If you haven’t already been contacted by the DOL for a routine audit of your retirement plan, don’t be surprised if they come knocking. DOL audit activity has been on the rise, focusing on areas of concern such as fee disclosures, conflicts of interest, and proper fiduciary governance. In many instances the audits have been random, but other common reasons such as an error on Form 5500 or participant complaints have also been the cause of an investigation. It can be daunting to receive a letter indicating that your plan has been selected for an audit. In addition to a preliminary list of requested items, you can expect an on-site interview with a DOL auditor, and then a period of time (sometimes in excess of 12-18 months) during which the auditor reviews their findings. Being prepared, responsive, and cooperative can help the process run more smoothly. It is strongly suggested that you work with your ERISA counsel, accountant, and external advisers to assist if you are the unfortunate recipient of an audit request letter. These sources of support can help reduce the likelihood that you will provide incomplete or irrelevant responses that could raise a red flag.
Prepare in advance for the possibility of an audit by ensuring your files are in order and easily accessible, including your signed plan documents (Adoption Agreement (if applicable), amendments, Summary Plan Descriptions, etc.); service provider contracts; statements showing payroll remittances and payroll deduction registers; loan activity reports, including defaults; fiduciary insurance and fiduciary bond policies; investment review materials with corresponding Investment Policy Statement; meeting minutes; evidence of 408(b)(2) disclosure review; communications to participants, especially those related to plan investment performance and fees being charged; evidence of ongoing fee reviews; and any and all written policies demonstrating overall governance with respect to your plan. Review your policies to ensure they match your practice and are not in conflict with your plan document(s). To the extent you have an outdated policy and/or one that conflicts with the terms of your document, amend the policy accordingly.
It is impossible to anticipate every possible gap in your plan compliance or administrative system in advance, but being well prepared, working collaboratively with your service providers, and being honest with the DOL auditor is your best course of action.