While you cannot take steps to all together avoid a Department of Labor (DOL) audit, by being aware of the most common triggers, you will be able to be more prepared in the event your organization is subject to an audit. A DOL audit can disrupt normal business, be stressful, time consuming and ultimately costly to your organization. According to a DOL audit study in 2014 approximately 5 out of 8 investigations resulted in penalties or some type of corrective action.
FAR REACHING AUTHORITY
DOL has a large amount of authority when it comes to auditing employee benefits plans and ensuring compliance with ERISA. Additionally, the department of labor has used its authority to ensure compliance with the Affordable Care Act. Since DOL has started enforcing compliance with ACA, audits of employee health benefits are on the rise.
An Investigator usually does not disclose the exact reason for a department of labor audit, the 3 most common triggers are:
- Participant complaints
- Incomplete or Incorrect Form 5500 answers
- Department of Labor National Enforcement
An investigation can be triggered if the department of labor has received repeated complaints from participants of an employee benefit plan that causes speculation of a fiduciary breach. According to the DOL audit summary of 2014, 687 investigations were opened due to repeated participant complaints.
The Form 5500 is a yearly report of the Employee Benefit Plan. If your organization is subject to ERISA, Form 5500 must be filled out yearly. If this form is incomplete, has incorrect answers or not turned in, it may cause an audit.
The third possibility of being selected for an audit could have nothing to do with your organization at all. It might be that there is a department or project that’s targeting DOL resources causing random audits.
Just remember, simply because your organization has been selected for a DOL audit review, this does not mean you’re in violation of employee benefits law. So, by being aware of audit triggers and preparing all the proper documentation, you can minimize the stress that comes along with a DOL audit.
If you’d like more information on preparing your organization for a department of labor audit you can download our