Tackling The 2010 IRS 401(k) Questionnaire

Tackling The 2010 IRS 401(k) Questionnaire

Completing it may require professional help

by Paul McEwan, CPA, MT, AIF

You might have received a letter from the IRS asking your organization to complete a lengthy online questionnaire about your 401(k) plan. In May, the IRS mailed 1,200 letters with instructions for completing the online questionnaire, as well as a PIN, password and source ID needed to answer the questionnaire on the internet. The letters were sent to a representative sample of 401k plan sponsors around the country.

The list of plan sponsors was gathered from organizations that completed a 2007 Form 5500. The questionnaire will focus on the 2008 plan year, but will also require data from 2006, 2007 and 2008 plan years. Respondents will have 90 days to complete it.  The agency will collect the responses and issue a report that will outline any noncompliance trends identified.

The IRS describes the 69 questions in the questionnaire as "comprehensive." The agency notes that the questionnaire does not mean your plan is under examination, however, it is using the questionnaire to determine plan sponsors' level of compliance with requirements. The sections of the questionnaire include demographics, plan participation, employer and employee contributions, top-heavy and nondiscrimination rules, distributions and plan loans, automatic contribution arrangements, Roth features, IRS voluntary compliance programs, plan administration and other plan operations.

If your organization receives a questionnaire, it is very important to complete it in a timely fashion; failure to respond could result in an IRS examination. Because of the technical nature of the questions, you should not attempt to answer the questions without professional assistance. The questionnaire contains questions that, if answered incorrectly, could indicate your plan is out of compliance, which could also trigger an examination. We strongly recommend that your Rea advisor assist you in completing the online questionnaire process. To learn more about how we can assist you with this online process, please call your local Rea office.