May 21, 2010
This week, the IRS mailed out questionnaires to 1,200 sponsors of 401(k) plans. These questionnaires are 46 pages long and contain hundreds of questions. They must be completed within 90 days of the date the IRS sends them.
Who Will Be Getting a Questionnaire?
The IRS selected 1,200 401(k) plan sponsors at random from all of the 2007 Forms 5500 it received. The IRS indicates that there are almost half a million 401(k) plans in the U.S., so less than 1% will be receiving questionnaires.
Am I Required to Complete the Questionnaire?
The questionnaire is technically a “compliance check” and not an audit of the plan. However, the IRS has indicated that failing to respond or provide all requested information will result in further examination of the plan by the IRS and could result in a full audit. Therefore, it is crucial that all questionnaires be completed.
What Types of Questions Are Included?
The questionnaires include a broad range of questions that the IRS breaks down into the following ten categories:
- Nondiscrimination testing
- Distributions and loans
- Other plan operations
- Automatic enrollment
- Roth features
- IRS correction programs
- Plan administration
Examples of specific questions include the following:
- “Enter the number of participants who made elective deferrals for each plan year listed below.”
- “What is the maximum percentage of compensation for which any match is available?”
- “Was the Plan top-heavy in the 2008 plan year?”
- “Has the Plan sponsor ever used the Employee Plans Compliance Resolutions System?”
Why Is the IRS Doing This?
The IRS is nominally collecting information on 401(k) plans to identify potential compliance and operational issues and to develop new education, outreach and enforcement initiatives. The IRS is planning to publish a report of its findings once all the questionnaires are complete, but the report will not include any information that will identify any specific plan or plan sponsor.
How Do I Complete the Questionnaire?
The questionnaire must be completed within 90 days of the date on the cover letter. Also, even though a paper version of the questionnaire is available, the actual questionnaire must be completed online. Since the questionnaire is long and requires a significant amount of data about the plan, you may want to consider completing the paper form before sitting down to enter the information online.
What Do I Do If I Receive a Questionnaire?
If you receive a questionnaire, we can help you compile the necessary data and complete the written form. Also, with a power of attorney, we can complete the online form for you.
If you receive a questionnaire or have any questions about this new IRS initiative, please contact David Putnal (404.888.8836), Toby Walls (404.888.8870) or Teri King (404.888.8847).
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