And the ERPA Contract Goes To……..

August 7th, 2008 · No Comments

In a strange, almost bizarre, twist today, the IRS announced that they have awarded the contract to conduct the examinations for the Enrolled Retirement Plan Agent (ERPA) program to the American Institute of Retirement Education LLC, a partnership between the American Society of Pension Professionals & Actuaries (ASPPA) and the National Institute of Pension Administrators (NIPA).

From the press release, it is not exactly clear what was awarded to the American Institute of Retirement Education LLC (AIRE) as the IRS press release said that AIRE will be working with Prometric and the University of Michigan to help administer the ERPA program. Prometric already administers the examination to become an Enrolled Agent, and the recommendation by the ACT committee had been for the IRS to create the ERPA program along the same lines as the Enrolled Agent program. My assumption here is that, since Prometric is in the business of administering tests and has over 300 testing facilities in just about every major city nationwide, that an ERPA candidate will be required to take the examination at a Prometric center and pay the fee for taking the exam to Prometric. I’m not sure what role the University of Michigan is expected to play in the ERPA process.

One thing that makes this announcement so interesting is that one of ASPPA’s functions for its members is lobbying the IRS and Congress on behalf of its members. Before awarding this contract, I am sure the IRS reviewed the impact of ASPPA’s lobbying activities, but functionally I think it raises questions about whether a government contractor can also engage in lobbying activities. It would have been nice for the IRS to either administer the examination themselves, or to have awarded to contract to a non-profit without a history of lobbying activities before the IRS.

It will also be interesting to see what impact this contract has on the very competitive educational materials market as the announcement does not state who will be actually writing the examination questions. The American Institute of Retirement Education states on its website that it will be providing a downloadable ERPA examination syllabus which will provide a description of the topics to be covered on the examination. Their website also states that The ERISA Outline Book by Sal Tripodi is the recommended reference text for the 2009 ERPA examination. The ERISA Outline Book is excellent. It is also written by Sal Tripodi, who has served as President of ASPPA. The cost of the 2008 edition of The ERISA Outline Book is $495, which I gladly pay each year for my copy. $495 was also the cost of my ASPPA membership for 2008.

So, as pension geeks like to say, let’s do the math:

Estimated annual salary of pension administrators who will want the ERPA designation = $40,000 to $60,000

Cost of ASPPA membership: $495

Cost of The ERISA Outline Book: $495

IRS Application Fee for ERPA designation: best guess is $197 which is the application fee paid to the IRS with the Enrolled Agent application.

Application Fee to the American Institute of Retirement Education LLC = ? unknown at this time

Fee to Prometric to take examination: best guess is $388, which is the current fee Prometric charges for taking the Enrolled Agent exam, broken down into payments of $97 for each part of the 4 part exam.

Just these fees add up to $1,575, and do not include the cost of any review courses or materials for taking the exam.

Once an individual earns the ERPA designation, the IRS requires 72 hours of continuing education to be earned over a 3 year period, with at least 16 of those hours earned each year.

ASPPA offers frequent continuing education to its members, and also to non-members for a slightly higher fee. For example, the cost of an upcoming web seminar worth 2 hours of continuing education credit is $195 for ASPPA members and $295 for non-members. Using $195 as the cost for 2 hours, this works out to $6,970 for 72 hours of continuing education required over the 3 year period.

The American Institute of Retirement Education LLC has announced that they will start accepting applications in October of 2008 for the first examination to be administered in April of 2009. The IRS announcement says that they expect 3,000 to 6,000 individuals to apply to be awarded the ERPA designation. With the process to earn the designation potentially costing $1,575 per applicant, this means the contract could be worth at least $4,725,000 to The American Institute of Retirement Education LLC this year and next year.

3,000 ERPAs requiring 72 hours of continuing education over the first 3-year period works out to a potential of $20,910,000 for The American Institute of Retirement Education LLC over that 3-year period.

Finally, it is interesting that the IRS did not following the ACT committee’s recommendation to create the ERPA program along with the same lines as the Enrolled Agent program, as the average annual wages between Enrolled Agents and ERPA are expected to be comparable. For enrolled agents, the application is made directly to the IRS and Prometric administers the exam provided by the IRS with help from the National Association of Enrolled Agents and the National Association of Tax Professionals. For the last two years, there has been talk of a trade association for ERPAs forming that would provide affordable continuing education for individuals seeking the ERPA designation, as well as inexpensive examination review materials and help to the IRS in creating the examination questions. One function that organization would have provided which is noticably absent from today’s press release is the enforcement of Circular 230’s ethics requirements. Currently, ASPPA does not police Circular 230 violations made by its members. It will be interesting to see how it will work if The American Institute of Retirement Education disbars an ERPA from practice before the IRS for a Circular 230 violation while at the same time ASPPA is lobbying on behalf of that same member before the IRS and Congress for how Circular 230 should be applied to pension professionals.