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Over the past few years, the Department of Labor (DOL) increased their plan examination and auditing efforts. A recent article in Financial Advisor magazine states that an estimated 70% of the audited plans were fined, penalized, or required to make reimbursements in their plan’s operation.

The DOL’s Employee Benefit Security Administration (“EBSA”) dedicated substantial resources to compliance efforts. In fact, they hired 1,000 new employees last year, with the primary responsibility of plan enforcement. This suggests a likely increase in plan audits, with smaller plans targeted more frequently.

According to  EBSA, a majority of plan failures occur because:
1. Employers neglect to follow the terms of their plan documents;
2. Inappropriate discrimination against the rank-and-file employees;
3. ERISA coverage requirements are not met;
4. Employers fail to deposit employee deferrals and loan payments in a timely manner;
5. Fiduciaries fail to file on time, or don’t file, Form 5500 (with the DOL’s new EFAST2 electronic filing program, the DOL picks up these failures faster than before);
6. Trustees fail to ensure participant loans comply with the plan’s loan policy.

Participant complaints are a leading DOL audit trigger. One of the most critical steps a plan sponsor can take is to respond timely to participant requests, whether in the form of a loan, distribution, or by providing information regarding the plan.