Is it the Tax Man who cometh? No, it's the DOL, which may be worse

During tax time, it's common for IRS audits to loom large in the minds of Americans, but have you considered your readiness for a different kind of audit by a different federal agency? Specifically, audits by the U.S. Department of Labor (DOL) aren't what they used to be. Today's DOL audits take longer, are more detailed, and can be very expensive. As is often the case when it comes to legal matters, the best strategy is advance preparation. Act now to save yourself time and money later—when an audit letter actually arrives.

What causes plan to be audited?

An employee benefits plan may be selected for investigation for several reasons:

• Sometimes the plan fits within the parameters of one of the DOL's national projects, whether it involves the type of plan (e.g., employee stock ownership plans or ESOPs) or a particular issue (e.g., ensuring participants who terminate employment with a vested pension receive their benefits).
• Information reported on the plan's annual Form 5500 filing or a referral from another government agency may cause the plan to be flagged for an audit.
• Participants have complained to the DOL.
• Litigation has been filed against the plan claiming it isn't being operated in accordance with its terms or a participant's benefits appeal wasn't decided promptly.

Prepare as though you're currently being audited

Even if you think your plan documents and administration are as clean as a whistle, engaging in a mock audit can provide you with insights on areas for improvement.