Feb 06, 2012
--- The Internal Revenue Service’s (IRS) interim report
of responses from its 401(k) Compliance Check Questionnaire offers a view of
the 401(k) plan design landscape. ---
The questionnaire findings also show
the impact of the 2008 market downturn on plan sponsor offerings. The
percentage of 401(k) plan sponsors that suspended or discontinued matching
contributions in their plans increased from 1% in 2006 to 4% in 2008. The
percentage of 401(k) plan sponsors that suspended or discontinued the
non-elective contribution in their plans increased from 2% in 2006 to 5% in
2008. The percentage of 401(k) plan sponsors that reduced non-elective
contributions in their plans increased from 1% in 2006 to 5% in
2008.
From 2006 to 2008, 58% of 401(k)
plans experienced a per-participant increase in the dollar amount of elective
deferrals; 52% of plans experienced a per participant decrease in the
percentage of compensation deferred. From 2006 to 2008, 67% of 401(k) plans
that permit employees to make after-tax contributions experienced a
per-participant increase in the amount of such after-tax
contributions.
Twelve hundred 401(k) plan sponsors
were randomly selected to complete the 401(k) Questionnaire via a secure
website. Ninety-eight percent of plans receiving the questionnaire responded.
Follow-up actions were taken in the case of all non-responders.
Forty-three percent of 401(k) plans
are safe harbor plans. Five percent are SIMPLE plans.
Eighty-six percent of 401(k) plans
are some form of pre-approved plan. Twenty-three percent of plan sponsors have
requested a determination letter from the IRS.
As for
plan administration, 53% of section 401(k) plan sponsors use a third-party
administrator for plan administration. Third-party administrators are
responsible for timely plan amendments for 73% of 401(k) plans, and are
responsible for the annual preparation of the Form 5500 for 83% of 401(k)
plans.