At ERISA’s 50th anniversary, a legacy of IRS-practitioner collaboration

This year marks the 50th anniversary of the enactment of the Employee Retirement Income Security Act of 1974, P.L. 93-406 (ERISA). While retirement plans existed and were subject to IRS rules well before ERISA, it was ERISA (along with the Revenue Act of 1978, P.L. 95-600, providing the Sec. 401(k) structure) that gave the United States its current qualified retirement plan framework (though it has been heavily amended and added to since enactment).

ERISA established or clarified the minimum funding rules, overarching fiduciary rules, vesting rules, participation rules, limitations on contributions, and some of the distinctions between qualified retirement plans and nonqualified plans. ERISA also provided the framework for the interaction between the IRS and the U.S. Department of Labor (DOL) in administering these plans.

Employee benefits practitioners’ and the IRS’s collaborative spirit

In the 50th year of ERISA, we want to highlight the success of the historic collaborations between the AICPA, other practitioner groups, and the IRS and DOL. This article offers perspectives from the last 30 years, including recollections of the early development of the IRS Employee Plans Division (Employee Plans) from the perspectives of a former IRS National Office employee, a practitioner who worked in this area (met through the AICPA) from the early 1980s, and a more recent Treasury staff member.

A multifaceted approach to employee plans

The relationship among the IRS’s Tax Exempt/Government Entities (TE/GE) Division; the IRS Office of the Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes (EEE)); the AICPA; and the American Bar Association (ABA) practitioner community has historically been one of cooperation and respect. While in other areas of taxation the interaction is generally just between two parties — the IRS and taxpayers — and thus potentially a bit more adversarial, Employee Plans and its practitioner groups needed to develop a more collaborative approach.

The unique dynamic in Employee Plans is due to the multiple stakeholders involved, including the IRS, employers who sponsor retirement plans, trustees, recordkeepers, employees, actuaries, tax professionals, and plan administrators. The seemingly constant regulatory and other guidance needed to maintain the qualified status for employee benefit plans has motivated government outreach. In response, the practitioner community has often rallied to provide helpful comments, examples, and even educational opportunities for IRS employees.

This long-term interaction has fostered a spirit of cooperation aimed at protecting employee retirement savings, benefiting all parties involved. The broad spectrum of interactions involved various stakeholders, encouraging all parties to work together toward a common goal: safeguarding employee retirement savings while laying out an equitable playing field for enforcement of the Internal Revenue Code.

Historical perspective and training initiatives

Particularly between 1983 and 1995, the IRS experienced significant growth and change. Legislative changes, including the Tax Equity and Fiscal Responsibility Act of 1982, P.L. 97-248; the Deficit Reduction Act of 1984, P.L. 98-369; and the Retirement Equity Act of 1984, P.L. 98-397, prompted the IRS to expand its workforce and enhance its guidance on ERISA. This period also saw an influx of new hires into the IRS and a concerted effort to provide these new people comprehensive training. According to one of the co-authors of this article, Karen Field, J.D., now an employee benefits practitioner but who worked for the IRS (commissioner’s side) from 1983 to 1995, “It was an exciting time to be working at the IRS” (see the sidebar, “Karen Field’s Inside Story,” at the bottom of this article).

Former Service employees bolstered training efforts for the flood of IRS newcomers by volunteering to teach classes and provide real-world perspectives. This collaboration extended beyond formal training to informal sessions, fostering a deeper understanding of the IRS’s approach and creating a bridge between theory and practice. Notable figures such as Don Alexander (IRS commissioner 1973–1977) contributed to these training efforts, enriching the learning experience for new IRS employees.

Employee Plans Projects Branch employees and those in other parts of Employee Plans had assignments such as working on the Chief Counsel regulations teams, especially after the Tax Reform Act of 1986, P.L. 99-514, passed; collaborating with the Forms and Publications team to disseminate guidance; and communicating with practitioners. During this time, one of the Projects Branch’s duties was to answer calls from practitioners and examiners, who were allowed to call directly within certain hours. Projects Branch employees were assigned times and had to sit in the “boneyard” (a separate room for taking calls). Occasionally, employees taking the calls were given questions to ask practitioners if they raised certain issues, as the IRS was trying to find out which areas needed guidance or to understand the effects of guidance that had already been issued.

Employee Plans employees were encouraged to talk to practitioners at AICPA and ABA conferences and report back with their comments and concerns. Employee Plans employees also taught IRS field agents and worked with them on some examinations. Even when helping agents with examinations, the employees were asked to gather practitioner comments and bring that information back to help with training and guidance. In fact, some of the Sec. 401(a) and 401(k) regulation examples came from practitioner calls.

Practitioner engagement and collaborative programs

The AICPA and other practitioner organizations, including the ABA, played a crucial role in fostering dialogue between the IRS and the practitioner community. Regular requests for speakers from the IRS National Office and the Chief Counsel’s Office facilitated ongoing communication and knowledge sharing. This interaction included formal conferences and informal discussions and direct engagement with practitioners.

In 1992, the IRS Baltimore Key District Director Pat Cox asked Assistant Chief Terry Franklin, who later became district director, to initiate a practitioner conference. Each state in the Baltimore Key District’s jurisdiction was appointed a liaison to the conference. A co-author of this article, Lisa Germano, was asked by Cox to be the Virginia liaison. The IRS initiated a newsletter that was mailed nationally by each key district to practitioners working in Employee Plans. Germano continued as a Virgina liaison under Franklin and was part of the national practitioner group that continued this annual event under a new organization, the Joint TE/GE Council.

In his 1994 letter to Germano inviting her to be the Virginia liaison, Cox wrote:

The 1994 conference, the third such conference in the Mid-Atlantic Region, was a success. Over two hundred thirty plan administrators, attorneys, accountants, and actuaries listened to knowledgeable officials from the Department of Labor, the Pension Benefit Guaranty Corporation, and the Service discuss current employee benefits issues and address practitioners’ concerns.

Based on the completed evaluations, the practitioners were extremely pleased with the conference. The IRS received high marks and was praised for being responsive to its customers by holding a practical conference dealing with everyday issues. To the question, “Did the conference meet your needs?” the majority responded with a resounding yes. Several individuals commented that they enjoyed the opportunity to ask questions directly to the speakers during the presentation and talk informally with them afterward. Another added, “The nitty gritty real-life discussions were very practical, and anything that can save us time and money is worthwhile.” The opportunity for interaction with the speakers and IRS personnel at lunch, during breaks, and at the reception was much applauded.

That beginning to practitioner conferences was repeated in the Pacific Coast, Great Lakes, and Gulf Coast areas. Over the years, the key district conferences became a national meeting for members of the area liaison groups created to put more formality into the meeting. Ultimately, in 2005, the Joint TE/GE Council took over the liaison with an annual informal meeting in Baltimore and then Washington, D.C.

During the early days of the IRS-sponsored conferences, practitioners had an opportunity to ask questions and discuss problematic areas they saw in their practices. It was an open exchange. One significant outcome of this collaboration was the development of the Employee Plans Compliance Resolution System (EPCRS). Feedback from practitioners seeking ways to voluntarily address plan compliance issues influenced the program’s inception. The EPCRS program, which has evolved over time, exemplifies the positive impact of practitioner input on IRS initiatives.

The former AICPA Employee Benefits Committee and now the AICPA Employee Benefits Tax Technical Resource Panel (TRP) had a lot to do with the benefits derived from this collaboration. The Chief Counsel’s Office and others in Treasury have been invited to join our meetings for open discussion since the mid-1980s. The volunteers for the committee and now the TRP also have provided feedback to proposed regulations and other guidance on a regular basis.

Mikio Thomas, a former IRS agent and closing agreement coordinator for the Mid-Atlantic region, recalls: “The entire practice of ERISA was developing, as were the IRS employees tasked with its enforcement. Having been part of the collaboration from the beginning through the self-correction programs IRS implemented, and that the Department of Labor later emulated, I believe working with the practitioner community helped the IRS be better and more efficient.”

More recently, Amber Salotto, J.D., a managing director of RSM US LLP and a current member of the AICPA Employee Benefits TRP, observed that during her recent period working at Treasury, “At times, the practitioner community did not understand certain restrictions the agency had in offering guidance, and the time spent together gave a deeper understanding of the issues at hand for all stakeholders.”

Current challenges and the path forward

After many dedicated career agents retired before and during the 2020 COVID-19 pandemic, along with continuing attrition, IRS TE/GE is once again tasked with training new people. The IRS is in a phase of significant hiring, bringing in new employees with varying levels of employee benefits experience. Training these new hires is a critical task, expected to take at least two years before they can handle Employee Plans examinations effectively.

During this transitional period, the patience and support of the employee benefits practitioner community are crucial. Providing additional guidance to new agents and volunteering to help with training sessions can help expedite these new IRS employees’ learning process and ensure a smoother transition. This collaborative approach, which has proven successful in the past, remains essential as the IRS navigates this new phase of growth.

Maintaining a positive dynamic

The collaborative relationship between employee benefits practitioners and the IRS has been instrumental in developing effective guidance and protecting employee retirement savings. By continuing to work together, share knowledge, and support the training of new IRS employees, the practitioner community can help maintain this positive dynamic and contribute to the ongoing success of the employee plans sector.

The current leadership at TE/GE continues to support this outreach, recognizing its past success in developing relevant guidance without the limitations that can occur in an “ivory tower” without practitioner input. The plan sponsor community has benefited from this ongoing exchange.

The authors want to leave behind the knowledge that this relationship took time to develop, and its future relies on practitioners today helping to educate new agents, as was done in the past, to ensure the continued success of the collaborative outreach model.

Karen Field’s inside story

After speaking at a conference while working at the IRS, I received a request from an attorney involved in a merger-and-acquisition (M&A) transaction. The M&A team had significant concerns about the target’s qualified plan status. He asked how he could volunteer the plan to be examined by the IRS. Casually, I arranged such an examination, as I routinely taught IRS field agents. When another firm wanted to do the same with a different plan, my adviser and I raised the issue with the director [of Employee Plans] and eventually with his boss. They suggested we put together a pilot volunteer program, which eventually became the EPCRS [Employee Plans Compliance Resolution System] program, though it has been much improved over time. We had to coax practitioners to join the program initially, explaining that we did not intend to use it to “catch” noncompliant plans.

— Lisa Germano, CPA, CGMA, J.D., is president and general counsel of Actuarial Benefits & Design Company in Midlothian, Va., and a member of the AICPA Employee Benefits Tax Technical Resource Panel. Karen Field, J.D., is a senior director with RSM US LLP in Washington, D.C. To comment on this article or to suggest an idea for another article, contact Paul Bonner at Paul.Bonner@aicpa-cima.com.