What will the DOL be looking for when they come for an investigation?

The Department of Labor (DOL) conducts investigations of fiduciaries and service providers to ensure that they operate plans in the participants’ best interests and in accordance with the plan document. In addition to requiring that violations are corrected, the DOL has authority to levy penalties and fines in appropriate cases.

Recent events indicate that the number of DOL investigations and penalties is on the rise. One of the biggest reasons is the current economy. Whenever the stock market retreats and plan account balances diminish, participants contact the DOL to complain about their plans. Many DOL plan investigations begin based on these participant phone calls. Certain complaints lead to greater scrutiny by the DOL such as if participants have difficulty obtaining routine documents from employers (participate statements or summary plan descriptions). Current “hot issues” that raise eyebrows at the DOL are if there are problems with late contributions of employee deferrals, and where excessive fees are being charged.

Below are a few of the plan traits that could trigger an examination by the DOL:

• Untimely contributions remitted to the plan
• Loan defaults/untimely remittance of payments
• Plans with a large percentage of assets in non-liquid assets such as real estate or limited partnerships
• Noncash contributions
• Unreasonably high administrative expenses
• Unreasonably low rate of return on contributions
• Insufficient interest paid on loans

Should your plan be investigated, what specifically will the DOL be examining? Below is a list of some of the items the DOL will be requesting during an investigation:

1. Signed copies of Form 5500 and all attachments (including accountant’s opinion, financial statements and notes)
2. Signed and dated copy of Plan documents and any amendments
3. Signed and dated copy of Trust agreement and any amendments
4. Copy of all IRS determination letter(s)
5. Copy of the most recent Summary Plan Description and any Summaries of Material Modifications
6. Copy of complete fidelity bond
7. Copy of complete fiduciary liability insurance policy
8. Copies of the audited corporate financial statements
9. Listing of where Plan assets are located (asset address, account numbers, names of all individuals who have authority to make deposits and withdrawals, etc.)
10. Copies of any and all statement(s) showing fair market value of Plan assets (e.g., investment account statements, brokerage account statements, mutual fund statements, bank statements, appraisal reports, valuation reports, etc.)
11. Copies of any and all minutes of Plan trustees, Plan committee, directors and officers
12. Copies of all documents relating to Plan procedures for employee contributions, employer contributions, and participant loans (e.g., payroll documents, employer contribution documents, etc.)
13. Copies of any and all supporting documents relating to loans made, held or acquired by the plan (e.g., loan applications and agreements, amortization schedules, etc.)
14. List of any and all plan officials and information for each individual
15. List of any and all service providers and contact information
16. Copies of all agreements with service providers (e.g., investment custodians, record keepers, third party administrators, accountants, attorneys, etc.)
17. Copies of the most recent annual report
18. Copies of any and all security agreements, mortgages, leases and deeds involving the plan