More Plan Audits — and Being Ready for them

By ASPPA Net Staff • August 02, 2016 • 0 Comments
Even a retirement plan whose administrators and sponsors strive to keep in compliance with the laws and regulations that govern plans and plan administration may not be immune from a plan audit. And simply resting on the laurels of that effort to stay compliance may not translate to audit readiness. Experts in a recent series of interviews offer tips on how to be ready in case a plan is audited.

How great is the risk? Human Resource Executive Online reports that almost one-third of the employers in a recent Willis Towers Watson survey said that the federal government had audited their retirement plan in the last two years.

And it’s not just the IRS doing the auditing — the DOL is in on the act as well. Willis Towers Watson’s Lisa Canafax, a senior retirement consultant in their Chicago offices, told Human Resource Executive Online that the “heightened scrutiny” is coming from both. Robin Schachter, an attorney in the Los Angeles office of Akin Gump, and Drinker Biddle’s Heather Abrigo agree that the DOL is being more active in this regard.

They elaborated on what the agencies are especially prone to pay attention to. Schachter said that some of their audits are random, but “more often they're initiated in response to a review or transaction, complaint or litigation.” He adds that employee stock-ownership plans, stock valuations and plans that invest in employer securities also have evoked DOL interest. And Abrigo said that late deferrals are the top issue that the DOL investigates, and that its investigators “always look at” them regardless of the reason an audit is taking place. She also noted that the DOL is scrutinizing fiduciary responsibilities.

A plan could take its chances. But the experts Human Resource Executive Online spoke to indicate that such an approach may be risky, and to offer insights regarding the importance of being ready and how to do that.

Tips they suggest include:

  • making sure the plan complies with laws and regulations;

  • documenting the fiduciary decision-making process;

  • keeping good records;

  • measuring results;

  • fixing delays in forwarding participant contributions to plans;

  • being ready to explain delays;

  • documenting all meetings; and

  • showing the process plan administrators followed to monitor, valuate and choose investment and investment providers.

Schachter added that acting prudently is part of the fiduciary's legal responsibility.