Labor and Employment Law Blog
May 25, 2010 / IRS ANNOUNCES COMPLIANCE CHECK PROGRAM
The Employee Plans Compliance Unit of the IRS announced earlier this month that it will be conducting a compliance check program of a sample of 1,200 sponsors of 401(k) plans. Sponsors selected for this program will receive a letter from the IRS describing the program, assigning a personal identification number (PIN), and directing them to a secure website to complete an online compliance questionnaire. These letters are anticipated to be received by the selected plan sponsors by the end of May. Plan sponsors have 90 days to complete the questionnaire, but can ask for an extension. According to the IRS, completing the questionnaire is technically voluntary. However, IRS officials have made it clear "they want the information" and that failure to respond or provide complete information will result in further action or examination of the plan.
The questionnaire will collect information on the following topics: demographics, participation, contributions, testing, distributions, plan loans, ROTH features, the IRS voluntary correction program, plan administration and other plan operation issues. The information gathered from the questionnaire will be used by the IRS for education, outreach and enforcement actions.
Although technically the questionnaire is not an audit, it may be used to open a future audit. If your company is selected to participate in this program, caution should be exercised in completing the compliance questionnaire, and it should be completed by someone who is knowledgeable about plan compliance requirements as they apply to your plan. If a compliance issue is discovered in completing the questionnaire, corrective action should be taken now. Through the IRS Voluntary Correction Program most errors can be corrected, some without any involvement of the IRS. By taking steps to voluntarily correct errors, many of the costly penalties that could be assessed by the IRS during an audit with respect to such errors may be avoided.
If you receive a letter from the IRS inviting you to participate in this program and to complete the compliance questionnaire, contact Linda Keng if you have any questions or if we can assist you in completing the questionnaire or in addressing any compliance issues you may discover.
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