Thursday, July 1, 2010

IRS Is Auditing Retirement Plans Remotely (Sort of)

A quick client service tip, FYI:

On May 17, 2010, IRS sent questionnaires to 1200 plan sponsors. The questions cover the same ground IRS covers in an audit, but not comprehensively. If one of your clients receives one of the questionnaires, be aware of the following:

• This is not an audit, but it can lead to one.

• One risk to the sponsor is that an answer might lead to an audit, and once a plan is under audit it is no longer available for the self-correction or voluntary compliance programs (SCP and VCP, part of EPCRS, the Employee Plans Compliance Resolution System). They could be forced instead into Audit CAP, the penalties for which are much more serious. For this reason, it is best to treat the Questionnaire as an audit even though IRS says it’s not one.

• Clients will want help with these. If a Unified Trust client gets a questionnaire, we will complete it for them except for any information we do not have.

Here’s a link to the IRS overview of the project:,,id=223440,00.html

Here also are some of IRS’s FAQ answers:

What is the 401(k) Compliance Check Questionnaire Project?

The 401(k) Compliance Check Questionnaire Project is a compliance check project being administered by the Employee Plans Compliance Unit (EPCU). This project is designed to be a comprehensive look into 401(k) plans to determine potential compliance issues, gain a better understanding of the reasons for noncompliance and determine any potential plan operational issues. This project will also assist us in developing additional education and outreach materials to improve future compliance and help us determine where best to focus our enforcement efforts.

Why was my plan selected?

The 1,200 plans selected to receive this compliance check were selected at random from 401(k) plans that filed a Form 5500 for the 2007 plan year.

Is this an audit?

This is a compliance check, which is neither an audit nor an investigation under IRC section 7605(b) nor an audit under section 530 of the Revenue Act of 1978. This is not a review of an organization’s books and records.

What is a compliance check?

A compliance check is a review by the IRS to determine adherence to certain compliance requirements under the Internal Revenue Code.

Am I required to respond to this compliance check?

Yes, a compliance check is an enforcement action which you must respond to. Failure to respond, or to provide complete information will result in further enforcement actions which may include an examination of your plan.


  1. If anyone has any clients that have received a questionnaire do they mind "blacking" out the name and posting it. I heard it's about 50 questions, just curious to what exactly they are asking.

  2. Justin, this is the link to the exact questionairre. Thanks for the question.