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Practice Management

Is Plan Audit Prep Among Your Resolutions?

John Iekel

In “New Year’s Resolution: Prepare Yourself for an IRS of DOL Plan Audit,” a recent entry in GreenbergTraurig’s blog, Jeffrey Mamorsky and Terry Moore cite a 2016 Willis Towers Watson report that says that the IRS or DOL audited the retirement plans of one-third of employers, and half of employers with at least 25,000 employees during the period 2014-15. “As a result, regulatory compliance is seen as a top-three risk for employers, with more than half conducting an operational compliance review in the surveyed time period,” they say. Further, they warn, “This level of audit activity and employer interest in conducting compliance reviews continues to the present day.”

The IRS, they say, audits plans to determine if they are satisfying the IRC’s tax qualification requirements, whereas the DOL is does so under its Fiduciary and Plan Expense Audit Initiative. And, they caution, there must be an annual financial audit of retirement plans with 100 or more participants in which plan fiduciaries certify to the auditor that certain internal control procedures are present regarding benefits the plan provides.
Mamorsky and Moore suggest that top minimize the risk of liability for compliance failures, plans should:

  • regularly review the operations of the retirement plan;
  • evaluate internal control procedures; and 
  • obtain insurance coverage for IRS audits.

“How confident are you that your company’s retirement plans are being run in accordance with all legal requirements under ERISA and the Internal Revenue Code (IRC)? Are you comfortable with the integrity of the annual representations made to your plan auditor that key benefit-plan controls are in place to make sure that your retirement plans are operated pursuant to their terms and applicable law?,” Mamorsky and Moore ask.