Get your Ducks in a Row
    58 Questions from the Department of Labor

    Erik Daley, CFA
    Managing Principal

     

    Introduction

    The Department of Labor has the difficult job of administering and enforcing Title I of the Employee Retirement Income Security Act (ERISA). Title I establishes the standards for governing the operation of employee benefit plans. One of the mechanisms they use in meeting their objectives are audits of retirement plan sponsors. These audits provide the Department a wide variety of data to analyze, but also provide plan sponsors insight into the issues that the Department is most interested in evaluating.

    Audits typically arise as a result in one of three ways.

    • Response to a participant complaint – The Department is responsible for helping ensure the rights of retirement plan participants and beneficiaries. In instances where participants may issue a complaint, the Department may elect to initiate an audit to review the facts and circumstances surrounding the complaint.
    • Wrong answer on the 5500 – In the new EFAST environment, the Form 5500 is coded with a number of automated compliance checks. Specific answers or series of answers to the Form 5500 questions may initiate a more detailed review of the form, which may lead to an audit by the Department of a plan.
    • Dumb “luck” – To help review compliance, the Department has to review a cross-sample (albeit small) of all retirement plans, not just those where there have been complaints, or where the Form 5500 generates questions or concerns. If you work with plans long enough, chances are you will get a visit from the Department.

    Frequently, plan sponsors want a satisfactory answer to the question, “why me?” However, the “why” is less important than ensuring the sponsor’s responses to Department’s inquiries are addressed completely and accurately. And while each audit may generate questions specific to the audit being conducted, there are a number of questions that come up on a recurring basis providing a good opportunity for plans to “self-audit” their compliance and record retention practices.

    58 POINT COMPLIANCE PLAN

    In a recent Department compliance audit, the process was initiated with a letter and request for responses to 58 questions from topics covering:

    • Plan Documents
    • Plan Administration
    • Plan Financials
    • Plan Investments
    • Joint Ventures & Limited Partnerships
    • Real Property
    • Loans
    • Service Providers & Expenses
    • Revenue Sharing
    • Plan Termination
    • Bankruptcy

    Many plan sponsors find it useful or essential to retain assistance in managing a Department audit. But whether you solicit assistance or go it alone, reviewing some of the questions asked by the Department and evaluating your ability to answer them completely, is a good preparatory step. Attached is a list of the 58 questions referenced above.

    Conclusion

    If terminology is outside of your area of expertise, or finding answers to technical questions is difficult, conducting additional training and establishing control processes will prove useful. For more information on fiduciary duties under the Employee Retirement Income Security Act, please see Multnomah Group’s Fiduciary Responsibility Guide.

    Multnomah Group, Inc.

    Phone: (888) 559-0159

    Fax: (800) 997-3010
    www.multnomahgroup.com