Self-Audits May Help Plan Sponsors Find, Fix Errors Before Government Does


Retirement plan sponsors responding to a recent survey cited regulatory compliance as a top concern, yet some of those respondents failed to perform self-audits that could identify potential compliance problems.

Regulatory compliance was cited as a top three concern by 47 percent of more than 300 plan sponsors participating in the 2016 Willis Towers Watson U.S. Retirement Plan Governance Survey, in results announced by the consulting company on July 6.

Yet 44 percent of defined benefit plan sponsors and 42 percent of defined contribution plan sponsors said they didn’t conduct a self-audit in the last two years, according to the survey.

Department of Labor and IRS auditors take the approach with retirement plan sponsors that the sponsors should find errors and fix them before the government finds them, Lisa Canafax, senior retirement consultant at Willis Towers Watson, told Bloomberg BNA.

Anxiety over regulatory compliance is well-founded, the survey said. About 31 percent of plan sponsors said they had been audited by the IRS or DOL in the past two years, including about half of the surveyed employers with at least 25,000 employees.

One area of plan operation that concerns DOL auditors is the problem of missing plan participants, Canafax said. These are participants who have left their employers’ retirement plan and are not receiving their benefits on reaching retirement age. This is a particular problem for employees who have left their employers’ defined benefit plan and had no rollover option, she said.

In contrast, participants in Section 401(k) plans are likely to have a rollover option to a new employer or an individual retirement account, she said.

About a third of respondents in the survey said that they didn’t conduct self-audits in the last two years because of limited budgets and resources.

Plan sponsors should not let the problem of limited resources get in the way of making some effort to integrate internal reviews into the plan’s governance structure, Canafax said.

Options for these plan sponsors could include doing a full scale review on a periodic basis or performing elements of the review on an annual rolling basis, doing pieces of it year-by-year, she said.

“For benefits and HR departments challenged to do more with less, using the high prevalence of DOL and IRS audits is a way to marshal the resources internally to be able to do these reviews,” she said.

The survey, conducted in February and March, was based on responses from more than 300 U.S. retirement plan sponsors representing a wide range of industries.

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