IRS & DOL Audits of 401(k) Plans
Are On The Increase
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Similar to passing a speed trap when driving down the highway, few things create that "pit in the stomach" feeling like receiving notification that you are about to be audited. If recent announcements from the IRS and the Department of Labor are any indication, an increasing number of 401(k) plan sponsors will have that experience in the coming months.
The "good" news is that unlike other types of government audits, IRS/DOL audits of retirement plans are not designed to look for tax revenue. Rather, both agencies are focused on preserving the benefits (tax and retirement) that plans are intended to provide. With that said, there can certainly be some unpleasant consequences if operational errors or fiduciary oversights are discovered.
What To Do If You Get An Audit Notice
Here are some steps you can take to ease the audit burden if you receive that notification in the mail.
- Take a deep, cleansing breath. Didn't feel the anxiety melt away? Ok, on to the next step.
- Don't procrastinate. Auditors are usually pretty reasonable people, and they understand that there are scheduling conflicts. As long as you contact them as soon as possible, they are often willing to be flexible with dates and deadlines.
- Make sure your plan files are organized. An auditor will usually have a list of items s/he must verify as part of the process. If your plan files are well-organized and include signed copies of documents, Forms 5500, etc., the process is much smoother. Audits often look back several years, so it is always a good idea to verify that you have ready access to historical files.
- Be cooperative. The general rule of thumb is to respond to questions promptly and thoroughly, but do not provide more than what is requested.
- Get it in writing. The retirement plan rules are complicated, and the terminology can be confusing. If an auditor has questions or requests additional information, it is a good idea to ask him/her to put it in writing so that you have a chance to read and understand the request before responding.
More "good" news is that DWC has years of experience helping clients through audits. If you are the lucky recipient of an audit letter, we are only a phone call away and we are able to work with you through the process.
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About DWC ERISA Consultants, LLC
DWC was founded in 1999 and has grown to provide employee benefit consulting services to nearly 750 clients nationwide. We provide compliance and consulting services for employer-sponsored retirement programs. For more information and to learn how DWC can work with you or your clients, please call us at 651.204.2600 or visit our website at www.DWCconsultants.com. For our take on developments in the retirement plan industry, visit www.PozekOnPension.com or check us out on Facebook, Twitter and LinkedIn.
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