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Retirement Plan Examinations and Enforcement Programs on the Rise: Guidance for Plan Sponsors

Posted by Paul D. Woodard | Mar 13, 2017 | 0 Comments

Contributing Author: Kristine M. Custodio, Advanced Certified Paralegal

Have you recently received a plan audit notice from the Department of Labor (DOL) or Internal Revenue Service (IRS)? 

Unfortunately, for many plan sponsors, such notification of audit should come as no surprise due to the increased amount of DOL and IRS investigations and audits.  

The Employee Benefits Security Administration (EBSA) is the branch of the DOL that is dedicated to enforcing the rules set forth in the Employee Retirement Income Security Act (ERISA) for private employee benefit plans. In 2016, the EBSA closed 2,002 civil and 333 criminal investigations. In fact, according to EBSA's website, EBSA recovered $777.5 million for direct payment to plans, participants and beneficiaries. EBSA recovered funds through enforcement actions, the Voluntary Fiduciary Correction Program, the Abandoned Plan program, as well as monetary benefit recoveries from informal complaint resolution.

What can you do as a plan sponsor to avoid or mitigate compliance issues even before an audit is initiated?

First and foremost, strong internal controls and best practices will certainly help. Be sure to respond to any employee requests and complaints promptly and professionally. Second, it is important to document the process. Remember, it only takes one participant's complaint to trigger an audit or investigation. Third, be sure to provide benefit resources and education to employees during meetings and in employee communications such as company newsletters.

What do you do if you uncover a plan administration or operational issue?

First, the best practice is to make sure that you document and identify the problem immediately. Second, after identifying the issue, you should look into the options available to plan sponsors to correct the problem. Both the DOL and IRS offer Voluntary Correction Programs available to plan sponsors before a formal audit has been initiated. Third, going forward, regularly conducting an internal audit of plan administration and operation will help to avoid unnecessary and unanticipated compliance expenses, which can have a big impact on small companies.

What do you do if you forgot to file your plan's tax return (Form 5500)?

Mistakes do happen. Fortunately, the DOL allows plan sponsors to participate in the Delinquent Filer Voluntary Correction Program (DFVCP) if a plan's Form 5500 is not timely filed. Seek assistance from your plan administrator and/or plan counsel early if you have questions on the plan's income tax filing requirements.

The attorneys at Butterfield Schechter LLP have significant experience and expertise guiding clients through IRS or DOL audits. If you have questions about IRS or DOL audits, contact the attorneys at Butterfield Schechter LLP for more information.

About the Author

Paul D. Woodard

Paul Woodard practices in the areas of Employee Benefits, Employee Stock Ownership Plans, Pension and Profit Sharing Plans, ERISA, ERISA Litigation, Business Law, Qualified Domestic Relations Orders (QDROs), and Estate Planning.


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