Los Angeles partner Bruce Ashton was quoted in an article titled, "Don't panic if the DOL shows up; Here is what could put plan sponsors at risk for scrutiny during an audit," in Investment News.
If a plan sponsor client receives an audit notice from the Department of Labor, keep cool. The Labor Department, which is quickly becoming a bigger part of financial advisers' lives, has been on a roll with respect to its investigative activities.
In fiscal 2013, it conducted 3,677 investigations, found violations in about 73% of those cases and recovered some $1.7 billion for retirement plans. The Labor Department also closed 320 criminal investigations, of which 88 led to indictments and 70 turned into either guilty pleas or convictions, according to data presented at the National Association of Plan Advisors 401(k) Summit in New Orleans last Monday.
Bruce posted a list of common risk factors that will get the attention of the Labor Department. Participant complaints tend to grab the Labor Department's attention, as do large amounts of "other assets" reported on the annual Form 5500 filed with the agency. Valuations that hold constant year after year may also appear suspicious, and referrals from the Internal Revenue Service will also catch the Labor Department's eye. Even negative news stories can bring the Labor Department to the plan sponsor's door, Bruce said.
As contradictory as it sounds, the first word of advice from legal experts is to keep a cool head if the Labor Department comes knocking. "If there's an investigation, consult with someone who's been through it before and knows what to do," Bruce said. Generally, the Labor Department will give plan sponsors 10 days to respond to a notice.