Mary Beth’s Corner

IRS vs. DOL – All About Audits

Participant Services
September 26, 2022

Only a few things can strike fear into the eyes of an employer like an audit notice. Despite the bitter chill that comes over when term audit is announced, an audit is just an official financial examination of employer accounts to ensure integrity within the plan.

IRS & DOL audits – one in the same?

Understanding the two organizations, Internal Revenue Service (IRS) and Department of Labor (DOL), that conduct plan audits will help you assist in understanding the cause and what actions to take.

The IRS and DOL enforce different laws so the scope of their audits is different. The IRS focuses on the compliance of your sponsored retirement plan under the Internal Revenue Code. Furthermore, the DOL is concerned with the enforcement of rules under the Employee Retirement Income Security Act of 1974 (ERISA) which includes your plan’s fiduciary and disclosure compliance.

2 Common Causes for Audit Activation

The DOL and IRS share information between agencies, which can and will prompt interest by either department. The agencies operate under a Memorandum of Understanding that details the coordinated efforts of both agencies when dealing with company plan audits.

The most common causes of audits are:

Late or incomplete Form 5500 Filing – Making Form 5500 filing errors is the easiest way to catch the attention of the IRS. Plan Sponsors are to record accurate financial and actuarial information pertaining to their sponsored retirement plan. In order to measure the operational status of the plan there can be no reporting errors or blank fields.

Note – My Benefits’ sister company, First Party Administrator, LLC, can be your elected administrative fiduciary where we will prepare, review and sign your Form 5500 – shifting retirement risk and responsibility from your organization to ours.

Participant Complaints – Eligible plan participants have the ability to report any mismanagement or misuse of your sponsored retirement plan to the Department of Labor’s Employee Benefits Security Administration (EBSA).

Note – It is important to pay attention to your staff and handle participant complaints in a professional and timely manner with reference to plan documents.

Utilize your TPA

In general, a small percentage of IRS and DOL audits are because of intentional plan sponsor misconduct. The majority of violations stem from plan sponsor errors, omissions and oversight.

If faced with an IRS or DOL plan audit, let My Benefits be your expert resource and put your mind at ease. Everyday we recognize the attention to detail and leadership that business owners need to run their retirement plans to a successful standard and we strive to be a driving force for innovation within our industry.