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On the IRS’s Radar

401(k) plans remain a top examination priority with the IRS, thanks in part to the results of the Service’s 401(k) plan questionnaire project, which concluded last year. What’s the IRS looking at? Plan loans, for one thing. The IRS has begun an Exam Project on defaulted loans, triggered by questionnaire data that showed 60% of surveyed plans saw an increase in the number of defaulted plan loans during the 2006-2008 period, and 47% reported an increase in the number of outstanding loans. While outstanding loans increased, the number of loans originated decreased.

Other items on the IRS’s radar include these “recurring errors”:

  • Non-amender and late amender issues — the number one exam issue
  • Plan sponsors’ failure to follow the terms of their plans
  • Annual nondiscrimination testing (ADP/ACP) issues
  • Sponsors not complying with the annual dollar limitation on employee elective deferrals
  • Failure to timely deposit employee elective deferrals


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