(b)lines Ask the Experts – Preparing for an IRS Audit

July 29, 2014 (PLANSPONSOR (b)lines) – “Though our 403(b) plan has never been audited by the Internal Revenue Service (IRS), I want to make certain we are troubleshooting for compliance issues that could come up in an audit.

“Are the Experts aware of any common IRS audit issues?”  

Michael A. Webb, vice president, Cammack Retirement Group, answers:

First of all, the Experts wish to compliment you on preparing your plan from a compliance perspective in the event that the IRS comes calling—it is preparation that all prudent plan sponsors should undertake.

To answer your question, that IRS actually has a handy webpage that lists the top ten issues auditors have encountered in their examinations of 403(b) and 457 plans. The top examination issues for 403(b) plans are:

  • 402(g) contribution limit excesses, primarily due to misapplication of the 15-year catch-up rule, as well as 415 dollar limit excesses;
  • Violations of the universal availability rule, which generally requires that all employees be given the right to make elective deferrals to the retirement plan;
  • Loan and hardship distribution failures.


In addition, though it may sound obvious, make certain you maintain a permanent file for a plan that includes EXECUTED copies of all plan documents. These documents are the first items an auditor will request, and the Experts have encountered a number of situations where documents were completed, but never actually signed.

If you focus on these issues, and address the other concerns for 403(b) plans that auditors have identified, your plan should be in excellent shape in the event of an IRS audit.

Thank you for your question!


NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.