In May of this year, the IRS began issuing "Compliance Questionnaires" to some 1,200 401(k) plan sponsors. The purpose of the questionnaires was not for an external audit, but rather to encourage sponsors to conduct an internal audit to identify and correct any compliance problems. While the compliance questionnaire is not formally part of the audit process, the IRS has reiterated that employers who do not respond will be contacted directly by the IRS. The most common problems that are identified by the questionnaire are plan documentation failure, failure in discrimination testing and failure to follow the plan's definition of compensation. While the IRS will use the questionnaires to plan future educational activities, sponsors can certainly use them as a self-correction guideline. Even employers who do not receive a questionnaire should consider this an opportunity to self-audit and self-correct. The IRS guide to completing the questionnaire is available here if you did not already receive one. For assistance in responding, or in self-auditing, please contact your attorney at Fox Rothschild.
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