"This an opportunity for employers," Rovell said. "The value is that the IRS has specifically said what they are going to look at. So why not be proactive and look at whether you are in compliance (in case you receive an IRS letter)?"

The 457(b) compliance checks are seen as a natural progression. Besides the check of 401(k) plans, the agency overhauled rules on 403(b) plans – the non-profit counterparts to 401(k)s – requiring all sponsors to have a written plan in place by the end of 2010.

"Until recently, " said Jennifer McCullough, a retirement plan specialist at CBIZ Retirement Plan Services, which is based in Cleveland. "403(b) and 457(b) plans have been flying under the radar."

Once non-profits received clear guidelines, McCullough said, they started looking at what more they could do to keep their top executives on board. So they took advantage of 457(b)s, which are also called "top hat" plans because they can only be offered to high-wage earners.

Under the code, plan assets are not held in trust, but remain the property of the employer and could be seized during bankruptcy or litigation. Often, McCullough said, employers grant immediate vesting rights to employees, thus granting them some protection from creditors. Contributions may come from employee deferrals and employer contributions and must be reported on W-2 forms.

One feature that makes the plans attractive is that contributions stand alone from those paid into other retirement instruments, such as 403(b) accounts. That means an employee can contribute the maximum amount allowed regardless of any other retirement plans in which he or she is investing.

Because the plans are often so small – some only cover one or two key executives – they often do not get the attention from plan administrators that other retirement funds do, McCullough.

"Regardless of how long a plan's been in place, you'd be surprised," at the compliance issues that can be discovered, McCullough said.

The biggest issue that employers need to be concerned about, both Rovell and McCullough said, are ensuring they are compliant with the regulations regarding filing for top hat status.

Rovell laid out the six areas the IRS is looking at during the compliance check: 

1. Verify that the employee contributions reported on a plan sponsor's Forms W-2 were actually made to a 457(b) plan. 
2. Determine whether the plan sponsor is eligible to have a 457(b) plan and whether the plan sponsor is a governmental entity, a non-governmental tax-exempt entity, or a combination of both. 
3. Verify that plan eligibility is limited to the top hat group. 
4. Determine whether the plan contains impermissible features such as loans, age 50 catch-up provisions or contributions placed in trust.
5. Determine whether hardship or "unforeseeable emergency" distributions have been made from the plan;. 
6. Verify that the plan filed for top hat status with the Department of Labor.

  "Number six is going to be the gotcha item on the list," he said.

That's because employers must not only have filed for top hat status, they must also include a copy of their form with their response to the compliance letter. In some cases, Rovell said, employers will find they had never filed the proper forms. Other employers, he said, will be unable to locate a copy of the form.

Another danger, McCullough warned, is that some employers may have mistakenly thought they were eligible to offer a 457(b) plan. That most often happens, she said, with quasi-tax-exempt entities like a county hospital that are taken over by private entities.

Although the compliance letters might rattle some nerves, McCullough said the best outcome of the IRS' compliance check would be more direction from the agency.

"I do hope we see more guidance with regard to correction (when employers find mistakes)," she said.

If the past is any guide, that outcome is likely. After the 401(k) check was completed, the IRS let employers know how to bring their companies into compliance when they find themselves afoul of regulations.

For those who receive compliance check letter from the IRS, McCullough has a final word of advice.

"Plan sponsors need to make sure they are prepared," she said, "with documentation that shows they are the right type of organization to offer a 457 plan."