DOL Audits: Protect the Retirement Plan You Administer

1. The Hidden Risk: Department of Labor Audits

Is your company’s retirement plan at risk of a Department of Labor (DOL) audit? Understanding the potential dangers and how to address them can save your company from audits, penalties, and fees. The DOL focuses on plans with flagged items, and some red flags take priority over others.

Audits can be incredibly time-consuming, costly, and damaging to your company’s reputation. The consequences of a DOL audit can extend far beyond just financial penalties. They may include:

  • Employees losing faith in the company’s ability to manage their retirement plans effectively, which could lead to decreased morale and even increase employee turnover.
  • Your 401k plan drawing unwanted attention from other regulatory bodies, potentially leading to even more scrutiny.

In fact, a report by the DOL revealed that nearly 65% of their audits in 2019 resulted in monetary fines or other corrective actions (source: U.S. Department of Labor, “Fact Sheet: EBSA Restores Over $2.5 Billion to Employee Benefit Plans, Participants, and Beneficiaries in Fiscal Year 2019,” October 2019.)

These statistics highlight the importance of ensuring your retirement plan’s compliance with all applicable regulations to avoid costly penalties and protect your company’s reputation.


2. Understanding the Audit Process

The DOL audit process typically begins with a letter notifying the plan sponsor of the investigation. The letter will outline the documents and records the auditor needs to review.

Keep in Mind: Plan sponsors should respond promptly to the auditor’s requests and cooperate fully throughout the
audit process.

The audit process can be lengthy, often taking several months to complete. During this time, the auditor will likely:

  • Review the plan’s operations thoroughly.
  • Test for compliance with applicable laws and regulations.
  • Work with the plan sponsor to develop a plan of action to correct the problems if any issues or concerns arise.

3. Proactive Steps to Avoid an Audit

To avoid triggering a DOL audit, it’s essential to stay informed about the latest rules and regulations regarding employer-sponsored retirement plans. Regularly reviewing your plan’s documentation and procedures will help ensure that you’re in compliance with all applicable laws.

Additionally, conducting internal audits and seeking guidance from legal and financial experts can provide valuable insights into potential areas of concern.

Implementing robust internal controls is another critical aspect of minimizing the risk of a DOL audit. This includes maintaining accurate and up-to-date records, conducting periodic compliance reviews, staying on top of important deadlines, and addressing any issues promptly.

By fostering a culture of compliance within your organization, you can help ensure that your retirement plan remains in
good standing.


4. Effective Communication with Employees

By providing clear information about the retirement plan and other tax-related issues, you can help your employees make informed decisions about their retirement plans. This, in turn, will reduce the likelihood of red flags appearing on your company’s plan.

Consider offering regular educational sessions and workshops on retirement planning and related topics, either in-person or through webinars.

Providing employees with access to resources, such as retirement calculators and educational materials, can also be beneficial in helping them make informed decisions about their retirement plans.


5.  Engaging the Right Professionals

To ensure your retirement plan’s compliance and reduce the risk of a DOL audit, it’s crucial to engage the right professionals, such as Third-Party Administrators who are 3(16) fiduciaries, accountants, and Financial Advisors who are 3(21) or
3(38) fiduciaries.

These experts can help direct and advise on policies and procedures that can help avoid errors and keep your plan in compliance, as well as provide compliance reviews for your plan.

By taking these proactive measures, you can help ensure your plan’s compliance and safeguard your company’s reputation.


6.  Establishing a Culture of Compliance

One often overlooked aspect of avoiding DOL audits is fostering a culture of compliance within your organization.

By emphasizing the importance of adhering to rules and regulations and promoting ethical behavior, you can create an environment where employees understand the significance of maintaining a compliant retirement plan.

Some strategies to cultivate a culture of compliance include setting clear expectations, providing ongoing training, encouraging open communication, and holding all employees accountable for their actions.

By fostering a strong compliance culture, you can minimize the risk of DOL audits and protect your company’s reputation.


7.  Staying Ahead: Regular Plan Reviews and Updates

As regulations change and your company grows, it’s essential to regularly review and update your retirement plan to ensure continued compliance.

This process should involve not only reviewing your plan documents but also evaluating the performance of your plan’s investments, fees, and service providers.

Regular reviews can help you identify potential issues early on and allow you to make necessary changes before they escalate into more significant problems that could trigger a DOL audit.

Staying proactive and keeping your plan up-to-date, you can minimize the risk of an audit and help ensure the long-term success of your employer-sponsored retirement plan.



Navigating the complex world of Department of Labor audits can be challenging, but by staying informed, implementing robust internal controls, and engaging the right professionals, you can protect your employer-sponsored retirement plan.

A proactive approach to compliance, combined with effective communication and a culture of compliance, can help you minimize the risk of a DOL audit and safeguard your company’s reputation.

Confidence Wealth Management is here to help employers and human resource specialists avoid the minefields. We ensure that business owners and administrators mitigate the risk of audits, protecting your company’s reputation and the future of your employees’ retirement plans.

Don’t hesitate to reach out to our experienced team for guidance and support.

Click on the button below to request an appointment or call us directly at (310) 820-4411 to get started on safeguarding your employer-sponsored retirement plan today.

Confidence Wealth Management team





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