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DOL Audit Tips and Traps

As savvy plan fiduciaries and advisors know, the best way to survive a plan audit is to avoid it in the first place. Once an audit is triggered, however, only the most carefully governed plans can expect a clean bill of health, Bruce Ashton, an attorney with Drinker Biddle & Reath, notes in a recent PLANSPONSOR article.

“In my time as a practicing attorney, I’ve rarely, if ever, seen a client avoid a plan audit once it has been identified as a possible target by the DOL,” Ashton says, pointing to a number of common triggers that can attract regulators’ attention. These include anything from a participant filing a complaint directly with the DOL or IRS — which tends to happen when the plan fiduciaries consistently ignore participants’ questions or concerns — to negative media coverage around a business problem or bankruptcy, he notes.

So what’s the best course of action if a plan winds up in the hot seat? Janet Nahorney, a partner at the accounting firm BlumShapiro in West Hartford, Conn., says once an audit is triggered, plan fiduciaries should cooperate fully with the DOL and provide whatever information is requested. Any stalling or misleading behavior will only bring heightened scrutiny, she warns. Fiduciaries should be diligent about tracking and meeting all deadlines for returning requested plan data; if possible, they should also arrange a meeting with all service providers to make sure everyone understands his role in the audit, as well as what information each will have to provide.

Nahorney and Ashton offer a laundry list of tips and traps in the article, which is posted online here. For plan fiduciaries, this one's a 7 on the Must-Read-O-Meter.

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