SPARK Finds Traps In IRS Questionnaire

Goldbrum notes that some of the answers to some of the multiple choice questions included in the questionnaire are "unacceptable under the law."

The list of answers to a question dealing with the number of loans outstanding and the amounts involved includes an answer referring to loans of more than $50,000. That "will raise compliance defect concerns," Goldbrum says.

The list of answers to a question about cashing out terminated participants "includes only one correct choice, i.e., $1,000," Goldbrum says. "Any other answer will result in compliance defect concerns."

The SPARK Institute recognizes that the IRS is trying to identify whether plans are following the correct rules and regulations, but "we are concerned that plan sponsors may be unintentionally confused or misled into believing that an unacceptable choice may be a proper response," Goldbrum says.

Answering the survey also could take a great deal of sponsor and plan vendor time during a period when many sponsors will be preparing annual filings for the Internal Revenue Service and the U.S. Labor Department, Goldbrum says.