Has your benefit plan been selected for an audit? Do not panic !



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Each year, a number of employee benefit plans are audited by the Internal Revenue Service (IRS) and the Department of Labor (DOL) to verify their compliance with the laws and regulations over which these agencies have enforcement authority.

Agencies particularly focus on compliance issues that present the greatest potential risk to the greatest number of employees. In particular, the DOL has intensified its reviews of group health plans in recent years as part of the Employee Benefit Security Administration Health Benefits Project.

be ready

With enough preparation, even your worst expectations shouldn’t be so bad. An important part of the preparation is the self-audit. Regularly.

Focus particularly on the most common compliance issues. For eligible pension plans audited by the IRS, these tend to involve failures related to (among others):

  • Timely change plan documents.
  • Administer compensation and eligibility rules in accordance with plan conditions.
  • Make unauthorized distributions.

Even if your plan’s financial data is verified annually by a third party (for example, pension plans covered by the Employee Retirement Income Security Act (ERISA)), perform your own spotlight on troublemakers. currents such as:

  • Bad interpretations of eligibility rules.
  • Misapplication of the definition of compensation.

The IRS and DOL both publish self-audit tools. The IRS Compliance Checklists, Common Plan Requirements Guide, and “fix” guides are handy resources for 401 (k) and 403 (b) plan sponsors. These include lists and explanations of specific Internal Revenue Code requirements for tax eligibility of pension plans and step-by-step means of correcting certain errors that might otherwise result in the disqualification of a plan.

The DOL Self-Compliance Tool for Group Health Plans can be particularly useful for plan sponsors who have not had a group health plan audited in the past two years.

Understand the review process

The IRS and DOL both publish guides explaining plan compliance audits:

  • The IRS Review Process Guide includes links to fairly detailed explanations of each of the eleven steps in a typical review.

Depending on whether your plan was selected for review based on pure random chance, participant complaints, a recommendation from another government body, an anomaly in the plan’s annual report, or a segment particular market that the agency’s national office had at the time, the review process could deviate significantly from the usual.

If your plan has previously corrected deficiencies as part of the IRS Employee Plan Compliance Resolution program, be prepared to demonstrate that the full correction has been made, including corrective actions taken to prevent recurrence of the plan. the same failure.

Some reviews will involve site visits and some will not. In addition, some agents will want to communicate only by fax or regular mail and others will allow communication by electronic mail.

Many agents do not work in an office every day and will therefore be difficult to reach by phone. Be prepared to be flexible and accommodating, but feel free to request the same from your designated agent, for example, if you need more time to fully respond to a request for information or documents.

The examination will end either with an irreproachable health check or with the identification (more likely) of one or more errors which must be corrected. Make sure you understand the errors identified as well as the proposed corrections and possible penalties. If you disagree with the officer’s findings, understand your appeal rights and these procedures.

Keep it in perspective

The government’s goal in any plan compliance audit is to identify compliance breaches. It never pays to deliberately ruffle the feathers of an official whose job it is to find your mistakes. Be professional and considerate and expect the same behavior from the officer. Among other things, this means responding, regardless of the time limit (extended or not) with documents and information organized in a way that allows the agent to do their job easily.

Either way, keep in mind that full compliance is virtually unheard of, and every failure has a resolution.

Monique Warren
is the manager of the White Plains, NY office of Jackson Lewis PC, where she advises employers on benefits compliance and administrative matters. © 2018 Jackson Lewis. All rights reserved. Republished with permission.

Articles related to SHRM:

Open registration and compliance all year round: how to avoid a DOL audit,
SHRM online Benefits, June 2017

What to expect from a health plan audit,
SHRM online Labor law, October 2016

Make retirement plan audits painless,
SHRM online Benefits, April 2013

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