Breaking Down the Department of Labor Audit

In a previous post, I reviewed seven ways your company can stay prepared for a Department of Labor (DOL) audit. This post covers the three phases of the audit: pre-audit, the audit itself, and post-audit.

Phase 1: You Have Been Selected for a DOL Audit

If you are selected for a DOL audit, you will be provided a written notification along with the list of initial information needed for the audit. The DOL may audit the 401k plan, the health and welfare plan, or any other qualified plan that the company offers. It may be one, two, or three plans that the DOL audit. Typically, the DOL will start with the current year and go back three years, but this is not definite.

If you are selected for a DOL audit, consider these four best practices:

1. 1. Review the list with all members of the benefits team and assign responsibilities to all involved based on their plan duties.
      
      
   2. Once the data is gathered, consult with outside counsel or a CPA firm to review the information to ensure that it is complete.
      
      
   3. Maintain a copy of all documents provided to the DOL.
      
      
   4. CPA or ERISA counsel can be available during the audit, but a power of attorney needs to be completed and provided to the DOL auditor.

Phase 2: The DOL Audit

While the DOL audit is in progress, keep these four main points top of mind:

1. 1. Ensure that the auditor’s requests are a top priority.

1. 2. The auditor will want to interview the responsible parties regarding plan administration and fiduciary oversight. Be sure that these individuals are available when the audit is in progress.

1. 3. Work with outside counsel/CPA firm to prepare for the interview.

1. 4. Review the processes surrounding day-to-day administration and fiduciary oversight so that you will be prepared to answer questions.

Phase 3: Completion of the DOL Audit

If there are open items, provide those as soon as possible to the DOL auditor. Your timely response to auditor requests is important in the audit process. At the end of the audit, a short exit conference may occur. Any open items are discussed, and if there are any items that can be communicated, they may be. However, many times the auditor may need to speak with the supervisor regarding a potential issue. Once the audit is complete, you are notified via letter if there are any issues or not. 

If there are issues, the DOL will explain the corrective actions required by the plan sponsor as well as the time frame to be completed. If you disagree with the items to be resolved, you can discuss with the auditor to attempt to resolve any miscommunications. To the extent that there is an issue and the plan sponsor agrees to the issue and resolves it, the plan sponsor should review their processes internally to ensure that the problem doesn’t occur again.

If you have questions about DOL audits, feel free to reach out to me at mbuckley@meadenmoore.com.