• IRS Announces 401(k) Compliance Check Questionnaire
  • June 25, 2010 | Author: James C. Bruinsma
  • Law Firm: Miller Johnson - Grand Rapids Office
  • The IRS Employee Plans Compliance Unit recently sent a letter to 1,200 randomly-selected employers that sponsor 401(k) plans.  The letters requested these employers complete an online 401(k) Compliance Check Questionnaire.  The IRS intends to use the information gathered to identify key compliance issues for purposes of future guidance and enforcement efforts.

    The questionnaire is not an IRS audit or investigation.  However, a failure to respond to the IRS questionnaire could result in an IRS enforcement action.  An employer must complete the questionnaire within 90 days after the date of the letter.

    The questionnaire is long and detailed (the printed version is 46 pages).  It requests information regarding the following topics:

    • Demographics
    • Participation
    • Employer and employee contributions
    • Top-heavy and nondiscrimination testing
    • Distributions and plan loans
    • Other plan operations
    • Automatic contribution arrangements
    • Designated Roth features
    • IRS voluntary compliance and correcion programs
    • Plan administration

    The questionnaire is available on the IRS’s website at www.IRS.gov/retirement/article/0,,id=223440,00.html (click on the View/Print The Guide to Completion of the 401(k) Questionnaire under “Other Resources”).

    Some of the questions only request statistical information that does not have a correct or incorrect answer.  But other questions are designed to determine if the plan is being operated consistent with the legal requirements.

    Therefore, even if an employer is not requested to complete the questionnaire, we recommend that the employer review the questionnaire as part of a self-audit regarding its 401(k) plan.  An employer that identifies a compliance issue could then potentially use the Employee Plans Compliance Resolution System (EPCRS) to correct the error.  The EPCRS provides the most cost effective way to fix errors that occur in administering a 401(k) plan.