June 2010

IRS Random Sampling of 401(k) Plans
The Internal Revenue Service has announced that its Employee Plans Compliance Unit (“EPCU”) will be mailing out a letter and instructions to a random sample of 1,200 employers that sponsor 401(k) plans asking them to complete a “401(k) Compliance Check Questionnaire.”

The Service is well aware that 401(k) plans have far surpassed defined benefit plans as the preferred retirement vehicle for the majority of employers. A recent IRS Employee Plans Examination Study of 79 market segments indicates that 401(k) plans are by far the most non-compliant type of retirement plan. Inasmuch as these plans comprise more than 60% of all retirement plans, the Service believes that it is important to the future of the private retirement system that 401(k) plans maintain the highest level of compliance possible.

Through a secure web site, the EPCU will collect responses on:

• Demographics
• Participation
• Employer and employee contributions
• Top-heavy and nondiscrimination testing
• Distributions and plan loans
• Other plan operations
• Automatic contribution arrangements
• Designated Roth features
• IRS voluntary compliance and correction programs
• Plan administration

The Service says that the information gathered will provide comprehensive information on 401(k) plans and will help EPCU maximize resources for education, outreach, guidance and enforcement efforts while minimizing the burden to compliant plan sponsors.

All plan sponsors will complete the same questionnaire, but there are some questions that only pertain to plans with certain features. Employers that fail to respond to the questionnaire or provide complete information will result in further action or examination of their plan, the Service cautioned.

A team from all different areas of the Employee Plans office of the Tax Exempt and Government Entities Division of the Service worked to create the questionnaire. The employers selected to participate were taken from a random sample of 401(k) plan sponsors that filed a Form 5500, Annual Return/Report of Employee Benefit Plan, for the 2007 plan year.

If you receive the questionnaire and need assistance completing it, please contact us.

Reminder! Mandatory Form 5500 Electronic Filing for 2009 Plan Years (Including Those Due July 31, 2010)
As part of the Pension Protection Act of 2006 (PPA), plan sponsors of employee benefit plans are required to file their 2009 Form 5500 returns electronically via the DOL/EBSA's new fully electronic processing system, EFAST2. This is a mandatory requirement for all plan years beginning on or after January 1, 2009. Read more...

Somerset News
2010 Seminars. Our seminars calendar for 2010 keeps expanding. Don't miss our popular Somerset Practical MBA Program, which includes a live webinar simulcast so those of you outside the Indianapolis area can participate. Please go online to see the complete schedule and register.

Somerset Turns 50 in 2010 - We are proud to be celebrating our 50th anniversary in 2010! Somerset’s roots began in 1960 with the founding of Whipple & Company, a certified public accounting firm. We are planning a celebration on the afternoon of Thursday, September 30--please save the date. Read more...

Employee Benefit Plan Commentator is provided by Somerset’s Employee Benefits Team for our clients and other interested persons upon request. For additional information on the issues discussed, please contact Yvette C. Ward, CPA. Since technical information is presented in generalized fashion, no final conclusion on these topics should be made without further review. 

These articles were written by and published herein with the permission from professionals of BDO.  Somerset is a member of the BDO Seidman Alliance, a nationwide association of independently owned accounting and consulting firms.

The Tax Practice at BDO is among the largest tax advisory practices in the United States. With 37 offices and more than 400 independent alliance firm locations in the United States, BDO has the bench strength and coverage to serve you. BDO is the brand name for BDO Seidman, LLP, a U.S. professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. For 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals. As an independent Member Firm of BDO International Limited, BDO serves multinational clients through a global network of 1,138 offices in 115 countries. BDO Seidman, LLP, a New York limited liability partnership, is the U.S. member of BDO International.