The DOL’s Move to Increase ERISA Audits

There have been recent rumblings that the Department of Labor plans to substantially increase the number of ERISA compliance audits it conducts each year, which may strike fear into the hearts of many HR professionals, particularly those responsible for this area. While experts and advisors don’t believe that companies or their staff members are deliberately doing things incorrectly, they do believe that significant opportunities for error — and audit — exist.

The Employee Benefits Security Administration is responsible for protecting the integrity of pensions, health and other employee benefits, and is charged with administering and enforcing ERISA. Much of the justification for EBSA’s 2012 budget proposal, which includes additional staff to conduct these audits, was based on concerns with how plan sponsors are managing these plans. The DOL has estimated that three out of four plans they audit have had an ERISA violation.

Lee Topley heads Unified Trust’s entire retirement plan consulting group, in Lexington, Ky. The DOL conducts more than 3,000 audits each year, says Topley. “I’ve seen that in 70 percent of the audits they find some sort of failure, either in the operation of the plan or in the interpretation of the plan provisions. There are exorbitant amounts of money fined against plan sponsors,” he says.

ERISA is one of those areas of HR administration that is probably not high on the list of most HR practitioners’ favorite things to do. And, truth be told, many simply don’t have enough people to spend sufficient time on plan issues, says Heidi LaMarca, vice chairman at the American Institute of Certified Public Accountants National Conference on Employee Benefit Plans. An increased chance of an audit, says LaMarca, means that HR departments need to double-check that:

• The people running the plan know the plan document inside and out
• Plan operations must be in compliance with the plan document
• The plan document must be in compliance with laws and regulations — all required amendments must be made.

Jill Masur, an audit manager with Kaufman Rossin., a Florida-based accounting firm, specializes in employee-benefit-plan audits, says that this move by the DOL has been coming around for some time, pointing to 2008 and the declining economy as a key factor. “A lot of peoples’ investments have really taken a negative decline and I think a lot of employees and participants, specifically, are looking a little more intensively into their investments and [that] goes back to the person responsible for the investments — the fiduciary.”

With this ramped-up focus and DOL’s announcement, it is unfortunately more likely than not that a company will receive a DOL audit.

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