IRS Creates 401(k) Compliance Questionnaire


With a new compliance initiative, the Internal Revenue Service (“IRS”) has added another tool to assist the government in discovering non-compliant 401(k) plans. The IRS has created an electronic plan compliance questionnaire composed of nearly 70 questions that cover a broad range of compliance issues, such as the method of plan administration, participation rates, and nondiscrimination compliance. Recently, the IRS randomly selected 1,200 sponsors of 401(k) plans to complete the questionnaire.

Plan sponsors chosen to participate should review their plan documents and administrative procedures in order to prepare well-researched and accurate responses within the 90-day response period to avoid further action by the IRS. The answers should be detailed and accurate as the responses will become a part of each plan sponsor’s permanent record with the IRS. Receipt of a questionnaire does not suggest compliance issues with a particular plan, nor does it imply the potential for a plan review or audit by the IRS . However, the IRS cautions that failure to complete the questionnaire within the 90-day timeframe will result in further action, up to and including an audit and/or penalties.

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