IRS Phone Forum Addresses Plan Errors, Updated Procedures

July 26, 2013 ( – A phone forum held by the Internal Revenue Service (IRS) instructed attendees on how to deal with plan-related errors.

By Kevin McGuinness | July 26, 2013
Page 1 of 3 View Full Article

During the event, “EPCRS: Correction of 401(k) Plan Mistakes,” co-presenter Avaneesh Bhagat, manager, Voluntary Compliance Group in the IRS’s El Monte, California, office, discussed common 401(k) plan failures. “Plan sponsors need to take a holistic view of these corrections,” he said. “They need to find the errors, fix them and avoid them going forward.”

One common mistake, he said, is the failure to do a timely update of plan documents. “Legislation can make for constant change to your plan documents and plan sponsors sometimes miss the deadlines for making such changes.”

Other failures may occur because the plan does not operate in accordance with plan terms such as compensation, matching contributions, ADP/ACP testing, eligible employees, the 402(g) limit, top heavy contributions, hardship distributions or loans.

To prevent errors from happening, Bhagat recommended plan sponsors regularly review plan records such as the original plan document, amendments, adoption agreements, IRS opinion or advisory letters, IRS determination letters, minutes or resolutions from the board of directors, and the summary plan description.

“Plan sponsors need to figure out where the gaps are and then amend these documents to reflect compliance with current legislation,” he said.