What Are Some Employer Best Practices for Managing a DOL Audit?

Most employer ERISA pension and welfare benefit plans are subject to investigation by the Department of Labor (DOL).  The Employee Benefits Security Administration (EBSA) is the agency of the DOL responsible for enforcing Title I of ERISA (which sets minimum standards to ensure that employee benefit plans are maintained in a fair and financially sound manner), including managing civil and criminal investigations. EBSA civil investigations (commonly referred to as “audits”) are the most common type of investigation.  This HR Alert provides a general overview of the DOL’s investigative powers in addition to suggested employer best practices for managing a DOL audit.

What is the Scope of the DOL’s Investigative Powers?

Generally, the DOL has the power to investigate whether any person has violated or may potentially violate any provision of ERISA Title I or any regulation or order issued thereunder. With respect to the scope of the DOL’s investigative powers, the following rules apply:

  • The DOL’s Investigative Power is Broad. Courts have held that a CEO’s personal financial records are within the scope of an employee benefit plan DOL audit.
  • Investigations Do Not Require Reasonable Cause. The DOL may initiate an investigation and inspect records, whether or not any reasonable cause exists.
  • The DOL Has the Power to Request Documents “Related To” ERISA Plans. In addition to its power to obtain documents in connection with an investigation, the DOL has broad general authority to request production of documents “related to” an ERISA plan.

What are Employer Best Practices for Managing a DOL Audit?  

Each DOL investigation is different and there are no hard-and-fast rules that will guarantee a successful outcome for every employer under investigation. However, the following suggestions will often make the process easier and may lead to a better result for an employer managing a DOL audit:

  • Treat the investigation as a high priority.
  • As soon as the initial document request is received, consult with experienced employee benefits legal counsel.
  • Elect a point person to be the single person of contact between the DOL investigator and the employer.
  • Keep management and legal counsel updated on the progress of the investigation.
  • Review all document requests from the DOL carefully with legal counsel.
  • Retain copies of any documents that service providers deliver to the DOL investigator.
  • If there are alleged violations and the employer under investigation elects to make voluntary corrections, then legal counsel and the DOL should discuss the corrections in detail to ensure that they are in agreement as to exactly what must be done and when.

What are Penalties for Failure to Comply with a DOL Audit?  

Failure to provide requested plan documents to the DOL can result in a penalty of up to $110 per day up to $1,100 per request. Multiple requests for the same documents are considered separate requests for purposes of the penalty rule.

Hamby Benefits Law, LLC recommends that you contact employee benefits counsel to assist you if your retirement or health or welfare plan has been selected for a DOL audit.

The above article is from our February 2014 HR Alert.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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