The IRS has been making audits of 401K plan loans and they seem to be working well, according to a key IRS executive.
The Internal Revenue Service has audited 100 401(k) plans that had 10 or fewer participants and more than $100,000 of loans to participants (interesting audit selection). They found problems in 90% of plans (where were the TPA’s?).
Since they have has so much success with this program it will be expanded.
An additional audit project is focused on new 401(k) plans, making sure that no deferrals are based on salary paid prior to the plan’s adoption.
Please make sure you are working with a qualified plan sponsor and a good administration company to be the TPA.