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Critical Issues Facing ERISA Plan Fiduciaries: DOL and IRS Audit Focus for 2013




Department of Labor Investigatory Focus

Contributory Plans Criminal Project – 15% of audits reveal criminal intent

Rapid ERISA Action Team – Audits for plan sponsors under financial stress

ESOP’s – Investigating inflated value of privately held stock

Consultant/Advisor Project – Compensational conflicts of interest

Health Benefits Security Project – Investigating health plans, approximately 20% of audits


DOL Source of Cases

Participant Complaints

Form 5500 Reviews; new system scans returns and provides automated exception reports

Referrals from Other Agencies, i.e. IRS, SEC


Other, including Fiduciaries


DOL Types of Investigations

Civil - Plan and Service Provider

Criminal – Plan, Service Provider, Employer and Individual (Majority of Cases)


DOL Fiduciary Do’s and Don’ts                                                                                       

Must Act “Solely in Interest” of Plan and Beneficiaries

Discharge His/Her Duties Prudently

Diversify Plan Investments

Follow Terms of Governing Documents

CAN NOT Accept “Gratuity” from Those Doing Business with the Plan (Kickback)

DOL Areas of Review in Civil Cases

Review of Plan Assets – Prudence, Prohibited, Transactions, Self-Dealing

Reporting and Disclosure


General Plan Operations – Looking for Defects/Deficiencies

Compliance to Plan Documents

Remittance of Employee Contributions


Internal Revenue Service Investigatory Focus

Forfeitures – Unvested plan contributions that become plan assets once a participant terminates

  1. Check the plan document
  2. Check break in service or Cash-Out distribution
  3. 5 year break in service rule
  4. Death of participant
  5. Certain matching contributions
  6. “Bad Boy” Clause – Forfeiture for cause

ERISA Accounts – Accounts that House Excess Revenue Sharing

  1. Plan document does not regulate ERISA accounts

Missing Participants – A participant or beneficiary who, after reasonable efforts made by the plan administrator, cannot be located

Ethics – Professional and Ethical practice before the IRS rules are found in Treasury Department Circular 230 and the IRS’s Statement of Procedural Rules

Fee Disclosures

  1. Significant increase in DC fee reviews and benchmarking
  2. Audit discussions include reasonableness of fees and appropriateness of the way fees are being paid


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