IRS Creates the Enrolled Retirement Plan Agent (ERPA)
Rev. 10/05/07, E-mail Alert 2007-13

Background
In 2004, Rich Hochman and other industry leaders brought attention to the fact that the IRS had changed Form 2848. The change meant that only four categories of professionals would be permitted to represent clients before the IRS on some retirement plan matters. These professionals include actuaries, attorneys, accountants, and enrolled agents designated by clients on Form 2848. Well, the story has developed a great deal since last year.

The IRS Restructuring and Reform Act of 1998 imposed substantial penalties on IRS employees that had unauthorized dealings with third parties. The purpose of the law was to prevent tax fraud. As a result, IRS Form 2848 (Power of Attorney and Declaration of Representative) was revised, and limits were placed on professionals that did not fall into one of the four categories. In particular, restrictions were put on “Unenrolled Return Preparers” (previously category H).

Fallout from the Change
It soon became apparent, however, that there was a need for relief because of the myriad retirement plans represented by third-party administrators and benefit consultants who are not members of one of the four approved categories. This is primarily the result of the tremendous growth of defined contribution plans over the last 20 years. Because of the intensive recordkeeping involved, 401(k) plan sponsors in particular have come to rely on third party administrators and benefit consultants to prepare Form 5500 and represent the sponsors before the IRS.

A Solution Emerges
The IRS Advisory Committee on Tax Exempt and Government Entities (ACT) performed a comprehensive analysis of the situation and has proposed the creation of a new category of practitioner that will be permitted to represent qualified retirement plan sponsors before the IRS. Rich was one of the practitioners invited to meet with senior IRS officials to discuss current practices in retirement plan administration, explain the key role that practitioners play in representing employers’ plans, and outline the problems caused by the change in Form 2848. Much of the information he provided was forwarded to the ACT members to assist in formulating the policy.

Testing, Continuing Education, and More
The proposed title for the new category of practitioner is Enrolled Retirement Plan Agent (or ERPA) under Circular 230. ACT has made a proposal to the IRS that would create a testing and approval process for individuals to pass in order to attain ERPA status. Status renewal procedures and continuing education requirements would parallel those currently required for enrolled agents, but would only encompass retirement plan issues, not the entire Internal Revenue Code.

IRS Examination
Generally, ERPA candidates would be tested on their knowledge of all types of retirement plans including defined contribution, defined benefit, and ESOP. Ethical, procedural, and practical testing elements could mirror the enrolled agent examination.

IRS CREATES THE ERPA DESIGNATION
In late September 2007, the IRS issued final Circular 230 rules introducing the Enrolled Retirement Plan Agent. The first IRS designation permitting such agents limited practice before the IRS. Rich and other industry leaders were part of the driving force behind this idea and bringing it to fruition. At an IRS hearing last June, Rich, Bob Kaplan, also from McKay Hochman, and Brian Graff, Executive Director of ASPPA, all testified in support of the program.

An Enrolled Retirement Plan Agent (ERPA) is defined as:

1. Any individual enrolled as a retirement plan agent pursuant to this part who is not currently under suspension or disbarment from practice before the Internal Revenue Service may practice before the Internal Revenue Service.
   
2. Practice as an enrolled retirement plan agent is limited to representation with respect to issues involving the following programs:
   
   1. Employee Plans Determination Letter program;
      
   2. Employee Plans Compliance Resolution System (EPCRS); and
      
   3. Employee Plans Master and Prototype and Volume Submitter program.
      
   4. In addition, enrolled retirement plan agents are generally permitted to represent taxpayers with respect to IRS forms under the 5300 and 5500 series which are filed by retirement plans and plan sponsors, but not with respect to actuarial forms or schedules.
      
3. ERPAs who practice before the Internal Revenue Service are subject to the provisions of Circular 230 in the same manner as attorneys, certified public accountants and enrolled agents.
   

Effective/applicability date. This section is applicable on September 26, 2007.

Eligibility for enrollment as enrolled agent or enrolled retirement plan agent.

1. Enrollment as an enrolled agent upon examination. The Director of the Office of Professional Responsibility may grant enrollment as an enrolled agent to an applicant who demonstrates special competence in tax matters by written examination administered by, or administered under the oversight of, the Director of the Office of Professional Responsibility and who has not engaged in any conduct that would justify the censure, suspension, or disbarment of any practitioner under the provisions of this part.
   
2. Enrollment as a retirement plan agent upon examination. The Director of the Office of Professional Responsibility may grant enrollment as an enrolled retirement plan agent to an applicant who demonstrates special competence in qualified retirement plan matters by written examination administered by, or administered under the oversight of, the Director of the Office of Professional Responsibility and who has not engaged in any conduct that would justify the censure, suspension, or disbarment of any practitioner under the provisions of this part.
   
3. Enrollment of former Internal Revenue Service employees. The Director of the Office of Professional Responsibility may grant enrollment as an enrolled agent or enrolled retirement plan agent to an applicant who, by virtue of past service and technical experience in the Internal Revenue Service, has qualified for such enrollment and who has not engaged in any conduct that would justify the censure, suspension, or disbarment of any practitioner under the provisions of this part, under the following numerous circumstances, explained on pages 24 and 25 of the regulations.
   

Enrollment procedures parallel those already in existence.
An unenrolled return preparer who prepared the taxpayer’s return may continue to negotiate with the IRS during an examination or bind that taxpayer to a position during an exam. Payroll agents do not fall into this category; however, payroll agents may assist in the exchange of information with the IRS regarding the taxpayer’s return, if the taxpayer authorizes the payroll agent. However, the Form 5307 is not a “return” and its filing may not be made by an unenrolled preparer. The same thing holds true for submissions under EPCRS.

Former Government Employees, Their Partners and Their Associates
There is a one-year prohibition from former employees appearing before or communicating with the intent to influence an employee of the Treasury Department with respect to a rule in which they were involved in developing. The one year starts after Government employment is ended.

There are sections of Circular 230 for ERPAs dealing with:

1. Conflicting Interest
   
2. Standards with Respect to Tax Returns and Documents, Affidavits and Other Papers
   
3. Sanctions
   
4. Incompetence and Disreputable Conduct
   
5. Conferences
   
6. Service of Complaint
   
7. Supplemental Charges
   
8. Discovery, Hearings and Publicity of Proceedings
   
9. Decision of Administrative Law Judge
   
10. Expedited Suspension
    

There is information on the enrollment process, maintaining the designation through continuing education, qualifying sponsor and more.

McKay Hochman expects to provide continuing education to ERPAs after they are enrolled. We are very gratified that our clients who were disenfranchised by the Act will once again be able to properly represent their adopting employers in all Qualified Plan matters. We are proud of our role in bringing this change about.

Regulations on ERPA