March 3, 2011Client Alert

IRS to Conduct Full Scale Examinations of 401(k) Plans Which Did Not Return Questionnaire

In May 2010, the Internal Revenue Service (“IRS”) sent letters to 1,200 401(k) plan sponsors requesting that each complete a questionnaire so that the IRS could better understand 401(k) plan compliance issues, determine how its tools and voluntary compliance programs were working, and identify participant awareness and plan sponsor compliance issues. At the time the request was made, the IRS warned that the failure to respond could trigger further IRS enforcement action, including the examination of the sponsor's 401(k) plan.


On February 23, 2011, the IRS announced that plan sponsors who did not complete the questionnaire will be subject to a full-scope examination of their 401(k) plan. It further stated that sponsors who completed the questionnaire were not necessarily exempt from future IRS examination or compliance checks of their 401(k) plans, but that any such examination would not be a direct result of the sponsor's answers to the questionnaire.


Employers who received a questionnaire from the IRS in the spring/summer of 2010 and who did not respond should consult with counsel to ensure that the necessary steps have been taken to address the impending plan examination.


If you have any questions about the content of this client alert, please contact a member of the Employee Benefits Subgroup at Michael Best & Friedrich LLP or your Michael Best attorney.

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