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IRS Still Considers 401(k) Plans a Top Exam Priority

According to Acting Director of IRS Employee Plans Thomas Petit, the IRS still lists 401(k) plans among its top examination priorities. Petit provided that confirmation to attendees of the ASPPA Regional Conference in Chicago.

IRS EP Exam Projects and Employee Plans Compliance Unit (EPCU) projects flow from the IRS report on the 401(k) plan questionnaire it had distributed. These include an exam project on defaulted 401(k) loans and a nonqualified 401(k) EPCU project.

The IRS report said that during the period 2006-08, 60 percent of 401(k) plans had an increase in loan defaults and almost half of plans had a higher number of outstanding loans. It also said that the report shows the importance of using the right codes when filling out and filing the Form 5500. In the sample studied, 87 percent of plan sponsors made mistakes in their filings; some of the errors showed that the plan was not a qualified 401(k) plan, and others said that their plan was a 401(k) whereas it was really a profit-sharing plan.

Petit also said that the report also allowed the IRS to identify some recurring errors 401(k) plan administrators make. These include non-amender/late amender issues, failure to follow plan terms, nondiscrimination issues, breaking the 402(g) limits and failure to deposit employee elective deferrals on time.

John Iekel is Senior Writer and Editor for the ASPPA Net and NTSA Net portals.