Guest Article

(From the March 7, 2011 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

IRS 401(k) Plan Questionnaire: Non-Responders Will Be Subject to Full-Scope Audit

In the most recent issue of Retirement News for Employers [dated Feb. 23, 2011] the IRS announced it will be conducting full-scope examinations of plans whose sponsors did not return the 401(k) Questionnaire it sent them in May 2010 as part of an IRS initiative to better understand 401(k) plan compliance.

An earlier study by the IRS Employee Plans Examination group revealed 401(k) plans to be "the most non-compliant plan type in the retirement plan universe." In an attempt to better understand those compliance issues, the IRS initiated a 401(k) Compliance Questionnaire Project by which it sent a questionnaire to "a statistically valid sample of 1,200 401(k) plan sponsors" that had filed a 2007 Form 5500. The May 2010 questionnaire directed the plan sponsors to provide, via a secure IRS website, information on the plan's demographics, participation, contributions, top-heavy and nondiscrimination compliance, distributions and plan loans, etc.

In the Retirement News the IRS announced that the information- gathering phase is complete and the IRS will be evaluating the responses. It intends to issue a report identifying those areas where additional education or outreach is needed, and how it can best focus its enforcement efforts. However, in order to obtain the data it needs for the market-segment analysis, the IRS announced it will be conducting fullscope examinations of plans whose sponsors did not return the 401(k) Questionnaire. The IRS encourages all plan sponsors to use the 401(k) Questionnaire as an internal control tool to review plan compliance.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Erinn Madden 202.220.2692, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955. Copyright 2011, Deloitte.