Once the data were gathered, IRS identified 73 study questions that could indicate whether or not a plan was in compliance. The analysis did not attempt to distinguish instances of noncompliance according to the severity of the violation. IRS’s estimates of noncompliance among 401(k) plans were inaccurate primarily because only 27 of the 73 questions that it identified as compliance indicators conclusively demonstrated a plan’s noncompliance. Consequently, the 44 percent of plans reported to have one or more compliance violations is at best an upper-bound estimate of the extent of noncompliance found in this study because the reported results are not limited to those items with sufficient information to identify noncompliance. To obtain information on the extent and types of noncompliance among these plans, IRS plans to conduct compliance studies similar to the one conducted on 401(k) pension plans. Appendix I: Scope and Methodology

	Determining the Steps IRS Took to Conduct the 401(k) Study

To determine what IRS did to estimate the prevalence and types of 401(k) plan noncompliance with the requirements of the Internal Revenue Code, we reviewed the final 401(k) compliance study report that IRS posted to its Web site. A.
Why GAO Did This Study

The Internal Revenue Service (IRS) studied 401(k) plan compliance with Internal Revenue Code requirements for tax-qualified plans.

What GAO Found

GAO found that IRS's estimates of noncompliance were inaccurate. The study, which audited a sample of 401(k) plans, did not provide information on the severity of the compliance violations identified and did not determine the number of plan participants or the amount of assets associated with noncompliance errors. Only 27 of the 73 study questions identified as compliance indicators conclusively demonstrated whether a plan was compliant or not. Consequently, the 44 percent reported to have one or more instances of noncompliance is at best an upper limit on the extent of noncompliance found. IRS has chosen specific types of private pension plans to study in a manner similar to the one conducted on 401(k) pension plans. The data that IRS collects will be analyzed to determine the prevalence and types of noncompliance among the plans studied.