401(k) plans represent the most preferred vehicle for retirement savings today – making up more than 60 percent of retirement plans, according to the IRS. However, 401(k) plans are also the most non-compliant type of retirement plan as well, according to a study by IRS Employee Plans Examinations. In light of the popularity and non-compliance of 401(k) plans, the IRS has launched a 401(k) “Compliance Check Questionnaire Project.”

The objective of the repost is to identify the areas where additional education, guidance, and outreach regarding 401(k) compliance are needed. The responses will also enable the IRS to determine where the agency needs to focus its enforcement efforts in order to address non-compliance related to the plans. Although the IRS has indicated that the questionnaire is not an audit or an investigation of the plans selected to complete the questionnaire, the agency has indicated that a plan sponsor’s failure to respond may result in further enforcement action.

Random sample

As part of the project, the IRS has randomly selected 1,200 401(k) plans from among plans that filed a Form 5500 for the 2007 plan year. These plans will receive a letter from the IRS with instructions to complete the 401(k) questionnaire using a website established for this purpose, or mailing the questionnaire back to the IRS. Recipients of the questionnaire have 90 days to complete and return the questionnaire. If a plan sponsor receives a letter to complete the questionnaire, they must follow the instructions included in the letter. Plan sponsors that wish to complete the questionnaire on-line will receive personal identification numbers and other information needed to create an on-line profile for purposes of providing the information on-line.

Categories

The questionnaire includes the following categories:

• 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; and
• Plan administration.

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