Subject: IRS 401(k) Compliance Check Questionnaire Project

Details
The Internal Revenue Service has announced that its Employee Plans Compliance Unit (“EPCU”) will be mailing out a letter and instructions to a random sample of 1,200 employers that filed a Form 5500, Annual Return/Report of Employee Benefit Plan, for the 2007-plan year.  These selected 401(k) plan sponsors will be asked to complete a “401(k) Compliance Check Questionnaire” via a secure, easy-to-use website.

The purpose of the IRS’s 401(k) Compliance Check Questionnaire Project is to gain a better understanding of why 401(k) plans are the most non-compliant plan type in the retirement plan spectrum.  This detailed examination of 401(k) plans is expected to shed light on potential compliance issues, the reasons for noncompliance and potential plan operational issues which will assist the IRS in fine-tuning its efforts to improve future compliance as well as help them determine where best to focus their enforcement efforts.

All plan sponsors will complete the same questionnaire however; there are some questions that only pertain to certain plans.  According to the IRS, this is merely a compliance check.  It is not an audit or an investigation; however, employers that fail to respond to the questionnaire or provide complete information will result in further action or examination of their plan.  Through a secure Web site, the EPCU will collect responses on the following information:

• Demographics
• plan features
• other qualified and nonqualified retirement plans sponsored by the employer
• determination letter for the plan
  
  
• Participation
• number of employees on last day of plan year
• number of participants
• age and service requirement restrictions
• other plan exclusion information
• type of plan participants
  
  
• Employer and Employee Contributions
• non-elective contributions
• deferral contributions
• after-tax contributions
• matching contributions
  
  
• Top-heavy and Nondiscrimination Testing
• top heavy contributions
• actual deferral percentage
• actual percentage testing and corrections
  
  
• Distributions and Plan Loans
• forms of distribution
• hardship rules
• plan loan rules
  
  
• Other Plan Operations
• employer stock
• foreign investments
• in-kind distributions
  
  
• Automatic Contribution Arrangements
• types of automatic contribution arrangements
• default investments
  
  
• Designated Roth Features
• number of participants making Roth contributions
• rollover features
  
  
• IRS Voluntary Compliance and Correction Programs
• questions regarding a company’s awareness and use of IRS correction programs
  
  
• Plan Administration
• administrative procedures
• amendment procedures