Surviving a DOL Audit

April 17th, 2008

The Employee Benefits Security Administration (EBSA) is a division of the U.S. Department of Labor (DOL) which is responsible for “ensuring the integrity of the private employee benefit plan system” in the U.S by enforcing ERISA and Title 18 provisions applicable to benefit plans.  One method that EBSA uses to identify and correct violations is through a DOL audit.  The audits are geared towards voluntary compliance on the part of the employer/plan sponsor, but can result in civil and/or criminal litigation if the efforts at voluntary compliance fail.

The EBSA conducts thousands of employee benefit plan audit each year, with approximately 75% of the audits resulting in at least one violation.  Although the majority of audits focus on civil violations, EBSA can also review plans for criminal violations, and recommend that criminal charges be brought against plan sponsors and/or plan fiduciaries.  Some plan sponsor audits are selected through a random selection process, but more frequently due to other avenues such as information received from another agency or through a participant complaint received by the EBSA Benefit Advisors.

If your plan is chosen for an audit by the DOL, generally the investigator will contact you via a letter advising you of the audit and requesting applicable plan documents.  Additionally, there will usually be an “on-site” review by the investigator that might require interviews with key employees and/or plan fiduciaries.  During the “on-site” review, employers should follow certain procedures:

  • Be courteous and professional with the investigator;
  • Designate 1 or 2 senior employees or an attorney who will be responsible for all contact and communication between the employer and the investigator;
  • Assign the investigator a “work area” during the audit and request the interviewer to refrain from indiscriminately questioning employees;
  • Have counsel prepare any employee or fiduciary prior to a DOL-requested interview and have counsel attend such interview;

After the audit completion, the investigator normally sends a letter to the employer/plan sponsor which summarizes the audit findings and identifies any facts that lead to a conclusion by the EBSA that a violation has occurred.  The letter will also require the employer/plan sponsor to correct the violations, reimburse plan losses plus interest, and advise of any penalties that will be assessed to the employer/plan sponsor for the violation(s).  Employer/plan sponsors have 10 days to respond to the audit findings communication.  This response is where employers/plan sponsors can refute the investigator’s findings, understanding of the facts and/or statutory interpretation.

The best way to survive a DOL audit is to proactively review all your benefit plans with legal counsel at least annually, and more often if any plan was amended during the year, or if the company experienced a significant change in demographics.  However, the second best way to survive a DOL audit relatively unscathed is to contact your benefits attorney as soon as you receive communication from the DOL regarding an audit of your plan(s).  The sooner you involve your attorney in the process, the more time he or she will have to review all documentation and prepare any witnesses.  The more information that is available to your attorney will make it easier for him or her to work with the investigator during the audit as well as providing him or her with the necessary information to refute the investigator’s findings of violations.

33 Responses to “Surviving a DOL Audit”

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