DOL Audits: What Long Island Employers Should Know

If your Long Island business offers employee benefits like a 401(k) plan or health insurance, you could face a Department of Labor (DOL) audit. For many business owners, the thought of a government audit feels overwhelming. But understanding how DOL audits work and preparing properly can help you navigate the process smoothly.

What Is a DOL Audit?

The Department of Labor conducts audits to ensure employers comply with federal laws governing employee benefit plans, primarily the Employee Retirement Income Security Act (ERISA). Think of it as the government's way of checking that you're following the rules designed to protect your employees' benefits.

During an audit, DOL investigators review your benefit plans, procedures, and documentation to verify you're meeting legal requirements. They're looking for compliance with rules about plan administration, employee communications, fiduciary responsibilities, and proper handling of benefit funds.

What Triggers a DOL Audit?

DOL audits can be triggered in several ways:

• Random selection: The DOL randomly selects plans for review, much like the IRS selects tax returns for audit
• Employee complaints: When employees file complaints about benefit issues, it can prompt an investigation
• Late or missing Form 5500 filings: Required annual reports that are late or contain errors raise red flags
• Red flags in filings: Unusual patterns in your benefit plan data that catch the DOL's attention
• Industry sweeps: The DOL sometimes focuses on specific industries or types of plans
• Referrals from other agencies: Tips from other government agencies or financial institutions

Common Areas DOL Auditors Review

During an audit, the DOL typically examines several key areas:

Plan Documents and Administration: Auditors verify that your plan documents are current and that you're following them correctly. They check if employee communications like Summary Plan Descriptions are accurate and distributed on time.

Fiduciary Responsibilities: As a plan sponsor, you have fiduciary duties to act in your employees' best interests. Auditors review investment selections, fee arrangements, and decision-making processes.

Participant Rights: The DOL checks that employees receive required notices, have proper access to their account information, and receive timely distributions when eligible.

Financial Controls: Auditors examine how benefit contributions are handled, ensuring timely deposits and proper accounting.

Prohibited Transactions: The DOL looks for any inappropriate use of plan assets or conflicts of interest.

Document Retention Requirements

Proper documentation is your best defense in a DOL audit. You must retain plan-related documents for at least six years after they're created or last effective, whichever is later. This includes:

• Plan documents and amendments
• Summary Plan Descriptions and other employee communications
• Form 5500 annual reports and supporting documentation
• Investment committee meeting minutes and decisions
• Employee enrollment forms and beneficiary designations
• Payroll records showing benefit deductions and employer contributions
• Service provider contracts and fee disclosures

Audit Response Best Practices

If you receive a DOL audit notice, don't panic. Follow these best practices:

Respond promptly: The DOL typically gives you 30 days to provide requested documents. Meet all deadlines and communicate if you need more time.

Designate a point person: Choose one person to coordinate with the DOL to ensure consistent communication and avoid confusion.

Provide only what's requested: Don't volunteer additional information beyond what the auditor asks for. Answer questions directly and completely but don't elaborate unnecessarily.

Keep copies of everything: Document all communications with the DOL and keep copies of all materials you provide.

Get professional help: Consider working with an ERISA compliance specialist who can guide you through the process and help ensure you're responding appropriately.

Avoiding Common Compliance Failures

Many DOL violations are preventable with proper procedures:

• Timely deposits: Ensure employee 401(k) contributions are deposited as soon as administratively feasible, typically within a few business days
• Regular plan document updates: Keep plan documents current with law changes and company policies
• Proper employee communications: Distribute required notices on schedule and maintain distribution records
• Investment monitoring: Regularly review plan investments and document your fiduciary decisions
• Accurate Form 5500 filings: File annual reports on time with complete, accurate information

How Benton Oakfield Helps

Managing ERISA compliance can feel complex, especially when you're focused on running your Long Island business. Benton Oakfield helps businesses throughout Nassau and Suffolk Counties maintain proper compliance and prepare for potential audits. We assist with document preparation, ongoing compliance monitoring, and can provide guidance if you face a DOL inquiry.

Our team understands the unique challenges facing Long Island businesses, from medical practices in Garden City to accounting firms in Hauppauge. We work to ensure your benefit plans meet all requirements while providing valuable benefits that help you attract and retain quality employees.

Ready to strengthen your benefits compliance? Contact Benton Oakfield to discuss how we can help protect your business and support your employees.

Compliance Note: Benefit plan rules and tax implications vary based on company size and location. This guide is for educational purposes only. Please contact your Benton Oakfield representative to discuss how this applies to your specific situation.

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