Are You Prepared for a DOL Audit?

EBSA, a division of the DOL responsible for ensuring the integrity of nearly 722,000 retirement plans, approximately 2.5 million health plans, and a similar number of other welfare benefit plans, such as those providing life or disability insurance in the United States, closed 1,122 civil investigations with 754 of those cases (67%) resulting in monetary results for plans or other corrective action in Fiscal Year 2020. EBSA recovered:

• over $3.1 billion in direct payment to plans, participants and beneficiaries
• 456.3 million in connection with 171,863 “complaints” with an employee benefit plan by an individual

The risk is real! It is not a matter of “if” but “when” you get audited! In today’s information age, the government agencies easily share information too, so a “complaint” and investigation by one entity could lead to an audit by another. There are no “absolutes”.

What is your risk tolerance?

3 Tips for Proactive Employee Benefits Compliance

Tip #1 – Maintain written plan documents for every employee benefit plan. 

If you are ever selected for a DOL audit, it is important to have documents showing you are complying with ERISA and that you are maintaining these documents. This may not only reduce your exposure to penalties but also make the audit process more manageable and less time-consuming.

Plan documents are the foundation of any ERISA plan that you sponsor (i.e., all employer-sponsored plans, except churches and governments). ERISA requires that every employee benefit plan have a written plan document that describes the benefit structure and guides the plan’s day-to-day operations.  

Documents from the carrier are not usually ERISA plan documents. Carriers are not subject to ERISA. Their documents may have about 80% of what ERISA requires but typically are missing critical information (e.g., plan #, named fiduciary, ERISA discretionary authority language).  So, plan sponsors (e.g., employers) need to do something on top of the carrier documents. 

Tip #2 – Establish formal process for providing required ERISA documents to plan participants and beneficiaries.

ERISA has two primary requirements and satisfying both requirements fall on the plan administrator (typically the employer). In addition to the plan document requirement mentioned above, ERISA also requires that plan participants and beneficiaries receive specific documents at certain times of the year.  For instance:

  • Summary Plan Description – upon enrollment and at various other times, providing information the participant may rely on about the plan’s terms, including who is eligible and what the benefits are.
  • Summary of Benefits and Coverage (SBC) – upon enrollment and within 7 days upon request
  • Marketplace Coverage Notice – within 14 days of employee’s start date
  • Children’s Health Insurance Program Reauthorization Act (CHIPRA) – on the first day of each plan year, to all employees who reside in a state which medical premium assistance is available, regardless of the employer’s location, and at the time of initial enrollment.

There are potential penalties associated with not providing the document when required. Employers should keep a record of when these documents are provided, to whom and how. The DOL during an audit is likely to ask for proof of the required participant communications.

Tip #3 – Have a formal document retention policy.

ERISA generally requires employee benefit plan documents to be retained at a minimum of six years after the plan’s Form 5500 filing due date. (Employers who do not have a Form 5500 filing obligation also must maintain the documents for six years after the date a Form 5500 would have been filed if it were not for an exemption.)

Documents that should be retained include but not limited to:

  • Original signed plan documents and amendments
  • Corporate resolutions and/or committee actions related to the plan
  • Plan disclosures and communications to participants (including Summary Plan Descriptions and Summary of Material Modifications) –notices, open enrollment guides
  • Financial reports, audits, and related statements
  • Form 5500s
  • Trust documents
  • Nondiscrimination and coverage testing results
  • Disputed claim records in the event of future litigation
  • Payroll and census data used to determine eligibility and contributions

Best practice is to maintain these documents for the life of the plan, providing a paper trail of the plan from its beginning.

Bonus Tip: Do not let your first audit be with the DOL!

Plan sponsors on a regular basis should complete an internal compliance audit or “check-up” of their employee benefit plans for compliance with ERISA and other legal requirements. The check-up can uncover areas that an employer should be doing differently or need to be changing prospectively, making the DOL audit process more manageable and less time consuming.

Regardless of how sound your business practices are, every organization should be prepared for a DOL audit.



If you have any questions about the above, or want assistance with an internal compliance checkup, please contact The Compliance Rundown. We would love to hear from you!

The Compliance Rundown is not a law firm and cannot dispense legal advice. Anything contained in this post or on their website is not and should not be construed as legal advice. If you need legal advice, please contact your legal counsel.

One thought on “Are You Prepared for a DOL Audit?

  1. Pingback: Can carrier plan materials serve as the SPD? – The Compliance Rundown

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