So what happens if your defined contribution (DC) the subject of a DOL audit? What should you expect and what should you do? A Pittsburgh based TPA provides some guidance.
The audit will start with a letter from the DOL’s enforcement arm (EBSA – Employee Benefits Security Administration) – your service provider may receive advance warning and should give you notice if you have a good relationship. The request could be limited or could ask for a significant volume of documents including:
- Insurance policies and riders
- Service provider agreements
- Summary plan descriptions
- Summaries of material modifications
- Form 5500s for the last two or three plan years
- Plan financial statements
- Trustee and corporate minutes
- Summary annual reports
- Participant records
- Bonds
Best responses include:
- Contacting the EBSA investigator immediately.
- Determine the purpose, scope and timing of the audit.
- Are extensions available and needed?
- Establish and internal primary contact.
- Copy all requested documents.
- Lawyer up.
- Inform senior management.
Some investigations take place on site where multiple employees are interviewed. If violations are found, you may be able to remedy them with limited penalties under a Voluntary Compliance programs. In more egregious situations where losses have occurred, payments may be required under a settlement which will result in a closing letter. That is, unless you disagree with the DOL’s finding and want to litigate the matter.
So what are best practices when it comes to a DOL audit? Leveraging your advisor, service provider and CPA that has performed the internal audit on your plan as well as keeping senior management informed. Establishing a relationship with an ERISA lawyer before an audit is also advised.
To make sure that you are complying, you might request a fiduciary checklist from your advisor and TPA as well as conduct fiduciary education for your Investment Committee. Better to spend time preparing and having all documentation ready than scrambling to find or, worse, create needed materials.
