One type of letter that we frequently receive from plan sponsors is a Department of Labor investigatory letter, notifying the plan sponsor that the Department of Labor will be investigating the plan. Sometimes it is in the form of a “limited review” and other times, a full scope investigation. Regardless of the scope of the investigation, here are a few things that you, the plan sponsor, need to know:
1. There is a reason for the investigation. DOL investigations can be triggered from participant complaints or data reported on the Form 5500. There are also several “projects” that the DOL has been investigating such as: (i) the Consultant and Advisor Project which looks at undisclosed and indirect fees; (ii) the Health Benefits Project which looks at whether group health plans are complying with Health Care Reform; and (iii) the ESOP Project which looks at whether participants are getting the benefits they are promised. Further, if you have been or are being audited by the Internal Revenue Service, the IRS may refer a particular issue that is discovered during the audit to the DOL.
While a DOL investigator is unlikely to disclose to you exactly why the plan is being investigated, knowing what an investigator will likely focus on will help you identify and preemptively resolve a potential issue. In my experience, a DOL investigation can be a less stressful experience if you voluntarily disclose plan issues to the investigator rather than the other way around.
2. You must respond. Generally, the initial letter advising you of an investigation is followed by a request for a myriad of plan-related documents. Ask your service provider and/or legal counsel to help you review and organize the documents before it is given to the DOL. Again, in my experience, a DOL investigator is less likely to examine a plan under a microscope if the requested plan-related documents are presented in a concise and orderly fashion.
It is important to note that if you do not respond to the DOL, the DOL has several “tools” at its disposal. For example, the DOL could request a deposition of the plan fiduciaries and/or issue subpoenas. The best course of action is to be proactive in your response, and if you are concerned about how to respond, get help!
3. The DOL investigator may want to talk to the plan fiduciaries. Sometimes, a DOL investigator will want to make an on-site visit and interview the plan trustees and other fiduciaries. Don’t guess or give the answers you think you should be giving. If you are concerned, reach out to the plan’s legal counsel and ask that they be present during the interview.
Lastly, be prepared and don’t be afraid to ask for help from those that are helping you administer the plan. If there is an error, the DOL will propose a correction. If you have not been investigated but are concerned, conduct an internal investigation of the plan. If you come across an issue, both the DOL and IRS have voluntary correction programs that you can utilize. The more you know, the better equipped you are to handle any DOL investigation.