Role of Internal Revenue Service

The Internal Revenue Service is responsible for administering the tax qualification requirements imposed by the IRC. Favorable federal income tax treatment flows from a determination that a plan qualifies under the Code. The Internal Revenue Service also administers the Code provisions governing the taxation of nonqualified deferred compensation arrangements, welfare benefit plans, and other types of employee benefit plans, such as stock option and stock ownership plans, which receive favorable federal income tax treatment.

The Internal Revenue Service also has authority to impose penalty taxes in certain situations, such as violations of the Code's prohibited transaction provisions, failure to adequately fund a defined benefit pension plan, and other types of violations.