How Advisors Can Address the Top Employer Retirement Plan Headaches

For employers, managing a company retirement plan can bring many challenges. From meeting compliance deadlines to tracking investment performance and fee reasonableness, it can feel like your head is spinning out of control. As mentioned in our last blog article, Steps to De-Risk Your Plan Advisory Practice During 2019, lawsuits have steadily increased over the last decade and can cause unwanted stress and chaos for plan sponsors. Advisors should pay close attention to these three plan sponsor stressors.

Top 3 Retirement Plan Headaches:

  1. Lawsuits
  2. DOL Audit Failures
  3. Missing a Compliance Deadline


In 2017, 307 criminal investigations were closed for offenses that were related to employee benefits plans. Nearly a third of those individuals were indicted.[1] In the current litigation environment, nearly any plan is subject to a fee claim.

ERISA class action settlements reached nearly $1 billion in 2017.[1] Plan sponsors are encouraged more than ever to regularly review their plan governance to protect themselves and any corporate liability. Despite the lawsuits and sizable settlements, there are successful cases, such as Dr. Alan Sacerdote, et al., v. New York University et al., where plan sponsors were able demonstrate the procedures they had in place that helped them hold up in court. The top two risk mitigators were:

  1. Establishing a prudent fiduciary process
  2. Plan documentation

These are important to keep in my mind when evaluating your client’s retirement plan and how your fiduciary process would potentially hold up in a court of law.

DOL Audit Failures

Typically, DOL audits are not random; they can creep up with very little notice. If faced with an audit, the DOL will ask the plan sponsor to provide a number of important documents. These include the signed plan document, summary plan description, annual Form 5500 filings, summary annual reports, plan committee meeting minutes, and more.[2] Establishing a documentation process is extremely important and should be intuitive and simple in the event that DOL reviews your client’s plan.

DOL audits can go all the way back to 6 years ago, which is the statute of limitations.[3] Therefore, the processes your client’s retirement plan puts in place today will impact them for years to come. Think of your retirement plan clients and the length of time you have served as their retirement plan advisor. If the DOL audited their retirement plan from six years ago, how would their procedures and documentation do under the microscope?

No plan sponsor or retirement plan committee wants to hear the DOL tell them they failed their audit and are subject to a sizable fine. The number of DOL civil investigations in 2017 rose to 1,114, totaling in recoveries of $682.3 million.[1]

In order for your clients to avoid DOL audits, you need to know what typically causes them. Some of the most common reasons are:[4]

  1. Participant complaints
  2. Curious/suspicious figures within the Form 5500
  3. Referral from other agencies
  4. Prohibited transactions
  5. An improper auditing report from a plan’s auditor

Missing a Compliance Deadline

Managing a retirement plan has many moving pieces from documentation to depositing employee deferrals. Missing a compliance deadline can be very costly if the mistake is not caught in time. In fact, filing a 5500-series return late can be up to $25 a day and a pricey maximum of $15,000.[5]

However, the DOL and IRS do offer options for filing that are anticipated to be late or are behind schedule. Your client can file for an optional two-and-a-half-month extension to their original filing deadline.

Some of the top compliance issues plan sponsors and advisors face are:

  1. Form 5500/audit neglect
  2. ADP/ACP testing
  3. Process refunds
  4. Employer contribution calculations and allocations
  5. Depositing employee deferrals

The old saying goes failing to plan, is planning to fail. Identifying and planning for potential lawsuits, DOL audit failures and missing a compliance deadline actually will bring your clients a step closer to avoiding them all together. Establishing internal processes for the company retirement plan and having an accountability system that enforces deadlines will alleviate some major stressors for plan sponsors and advisors.

[1] DOL. Fact sheet: EBSA Restores Over $1.1 Billion to Employee Benefit Plans, Participants and Beneficiaries. 2018

[2] Wiss. What the DOL Looks for During an Audit. January 2017.

[3] DOL. Fiduciary Investigations Program.

[4] Benefits Magazine. The Art of Surviving IRS and DOL Audits. August 2014.

[5] IRS. 401(k) Plan Fix-It Guide. Feb 2018.

About Author:

Craig Rosenthal, Head of Strategy and Chief Marketing Officer

Craig Rosenthal, Head of Strategy and Chief Marketing Officer

Craig is Head of Strategy and Chief Marketing Officer for Fiduciary Decisions. In this role, he is responsible for driving Product and Partnership strategy as well as the overall messaging and marketing for the firm.

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