The Internal Revenue Service (IRS) will begin mailing questionnaires to 401(k) plan sponsors to gather information about compliance with applicable tax rules. The questionnaire will focus on 401(k) plan operations, including eligibility, employee deferral rates, compensation definitions and nondiscrimination testing. The IRS is expected to mail several thousand questionnaires to 401(k) plan sponsors around the country to help make certain it reaches a representative sample.

The questionnaire is in response to past IRS audits that have shown significant 401(k) plan noncompliance from a lack of internal controls at the plan sponsor level. In addition, the questionnaire is based on various tools the IRS provides on its website, including the 401(k) fix-it guide, the 401(k) checklist, and the check-up for 401(k) plans.  Please note that while accounting firms prepare a financial audit for 401(k) plans with 100 or more participants, the financial audit is significantly different than what the IRS examines on its 401(k) plan compliance audits.

After collection of the responses or nonresponses, the IRS will issue a report on its findings to be published on its website. The report will assist the IRS to develop further website tools, perform audits and compile strategies to deal with any noncompliance trends reflected in the data received.

Littler’s employee benefits attorneys are available to assist plan sponsors with their answers to the questionnaire and are also available to assist plan sponsors in self-audits of their 401(k) plans as well as assisting with the IRS tools.
 

This entry was written by Melissa Kurtzman.