Hot breath, fear, sweaty palms – You’ve
received a request from the Department of Labor (“DOL”) to provide documents
about your retirement plan. You are being investigated.
Your first thought may be, how did this
happen? Why does the DOL care about my company’s retirement plan?
Whether it was a complaint from a plan
participant, a referral from another agency, an error on your Form 5500, or
simply the luck of the draw, you could spend the next 12 to 24 months becoming
familiar with the DOL’s concern over how your plan’s fiduciaries carry out
the Request: 5 Tips You Should Know
If you knew in advance that your plan was
going to be investigated, how would you have prepared? As a best practice, all
plan fiduciaries should take the following five steps:
Know who the plan’s
This will be one of the first questions asked by the DOL, and they will be
looking to understand the knowledge level of these fiduciaries.
The DOL looks for written documentation showing how the plan’s fiduciaries
carried out their responsibilities. The documentation should demonstrate the
process that results in the decisions made in the best interests of the plan
Trying to learn as you go during an investigation can be problematic. Understanding
ERISA’s fiduciary duties and how to properly administer plans ahead of time can
make the investigative process much smoother.
It’s a best practice to get fiduciary liability insurance related to your plan.
You can even pay the premiums from the plan under certain conditions. Notably,
some policies will cover the costs of investigations after the deductible has
Keep plan related
Having your plan-related documents organized and accessible prior to the
investigation will make responding to the DOL much smoother.
the Investigation: 5 Hassle-Saving Suggestions
Once you receive the notice of
investigation requesting plan-related documents, how can you prepare for the
process? The following steps should be taken:
Choose a primary
It is best to have only one person communicate with the DOL investigator
throughout the process to eliminate confusion. All communications should be
kind, respectful and courteous. Consider ERISA counsel as the primary contact
as they can act as a translator to eliminate misunderstandings and often look
for ways to streamline the process.
Negotiate the scope
of the requests.
The DOL intends to be reasonable in their requests for documents. If a request
seems overly burdensome, explain the situation and the DOL might modify their
request in an appropriate fashion.
Perform a review of
the documents prior to production. Documents should never blindly be provided
to the DOL. You (or your ERISA counsel) should review the documents to fully
understand what is in them and to ensure that collections of documents are
complete. If a negative is found (such as earning contributions have been
late), it may make sense to report them to the DOL voluntarily.
documents in a neat and organized fashion. When documents are provided to the
DOL in a neat and orderly fashion, either on paper or electronically as
requested by the DOL investigator, you are demonstrating that as fiduciaries
you are organized. When documents are presented haphazardly, it may cause the
DOL concern about how the plan’s fiduciaries carry out their responsibilities.
Always be truthful.
DOL will request interviews with the plan’s fiduciaries. The interviews will
feel similar to a deposition with the DOL asking questions about the plan and
how the fiduciaries administer it. It is always key to be truthful in
answering, even if it may be uncomfortable when you have noted an error such as
late contributions (a favorite area of investigation by the DOL). Being
truthful about errors commonly results in the DOL allowing voluntary efforts to
fix them. The DOL is more likely to seek to penalize or enter into settlement
agreements in the most egregious cases.
DOL investigations happen. Take the time
now to clearly document your plan actions, explain why they were taken, and
always remember to act in the best interest of plan participants. This way, if
the DOL comes knocking at your door, you will be prepared.