How are plans selected for an EP examination? For example, what methods are used?
Is statistical sampling used? In EP Examinations we use the Returns Inventory & Classification System (RICS). In the past there has been an informal doctrine in using RICS that is called “LUQ” – that is, we scrutinize a return to determine if an item is Large, Unusual or Questionable. The key down the road is sampling variant analysis. In other words, what are the items that may lead to a mix of issues that lead to compliance problems? We will use these items to pick the returns with the highest potential for noncompliance and will let us identify the issues that are relevant to a particular market or customer segment. In the future, I would also like to see us select returns other than through RICS by including local knowledge and agent expertise in the selection process. In some of our market segments statistical sampling is not appropriate. We have revised our statistical sampling by plan type (i.e., 401(k), Defined Benefit, Profit Sharing, Money Purchase). We want to do a fairly si
