IRS 401K Compliance - Questionaires are coming...but why?
As our readers know by now, that the IRS is continuing to look at alternative means of revenue generation. Attacking the area of misclassified workers was one that we have focused on and now this is possibly the next.
IRS may not only use this to to generate revenue, but find a way to solve for the growing Social Security shortages. Many of us hear varying numbers describing the shortfall in Social Security funds for retiring baby-boomers. Several plans have been submitted to the Obama administration that would put more government control over 401(K) plans as a means to help support those shortfalls.
IRS Employee Plans Compliance Unit has launched its 401(k) Compliance
Check Questionnaire Project. The will be sending instruction letters to 1,200 random sponsors of 401(k) plans that filed an Annual Report for the 2007 plan year.
IRS intends to use the information to identify key compliance issues for future guidance on, and enforcement of, these issues. The questionnaire is not an IRS audit or investigation, however,failure to respond will result in IRS enforcement action, which may include an examination of the 401(k) plan.
The Questionnaire seeks detailed information on a wide range of topics. Topics include: demographics,participation, employer and employee contributions, top-heavy and nondiscrimination testing, distributions (including plan loans), automatic contribution arrangements, designated Roth features, plan operations
and administration, and IRS voluntary compliance programs.
The Questionnaire can be seen on the IRS website at 401(K) Questionnaire (Click on "View/Print the Guide to Completion of the 401(k) Questionnaire").
If you receive the instruction letter, the Questionnaire must be completed and submitted to the IRS within 90 days of the date on the letter. While the Questionnaire is publicly available on the IRS website, plan sponsors completing the Questionnaire must do so through a secure on line system on the IRS website.