IRS Probes 401(k) Compliance

The Internal Revenue Service has begun mailing out questionnaires to 401(k) plan sponsors to assess compliance with retirement plan regulations.

The IRS random sample is going to 1,200 401(k) plan sponsors that filed a Form 5500 for the 2007 plan year. Plan sponsors who receive a letter will complete the questionnaire by accessing a special website.

The questionnaire categories are:

•    Demographics
•    401(k) plan participation
•    Employer and employee contributions
•    Top heavy and nondiscrimination rules
•    Distributions and plan loans
•    Other plan operations

•    Automatic contribution arrangements
•    Designated Roth features
•    IRS voluntary compliance programs
•    Plan administration

The IRS will then issue a report summarizing the results and identifying areas where additional education, guidance, and outreach is needed—as well as how IRS enforcement can address or avoid non-compliance in 401(k) plans.

The IRS emphasized that the questionnaire is a compliance check, not an audit or investigation. Nonetheless, failure to complete the questionnaire will result in further enforcement action.