The Internal Revenue Service (IRS) recently began a new compliance check questionnaire that focuses on the Roth deferral provision in 401(k) plans. The purpose of the questionnaire is to assist the IRS in determining potential noncompliance issues related to the Roth feature of 401(k) plans.
In 2012, the IRS conducted a similar questionnaire, in which it inquired of approximately 1,200 plan sponsors. The IRS received a 98% response rate. The plan sponsors that did not respond to the questionnaire were subjected to an audit of their plan. The IRS has stated that it will follow-up with all nonresponders and examine the plans of all intentional nonresponders.
Clearly, the IRS does not view these questionnaires to be voluntary.
If compliance issues are identified, the IRS may conduct a plan audit or otherwise request that compliance issues be corrected by the plan sponsor.
Before receiving the compliance check questionnaire, plan sponsors would be wise to perform a self-review of their plan to ensure that it is operating in compliance with necessary laws and regulations. For those selected to participate in the compliance check, it is highly recommended that they contact their employee benefit plan expert.
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