401(k) Questionnaire
Rev. 07/23/10; E-mail Alert 2010-11

The IRS wants to learn more about 401(k) noncompliance so it can more effectively target plans for examination and bring them into compliance. During the week of May 17th, the Service mailed questionnaires to 1,200 401(k) plan employers randomly selected from the 2007 Form 5500 filings. It also issued a special edition of its Employee Plans News to provide an overview of the extensive questionnaire. The 401(k) questionnaire is also known as IRS Form 14146.

The employers chosen to participate received a letter from the IRS with a password and personal identification number (PIN). The Internet-based questionnaire consists of 69 questions, many of which have multiple parts. The questions are about the 2008 plan year, although data must also be gathered from the 2006 and 2007 plan years. Employers were instructed to return the questionnaire within 90 days. The IRS stated that if an employer did not respond, the result would be further enforcement action, which will likely include an IRS examination of the plan.

The 90-day deadline to respond is fast approaching!

To complete the questionnaire, the employer will need the help of a plan administrator, recordkeeper, consultant or ERISA attorney. More importantly they should probably not attempt to complete it without the help of one of those parties because there are questions that — depending on how they are answered — may indicate that the plan is out of compliance.

Sample Questions
Question 18a asks if the plan was top heavy for 2008. If yes, question 18b asks if non-key employees were provided with a minimum contribution. Question 18c asks if the minimum was less than 3%, 3%, 5%, or any combination of these choices or another amount. Question 19a asks for the ADP for the highly compensated employees and the non-highly compensated employees rounded to the nearest 100th for 2006, 2007, and 2008. Question 19b asks if there was a correction required for 2006, 2007, or 2008. Question 19c asks for the correction method for 2006. Question 19f asks if refunds were made within 2½ months for 2006, 2007, or 2008. Question 19g asks if the refunds were made by the end of the twelth month.

Question 23a wants to know if the plan was ever a safe harbor 401(k) plan. If yes, question 23b wants to know if it was a safe harbor in 2008. If yes, question 23c asks when the plan became a safe harbor. Question 23d asks the type of the safe harbor contribution and question 23e asks how the safe harbor notice is distributed. Question 25e asks the plan sponsor to complete the dollar amount of the largest outstanding participant loan balance, the largest participant loan made by the plan during the year, and the participant’s balance for each year (2006, 2007, and 2008). Question 43a asks: “Does the Plan include an automatic contribution arrangement?” If you answer yes, then question 43b asks you to check off one of the following: QACA, EACA, QACA and EACA, or neither QACA nor EACA. Question 61a asks: “Does the plan have policies and procedures that it uses to review the Plan’s operation to determine that the Plan is operated in accordance with its terms?” If yes, question 61b wants to know how often these are reviewed.

Bill Grossman, ERPA, QPA