by Ed Frado, J.D.

IRS recently announced that, starting in March, it would begin sending questionnaires to “a random sample of 401(k) plan sponsors” for a new initiative to gauge the “health of these plans.”  As background, the IRS provides on its website several tools (e.g., a “401(k) Fix-It Guide”) intended to encourage plan sponsors to conduct periodic reviews of their plans and to self-correct documentary or operational compliance issues discovered in those reviews.  Top IRS officials have stressed over the past couple of years that it will be a lot less expensive if plan sponsors find errors and self-correct them than having the IRS discover those errors during a plan examination.

In announcing this new initiative, the IRS stated that the questionnaire will elicit information that will help the IRS to determine if the tools referenced above are being used and are working.  Overall, the IRS noted that it drafted the questionnaire to help the IRS “better understand compliance behaviors.”

What will the IRS do with the questionnaire answers?  The IRS stated that it will prepare a report of findings and publish that on its website, as well as update its website materials “to better serve the needs of the plan sponsors.”  However, even a small amount of cynicism could lead to the thought that the IRS may eventually use the questionnaire responses as a way to target plans for an examination.

In any event, plan sponsors that receive a questionnaire under this initiative should consider discussing it with the plan’s service provider and having the responses reviewed before submitting the completed questionnaire to the IRS.  Also, this serves as yet another reminder that plan sponsors should conduct periodic reviews that are distinct from the plan’s annual ERISA audit and self-correct any discovered compliance issues.

Ed Frado is an employee benefits attorney who has specialized exclusively in this field for more than 11 years.  At Denver Compensation & Benefits, LLC, he advises clients in a wide array of employee benefits issues.  Also, Ed is a frequent speaker at seminars,  conferences, and accounting firms’ in-house training for employee benefits auditors.  You can reach Ed at