DOL Audits: Is Your Retirement Plan Losing Money Consistently?

Spotting Red Flags in Your Retirement Plan

Consistently losing money in your retirement plan can put you at risk for a Department of Labor (DOL) audit, which comes with potential penalties and fees. It’s essential to understand the factors that may trigger an audit and take steps to remedy any issues.

This article will explore one of the red flags leading to a DOL audit, ways to address these concerns, and the importance of collaborating with a knowledgeable Advisor to maintain compliance and protect your retirement plan.


Detecting the Signs of a Troubled Retirement Plan

The DOL prioritizes specific flagged items when selecting plans for audit. Retirement plans that consistently lose money are prime targets.

Although plans can decrease in value during economic downturns, such as the Tech Bubble in 2000 or the Financial Crisis in 2008, they should generally grow over time due to ongoing contributions and investment returns.

According to a DOL report, 75% of audited retirement plans in 2020 had at least one violation, resulting in over $3.1 billion in fines and penalties (source: DOL).

If your plan’s value is consistently declining, it’s time to investigate the causes and take corrective action.


Grasping Your Fiduciary Responsibility

As a plan sponsor, you have a fiduciary responsibility to act in the best interests of your plan participants. This includes monitoring your retirement plan’s performance and addressing any issues that may arise.

The Employee Retirement Income Security Act (ERISA) mandates that plan fiduciaries adhere to strict standards of conduct to protect the interests of plan participants and beneficiaries (source: DOL).


Pinpointing the Causes of Persistent Losses

Several factors could contribute to a retirement plan’s consistent losses. These may include poor investment performance) risky investments that aren’t prudent, excessive fees, or even fraud.

To determine your plan’s losses root cause, you must review its performance, investment options, and fees, and then compare them to industry benchmark.


Tackling Losses and Enhancing Plan Performance

After identifying the causes of the losses in your retirement plan, it’s time to take corrective action. This may involve adjusting the plan’s investment lineup, negotiating lower fees) providing education to your participants and/or company administrators, or implementing additional oversight measures to prevent fraud.

In many cases, it may be best to consult with a qualified Financial Advisor who is a fiduciary to address these issues.


Collaborating with Skilled Plan Providers

Your Third-Party Administrator (TPA) and the right Financial Advisor, who we recommend both be fiduciaries, play crucial roles in guiding and advising on policies and procedures that can help avoid errors and reduce the chance of a DOL audit.

They can assist in monitoring plan performance, ensuring compliance with ERISA regulations, and providing education and support to plan participants.


Staying Informed and Proactive

Regularly reviewing your retirement plan’s performance, fees participant education, and investment options is essential to maintaining compliance and avoiding potential DOL audits.

By staying informed and proactive, you can identify and address issues before they escalate, protecting your plan and
its participants.


The Advantages of Active Plan Management

Proactively managing your retirement plan not only helps you avoid the risk of a DOL audit, but also contributes to your plan’s long-term success and your employees’ financial well-being.

A well-managed retirement plan can lead to increased participation rates, higher employee satisfaction, and improved financial outcomes for your plan participants.


Act Now to Safeguard Your Retirement Plan

If your employer sponsored plan is consistently losing money, it’s time to take action. Investigate the causes of these losses, consult with a qualified Financial Advisor, and implement the necessary changes to protect your plan and its participants.

Confidence Wealth Management specializes in assisting employers, trustees, and human resources professionals with obtaining an independent and objective evaluation of their current employer-sponsored retirement plan performance, and establishing a new, properly structured plan when needed.

We advise them on strategies to mitigate the risk of costly mistakes and overlooked plan components that could cause problems with the Department of Labor, their employees, or regulatory bodies.

Our firm focuses on optimizing plan design and implementing retirement plan services that guide you towards your goals while delivering results for your company, the plan, and its participants.

To schedule an appointment, click below or call us at (310) 824-1000.


Confidence Wealth Management team





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