What Triggers a DOL Audit?

Don’t Be Left in the Dark:  Plan Sponsor Information about Department of Labor Investigations

Most Plan Sponsors would agree that getting a notice of a Department of Labor (DOL) audit investigation on their benefit plan is not a gift they would typically want to receive.  When faced with a DOL audit, it is the plan sponsor that is ultimately responsible and held accountable for the overall plan administration.  This doesn’t fall to any of the service providers that are associated with the benefit plan.  Plan sponsors must act in the best interest of their participants and ensure that their benefit plan is in full compliance with the Employee Retirement Income Security Act (ERISA).

The DOL’s Employee Benefits Security Administration (EBSA) has been tasked with conducting benefit plan audits since 2010.  In fiscal year 2019, the EBSA closed 1,146 civil investigations with 67% of those cases resulting in monetary results for plans or other corrective action.  In total, for fiscal year 2019, the EBSA has restored over $2.5 billion to employee benefit plans, participants, and beneficiaries.

As a Plan Sponsor, this may have you asking yourself – can this happen to my benefit plan?  Certain triggers will potentially put your plan at risk for a DOL audit, but also plans can be chosen at random.  These audits can also happen at a moment’s notice.

Triggers for a DOL Audit

EBSA audits focus on fiduciary issues and reporting and disclosure items.  A great deal of these issues can be identified by reviewing the Form 5500 that is filed annually.  However, other items could potentially flag your benefit plan for audit:

  • Participant or employee complaints about the benefit plan
  • Late or incomplete filing of the Form 5500
  • Alternative investments in the plan
  • Improper or excessive fees paid to service providers
  • Untimely/late remittances or deposits
  • Prohibited transactions

Being Prepared for a DOL Audit

While you may never be fully prepared for a DOL audit, it is important for plan sponsors to be proactive and start taking steps now to help reduce the impact of the investigation.

  • Maintain current plan documents, amendments, policies, and summary plan description
  • If an employer is aware of any participant complaints, those should be addressed timely
  • Review the Form 5500 prior to filing and ask questions of the preparer of the Form if needed
  • Make sure that your plan is following all the specific items as stated in the plan document

There is no way to truly avoid an investigation by the EBSA, but by understanding certain triggers and how to prepare will put plan sponsors in a much better place if that day ever comes.

Contact Us

For more information about how Windham Brannon’s Employee Benefit Plan Practice, email Anne Morris, amorris@windhambrannon.com.

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