GAO offers exemption recommendations for prohibited IRA transactions


The Government Accountability Office (GAO) has offered the Internal Revenue Service (IRS) and Department of Labor (DOL) recommendations regarding exemption oversight of prohibited IRA transactions.

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The GAO is recommending the IRS and DOL establish a formal means, such as a memorandum of understanding or other mechanisms, to collaborate on the oversight initiative. The GAO is also recommending the DOL document policies and procedures for managing the exemptions process.

The GAO’s analysis included reviewing relevant federal laws and regulations; examining agency guidance, exemption process documentation, and application case files; assessing interagency coordination using internal control standards and prior work on interagency collaboration; and interviewing DOL and IRS officials.

The GAO determined roughly half of the IRA prohibited transaction exemption applications reviewed were withdrawn by the applicant before the review process was completed, noting it found most of the prohibited transactions for which an exemption was sought involved the sale of IRA assets.

As it related to the DOL’s application review process, the GAO said it learned the DOL had not sufficiently documented internal policies and procedures to ensure effective internal control of its process. Documenting procedures could increase transparency about how applications are handled, reduce the risk of DOL employees carrying out their duties inconsistently, and provide a means to retain organizational knowledge should key personnel leave unexpectedly.

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