How to Prepare for an Employee Benefit Plan Audit by the IRS or DOL

Have you received notification that your employee benefit plan has been selected for an audit?  Don’t panic.  Each year, the Internal Revenue Service (IRS) and Department of Labor (DOL) selects a number of companies they will audit for compliance to regulations and statues.  While this can be nerve-racking for executives, the process doesn’t have to be as scary as it sounds. With a bit of preparation and an understanding of the process, your employee benefit plan audit is more likely to be seamless and non-disruptive to your company’s operations.

Step 1: Be Prepared

Preparation is the key for a successful employee benefit plan audit.  It’s best to begin those preparations long before you get notified of an audit by establishing self-auditing practices.  Regularly using a third-party employee auditing service helps you ensure your company is always in compliance with the Employee Retirement Income Security Act of 1974 (ERISA) and the DOL regulations.

Step 2: Know Their Focus

The IRS and DOL tend to focus on the issues that pose the greatest risk to the largest number of employees, including tax-qualified retirement plans and group health plans.  While this doesn’t mean you should ignore other aspects of your employee benefit plan; it does mean that special consideration should be taken with the administration, record-keeping, and reporting for these elements.  The IRS provides a retirement plan compliance check-list and the DOL provides a health plan compliance tool to aid in self-auditing.

Step 3: Understand the Process

While there is a standard examination process for audits by the IRS or DOL, the actual experience may vary significantly depending on whether your plan was chosen at random or due to complaints, referrals from other agencies, or a flagged issue in the plan’s annual reporting.  Both agencies offer guides that discuss the standard processes on their websites: IRS EP Examination Process Guide and DOL Health Plan Investigations.

Some audits will be conducted on-site at your facility while others will happen off-site.  The preferences of your assigned auditor will vary, including their preferred communication method (fax, mail, or e-mail) and timeline. This means your current auditor may not operate in the same way as a past auditor.  That’s okay. It’s important to be as flexible and accommodating as possible with your auditor.  It is also important to establish effective communication with them.

Keep in mind that your relationship with your auditor will be better if you adhere to the deadlines they set.  If you are unable to meet the deadline, ask for an extension instead of ignoring the request.

Step 4: Get Support

Audits by any government agency can be time-consuming and stress-inducing for the company.  By hiring expert IRS Audit and DOL Audit representation, you can reduce the strain on your resources.  You also increase your chances of a more positive experience.  If the audit uncovers compliance issues, your audit team can guide the remediation process quickly and efficiently.

With over 35 years of experience, Hall & Company’s team of professionals have guided countless companies through employee benefit plan audits.  We specialize in both self-audit and government agency audit circumstances.  Contact us via email or call our offices at: 949-910-HALL (4255).

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