Just this once — if the IRS comes knocking, don’t run

I’m pretty sure if I said, “Some folks at the IRS have a few questions they’d like to ask you about your 401(k) plan,” you’d start getting nervous. But just this once, there’s nothing to worry about.

The Internal Revenue Service recently began mailing out questionnaires to 401(k) plan sponsors to assess compliance with retirement plan regulations, EBN sister title Money Management Executive reports.
The IRS random sample is going to 1,200 401(k) plan sponsors that filed a Form 5500 for the 2007 plan year. Plan sponsors who receive a letter will complete the questionnaire by accessing a special Web site.

If you’re one of the lucky few, expect to see questions about your plan’s:
•    Demographics
•    401(k) plan participation
•    Employer and employee contributions
•    Top heavy and nondiscrimination rules
•    Distributions and plan loans
•    Operations
•    Automatic contribution arrangements
•    Designated Roth features
•    Administration.

In addition, you’ll likely be asked about IRS voluntary compliance programs.
The scoop is that the IRS will then issue a report summarizing the results and identifying areas where additional education, guidance and outreach is needed — as well as how IRS enforcement can address or avoid non-compliance in 401(k) plans. Pretty painless, right?

The IRS emphasized that the questionnaire is a compliance check, not an audit or investigation. Whew!

However, if you’re chosen, don’t give the questionnaire the brush off. Failure to complete it will result in enforcement action.

Do retirement plan compliance and the Form 5500 make you skittish? How do you and your team ensure that all the I’s are dotted and T’s crossed? Offer up advice to your fellow pros in the comments.