IRS Audit: A 403(b) Plan Sponsor’s Experience

December 7, 2010 ( - Karen Janway, Director, Benefits and Administrative Support, Presbyterian Healthcare Services, has been through three Internal Revenue Service audits and two Department of Labor audits of the organization’s 403(b) plan.

She told attendees of PLANSPONSOR’s recent Webcast, sponsored by MetLife, the IRS gave her four weeks advance notice of which plans would be audited and provided a checklist. In the advance notice, the agency requested documents to be sent to the IRS electronically ahead of time.  

In preparation for the audit, Janway said she reserved a room for the agent to use while he or she was on site. The room must be secured and the agent given a lock because of the private nature of the information.   

She and her staff gathered documents requested by the IRS and clearly labeled them according to the checklist provided. Janway said some items may only be viewed online, such as payroll data, so the agent should be set-up ahead of time with view-only access. She also noted that she looked to providers for information on hardships during audited year or years, loans and loan balances, account balances, match contributions, and a double check of the amount of contributions made in a particular year.  

Once the agent was on site, Janway said there was a one-hour briefing.  During this time she recommends sponsors disclose up front any defects they know about. Janway also set the tone for the interaction during the audit experience by showing the agent where the restrooms and cafeteria are and recommending restaurants and local sites for the agent’s evenings. The agent was introduced to staff that would be helpful during the audit.   

Janway said she checked in with the agent at the end of each day.  She recommends this as a way to avoid surprises and keep the relationship friendly. She also made a followup call after the agent’s visit.  

Janway said she learned to keep all the gathered information separate for a few months after the IRS visit, in case the DoL followed along soon after; the DoL wants mostly the same information. 

Janway is proud of the fact that there were no findings from the audits.  She found the audit experience to be generally pleasant. “I always look at audit as opportunity to improve, not the boogey man coming in,” she said.