The Department of Labor (DOL) may audit an employer sponsored benefit plan (generally retirement plans such as 401(k)s or defined benefit plans) at any given time to ensure compliance with applicable provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
The audit process begins when the plan receives a letter from the regional or district office of the Employee Benefits Security Administration (EBSA), a division of the DOL. The letter, known as an “Initial Document Request”, advises the plan sponsor that the plan is under investigation and requests certain plan documents. Depending on the nature and extent of the audit, the documents requested vary from a few pages to volumes of documents detailing the plan's administration over multiple years. Initial Document Requests commonly require the production of plan documents, adoption agreements, trust agreements, summary plan descriptions and all amendments thereto, financial statements, participant data, Form 5500s for at least two plan years and other filings with the IRS.
Plan sponsors should consult legal counsel promptly after receiving an Initial Document Request to help prepare a timely response, provide guidance throughout the audit process and advise on legal issues affecting the plan. The plan sponsor or its legal counsel should also contact the EBSA investigator assigned to the audit to establish a friendly rapport and learn more about the purpose, scope and timing of the audit.
Legal representation is particularly advisable should EBSA decide an additional onsite investigation is necessary to ensure compliance. During the onsite investigation, an EBSA investigator may visit the plan sponsor's location to inspect detailed plan documents, employer/employee records, financial statements, accountings and various other reports substantiating the plan's compliance. The EBSA investigator may also interview individuals to inquire about the plan's administration and validate facts.
If violations are identified during the audit, EBSA will issue a Voluntary Compliance Notice Letter outlining the DOL's findings. It is the plan sponsor's responsibility to investigate the validity of these findings and take immediate action to either dispute or remedy the alleged violations. Again, consult legal counsel for more information regarding your voluntary compliance options and the requisite steps to obtain an EBSA closing letter confirming the audit is complete and your plan is compliant.
If your plan is under audit, contact Butterfield Schechter LLP for more information and assistance in streamlining the process. Our attorneys are experienced in representing a range of plan sponsors and their plan(s) during all stages of an audit. We will help you review and compile the requested documents, analyze the validity of any claims against the plan or plan sponsor, facilitate communication and cooperation with the EBSA investigator, prepare you for and represent you at any onsite investigations, help you understand any possible violations identified during the audit, advise you of your options and help respond accordingly in order to achieve compliance.