What is one of the main reasons for maintaining compliance with IRS retirement plan requirements?

Maintaining compliance with IRS retirement plan requirements is critically important to avoid tax penalties. The IRS has established a set of regulations that retirement plans must adhere to in order to retain their qualified status. If a plan fails to comply with these regulations, it risks facing significant financial consequences, including penalties and taxes on both the employer and employee contributions. In some cases, non-compliance can even jeopardize the tax-deferred status of the retirement plan itself, resulting in tax liabilities that could have been avoided with proper adherence to IRS rules. Therefore, ensuring compliance is essential for safeguarding the financial interests of both the plan sponsors and participants.