distribution
• excessive employer deduction
• taxable participant loan.

Example: Plan Loan Creates Participant Tax

Employee Plans finds a participant loan that violated Section 72(p).

The participant failed to report the taxable amount.

The agent can propose a Form 1040 discrepancy adjustment.^[9]

The IRS states that the discrepancy adjustment itself is not an income-tax examination of that return.^[9]

That procedural distinction can matter for statute and examination questions.

The Scope Can Expand

A sponsor should not assume:

the opening letter lists 2025, therefore 2024 is safe forever.

Current IRS procedures permit examination scope to be:

• expanded
• contracted

with appropriate managerial involvement.^[6][7]

The Process Guide identifies Letter 1346-J for adding:

• prior years
• subsequent years
• related returns.^[1]

Why Adjacent Years Get Pulled In

Suppose the IRS finds:

bonus compensation incorrectly excluded in 2025.

The same payroll code existed in:

• 2023
• 2024
• 2026.

The agent has an obvious reason to ask whether the issue is systemic.

A one-year examination can become a multi-year correction project.

Scope Expansion Is Not Automatic

The IRS does not have to open every adjacent year merely because one error exists.

Current planning guidance instructs examiners to analyze:

• risk
• significance
• prior/subsequent years
• trends.^[6]

That gives a sponsor a practical incentive to establish whether the issue was:

isolated

or:

systemic.

Internal Controls Can Narrow the Story

Assume 2025 has one configuration error.

Sponsor can prove:

• 2024 reconciliation passed
• system change occurred January 2025
• issue was discovered and fixed November 2025
• 2026 mapping is correct.

That chronology can help define the failure.

Without it, the agent may reasonably test more years.

Statutes of Limitation Still Matter

Retirement-plan examinations can involve several tax returns and tax consequences.

The IRS Process Guide discusses limitation periods and possible written extensions.^[1][8]

A common general federal assessment period is three years after a return is due or filed, whichever is later, but retirement-plan cases can involve distinct:

• trust
• excise-tax
• employer
• participant

returns and statutes.^[1]

Do not use one universal date for the entire plan.

The IRS May Request an Extension

The examination correspondence tools include:

Letter 907-A — TE/GE Request to Extend Statute.^[1]

A sponsor can be asked to sign a consent extending the time for assessment.

That request deserves legal and tax review.

It should not be signed automatically.

Refusing an Extension Does Not End the Audit

If a taxpayer declines to extend a statute, the IRS can take protective action before the limitations period expires.^[1]

Depending on the tax issue, that can include:

• proposed assessment
• statutory notice
• other procedural protection.

The real decision is not:

sign = audit continues / refuse = audit ends.

It is whether an extension produces a better resolution process than forcing the issue against an expiring statute.

The Examination Is Also an Evidence Test

A technically correct plan can create avoidable problems if the sponsor cannot prove what happened.

Important evidence includes:

• executed plan documents
• amendments
• payroll records
• census files
• contribution confirmations
• vesting records
• test reports
• loan documents
• distribution forms
• participant elections
• correction files.

Tax qualification is easier to defend when the record is reproducible.

"The Recordkeeper Has It" Is Not a Control

Recordkeepers can:

• change systems
• archive data
• terminate contracts
• have incomplete employer-source information.

The sponsor remains responsible for operating the plan.

Permanent plan and correction records should not depend on one vendor portal remaining accessible forever.

The Agent Can Test the System, Not Just One Transaction

If an IDR identifies one late entrant, the examiner can ask:

How does the employer identify every entrant?

That turns a participant problem into an internal-control test.

The sponsor should be ready to explain:

• responsible role
• data source
• frequency
• reconciliation
• exception handling.

A system answer is stronger than:

"HR usually catches it."

Qualification Issues and Tax Issues Can Travel Together

An plan examination may produce:

Qualification correction

Handled through:

• SCP where still available
• Audit CAP.

Excise tax

Potential Forms 5330.

Income-tax adjustment

Potential discrepancy adjustment.

Trust tax

If qualification is revoked or other trust issues arise.

The same examination can therefore create several workstreams.

Audit CAP Is Not the First Answer to Every Finding

When an agent identifies a problem:

first classify it.

Ask whether:

• it is actually a qualification failure
• it was already validly corrected
• insignificant SCP applies
• expanded SCP survived because correction activity began before examination
• a direct statutory correction method applies.

Audit CAP belongs to the unresolved qualification failure.

Not every factual discrepancy.

Example: Correction Was 80% Complete Before IRS opening notice

Sponsor identifies a missed-match issue in June.

Before IRS contact:

• all affected employees identified
• principal calculations complete
• earnings methodology approved
• most corrective deposits made.

The IRS opening letter arrives in August.

Do not assume:

"audit started, SCP is dead."

The pre-examination correction chronology can matter under current rules.^[5]

Preserve the evidence and complete the legal analysis immediately.

Example: Sponsor Only Knew There Might Be a Problem

Same dates.

Before the letter:

• internal email says "match might be wrong"
• no affected population
• no method
• no calculation
• no correction activity.

That is materially weaker.

Awareness is not the same as demonstrating active correction of the identified failure.

Example: Compliance Check Before VCP

EPCU contacts the sponsor.

During the compliance check, counsel finds a plan document failure not suitable for SCP.

Because the contact is not an examination, VCP can still be available.^[10]

That is a meaningful opportunity.

If the sponsor waits until referral to examination:

the opportunity can disappear.

Example: Second Plan Inherits Status for a Shared Limit

Employer sponsors:

• Profit Sharing Plan A
• 401(k) Plan B.

Plan B is already being examined.

The two plans are aggregated for Section 415.

A Section 415 failure involves both.

Plan A can be treated as under examination for the shared Section 415 issue under the EPCRS aggregation rule.^[4]

Do not evaluate Plan A's VCP eligibility in isolation.

The Examination Can End Without a Qualification Sanction

Possible outcomes include:

• no material adjustment
• issue resolved through documentation
• valid SCP correction
• excise or income-tax adjustment without plan disqualification
• Audit CAP
• proposed disqualification
• appeal.

An audit notice is not a prediction of the endpoint.

Issue Resolution Starts With Facts

The IRS Process Guide emphasizes establishing the facts before deciding whether an error occurred.^[1]

That is good audit strategy for the sponsor too.

Separate:

Fact

Employee entered October 1.

Plan term

Required entry July 1.

Legal conclusion

Operational failure.

Correction

Determine missed deferral opportunity, match, earnings and testing effects.

Starting with the conclusion makes disputes harder to resolve.

Ask for a Manager Conference When the Issue Stalls

If the sponsor and agent cannot resolve:

• facts
• legal interpretation
• correction

the Process Guide says the sponsor can request a conference with the agent's manager.^[1]

That is often more efficient than escalating immediately into a formal protest.

A manager conference should be prepared like a short case:

• agreed facts
• disputed facts
• controlling authority
• requested resolution.

Technical Assistance Can Enter the Case

The IRS can use internal technical assistance or formal technical advice for difficult issues.^[1]

These routes are not quick fixes.

Formal technical advice can substantially extend the case.

The sponsor should decide whether the issue is truly novel before turning a manageable factual dispute into a multi-year technical project.

Appeals Is Independent of the Exam Function

The IRS Appeals Office is separate from the local examination function.^[1]

If the sponsor disagrees with examination findings, the process can require a written protest identifying:

• disputed issues
• relevant years
• facts
• legal authority.^[1]

The appeal is strongest when the administrative record was built correctly during the examination.

Do Not Save the Best Evidence for Appeals

A common bad instinct is:

"We'll hold that argument for Appeals."

That can weaken the case.

Build the factual record with the examining agent.

Then Appeals receives:

• developed facts
• clear documents
• defined disagreement.

Ambush is not a substitute for an administrative record.

What to Do When Letter 6031 Arrives

1. Record the received date

EPCRS timing may depend on it.

2. Preserve existing correction evidence

Especially any work begun before notice.

3. Identify the exact plan and years

Do not assume other plans or periods are included.

4. Read the IDR by issue

Build a response matrix.

5. Reconcile data before production

Especially:

• census
• W-2
• payroll
• contributions
• Form 5500.

6. Decide who represents the sponsor

Use Form 2848 when representation is needed.

7. Run a targeted self-audit

Do not wait for the agent to identify every related problem.

8. Classify any newly identified failure immediately

Determine:

• SCP status
• Audit CAP exposure
• separate tax issues.

9. Control the chronology

Keep dated decisions, corrections and communications.

10. Fix the process

An examination finding often exposes a control weakness, not just one bad number.

IRS Examination vs. Compliance Check vs. CPA Audit vs. DOL Investigation

The word audit is not enough.

Identify who is conducting it and under what authority.

Before vs. After the EPCRS Cutoff

Timing can be more important than dollar size.

Form 2848 vs. Form 8821

If the person needs to negotiate, argue law or act as representative:

verify the power granted.

Typical IDR Record Map

The strongest response connects each record to the requirement it proves.

Frequently Asked Questions

What is an IRS 401(k) examination?

It is an Employee Plans review of the plan's books, records, written terms and operation to determine compliance with federal retirement-plan tax rules.^[1][2]

Is it the same as my annual CPA plan audit?

No.

The CPA audit is a financial-statement engagement. Employee Plans examines federal tax compliance.

Is it a DOL audit?

No.

IRS and DOL have different statutory responsibilities, although the same conduct can create issues with both agencies.^[3]

How does the IRS normally start the examination?

Current IRS procedure requires written initial contact using Letter 6031.^[6]

What is Form 4564?

It is the Information Document Request used to ask for records and written responses during an examination.^[1][6]

When does the EPCRS examination cutoff occur?

Revenue Procedure 2021-30 contains a specific definition. It includes receipt by the sponsor or authorized representative of verbal or written notification of an impending plan examination or referral, along with other circumstances.^[4]

But doesn't current IRS procedure require a letter first?

Yes.

Current IRS instructions require normal first examination contact by written Letter 6031.^[6]

The EPCRS definition has not been rewritten to say only Letter 6031 counts.

Can I file VCP after the opening examination letter?

Generally no once the plan or sponsor is under examination under EPCRS.^[4]

Can I still use SCP?

Possibly.

Insignificant failures retain separate treatment. For an eligible inadvertent failure under current interim SECURE 2.0 guidance, pre-examination actions demonstrating a specific correction commitment can matter.^[5]

Is knowing about the problem before the audit enough?

No.

Current guidance looks for actions showing active pursuit of correction, not mere awareness.^[5]

Is a compliance check an examination?

No.

Current IRS guidance expressly distinguishes compliance checks from examinations, and EPCRS can remain available during a compliance check.^[10]

Can the IRS add more years?

Yes.

Current procedures allow examination scope to expand when appropriate.^[1][6]

If another company plan is under audit, is my 401(k) also under examination?

Sometimes.

EPCRS contains aggregation rules for plans tested together under specified qualification requirements.^[4]

Can a determination-letter review trigger under-examination status?

Yes, for failures raised by the reviewing Employee Plans agent under the circumstances described in the EPCRS procedure.^[4]

What is a discrepancy adjustment?

It is a procedure for adjusting certain related income-tax items, such as participant or employer tax consequences, based on facts developed during the Employee Plans activity.^[9]

Is a discrepancy adjustment a separate income-tax audit?

The IRS says no; it is not itself an examination of the related income-tax return.^[9]

Can I have a representative?

Yes.

An eligible representative can act under a valid Form 2848.^[1][6]

Can the IRS request more time before the statute expires?

Yes.

The Service can request a written statute extension. Whether to agree should be evaluated based on the specific case.^[1]

Can I appeal?

Yes.

The Employee Plans process includes manager review and IRS Appeals for unresolved issues.^[1]

The ROIStreet Examination Response Sequence

Record the IRS notice date → identify plan and years → preserve all pre-existing correction evidence → determine the EPCRS examination cutoff → freeze assumptions about VCP until timing is confirmed → inventory plan documents and amendments → reconcile census, W-2, payroll, deposits and Form 5500 → map every IDR item to a qualification issue → identify related plans and aggregation rules → classify newly discovered failures → determine SCP / Audit CAP / separate-tax treatment → respond accurately and consistently → document internal controls and root cause → expand correction when adjacent years are actually affected → manage statute issues deliberately → resolve facts before arguing conclusions → request manager review when needed → preserve Appeals rights → keep the final examination and correction file permanently

The assumption to challenge is:

"We can decide how to correct once the IRS tells us what it found."

That gives away the sponsor's best options.

For a 401(k) plan, the most valuable examination work often happens before the agent reaches a conclusion: knowing when the EPCRS cutoff occurred, proving what correction had already begun, reconciling the records, and identifying the actual scope before a small operational issue becomes a larger qualification case.

Sources & References

1. Internal Revenue Service: EP Examination Process Guide — https://www.irs.gov/retirement-plans/ep-examination-process-guide
2. Internal Revenue Service: Examinations and Enforcement — https://www.irs.gov/retirement-plans/examinations-and-enforcement
3. Internal Revenue Service: 401(k) Resource Guide — What If You Are Audited? — https://www.irs.gov/retirement-plans/plan-sponsor/401k-resource-guide-plan-sponsors-what-if-you-are-audited
4. Internal Revenue Service: Revenue Procedure 2021-30 — Employee Plans Compliance Resolution System — https://www.irs.gov/irb/2021-31_IRB
5. Internal Revenue Service: Notice 2023-43 — SECURE 2.0 Expansion of EPCRS — https://www.irs.gov/irb/2023-24_IRB
6. Internal Revenue Service: IRM 4.70.12 — Planning the Examinations — https://www.irs.gov/irm/part4/irm_04-070-012
7. Internal Revenue Service: IRM 4.70.13 — Executing the Examination — https://www.irs.gov/irm/part4/irm_04-070-013
8. Internal Revenue Service: IRM 4.70.14 — Resolving the Examination — https://www.irs.gov/irm/part4/irm_04-070-014r
9. Internal Revenue Service: EP Examination Process Guide — Discrepancy Adjustments — https://www.irs.gov/retirement-plans/ep-examination-process-guide-discrepancy-adjustments
10. Internal Revenue Service: Voluntary Correction Program — Did You Complete Your Correction? — https://www.irs.gov/retirement-plans/voluntary-correction-program-did-you-complete-your-correction

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