DOL Plan Audits

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The Department of Labor (DOL) conducts audits of retirement plans to ensure they comply with ERISA standards. While some audits are random, others can be triggered by errors, such as mistakes in Form 5500 submissions. Here’s an overview of the DOL audit process and how plan sponsors can stay prepared.

Always Be Prepared

Plan sponsors should always be ready for a potential audit by maintaining accurate records, conducting regular compliance reviews, educating fiduciaries, and engaging professionals to assist with compliance. It's essential to consistently document all decisions and processes to demonstrate prudent management of the plan.

Common Audit Triggers

Several factors can trigger a DOL audit, including:

  • Participant Complaints: Issues raised by participants can prompt an audit.
  • Form 5500 Red Flags: Errors or inconsistencies in this critical filing may attract DOL attention.
  • Late Deposits: Delayed contributions to participant accounts can be a red flag.
  • Non-Discrimination Testing Failures: Failure to meet required tests may trigger an audit.
  • Prior Audit Findings: Previous issues can lead to follow-up audits.

The Audit Process

When a plan is selected for an audit, the sponsor will receive a notification letter from the DOL. The audit typically involves several steps:

  1. Document Requests: The DOL will request specific documents related to the plan.
  2. On-Site Visits: Auditors may visit the sponsor’s location to review records.
  3. Review and Analysis: The DOL will review the provided documentation and analyze compliance.
  4. Communication of Findings: After the review, the DOL will communicate any findings. Non-compliance can result in financial penalties, fiduciary liability, and required corrective actions.

Diligence and Protection

Plan sponsors can be held personally liable for breaches of duty, including cybersecurity incidents. To mitigate risks, it’s wise to consider a Fiduciary and Cyber Liability Insurance Combo. This coverage addresses DOL cybersecurity recommendations and provides protection in case of breaches.

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