Spring Cleaning Series: Self-Auditing Benefit Plans
Spring Cleaning Series: Self-Auditing Benefit Plans 04/08/14 Alyssa D. Dowse
Spring has finally arrived, even if it doesn’t feel like it in some parts of the country! Time for those of you who are responsible for HR, benefits, and immigration to dust off the cobwebs and do a bit of spring cleaning, with the help of the Quarles & Brady Labor & Employment Practice Group. This is the first in a series of “Spring Cleaning” alerts: Over the next several weeks, we will provide you with various to-do items and tips in the employee benefits, employment, and immigration areas.
Spring is the perfect time to perform a “self-audit” of your retirement and health plans, to confirm compliance with Internal Revenue Service (IRS) and Department of Labor (DOL) rules. Both agencies have stated publicly that they have significantly increased examination (on the IRS side) and audit (on the DOL side) activity for retirement and health plans. However, a company will generally have little-to-no advance notice of the examination or audit and could face serious penalties and fines (including on a personal liability basis for a fiduciary) as a result of compliance issues found during the examination or audit. Through self-audits, a company can find and fix compliance issues, leading to a much smoother, and generally less intensive, audit or examination in the future. Advance discovery also allows for early correction of issues under more forgiving (and less expensive) IRS and DOL compliance and correction programs.
A self-audit should, at a minimum, focus on issues of particular importance to the IRS and DOL. While the actual retirement or health plan documents and records are very important, the IRS and DOL are also expanding their retirement plan focus to the people behind the plans by looking closely at internal controls in plan operations (on the IRS side) and fiduciary training (on the DOL side). The IRS and DOL will generally pursue a more thorough audit or examination of plans with weak or unclear internal control and fiduciary structures. We’re also aware of situations in which the DOL will request information regarding fiduciary training undergone by plan fiduciaries prior to the audit, interview fiduciaries during the audit, or order fiduciary training following the audit. A self-audit should also consider the accuracy of government filings such as Forms 5500.
A self-audit should consider whether (and how long ago) plan fiduciaries received training regarding their responsibilities. We recommend that plan fiduciaries receive regular fiduciary training to help prevent future compliance issues. Quarles & Brady offers an affordable flat-fee fiduciary training package. For more information, click here.
The IRS and DOL provide several free online resources that companies can use to help guide their retirement and health plan self-audits. We’ve listed a few of these resources below, and you can visit the IRS and DOL websites for more resources. Your benefits counsel could also design a self-audit for you or assist in the self-audit process, including the performance of “spot checks” for a less extensive self-audit. Note that the self-audit would have a different scope and purpose than the independent qualified public accountant audit required for most large retirement plans as part of the Form 5500 filing. If the self-audit discovers any compliance issues, there are IRS and DOL correction programs that may allow you to fix many of those issues.
Sample of Free Resources Offered by the IRS and DOL:
- IRS Checklists for Retirement Plan “Check-ups” (including 401(k) and 403(b) plans).
- IRS Fix-it Guides (including 401(k) and 403(b) plans).
- IRS Information on Internal Controls.
- DOL Health Benefits Laws Self Compliance Tools/Checklists (including for HIPAA and the Affordable Care Act).
- DOL - Fiduciary Resources - Retirement Plans and Health Plans.
For more information, contact the authors of this alert: Marla Anderson, at (312) 715-5079 / [email protected]; Amy Ciepluch, at (414) 277-5588 / [email protected]; or Alyssa Dowse, at (414) 277-5607 / [email protected].