Why 73% of 401(k) investigations end in fines

Here are some compelling reasons why it’s in your company’s best interest to do a self-audit of its 401(k) administration processes.

In 2013 alone, the DOL closed 3,677 total 401(k) investigations. What’s worse, nearly three-fourths (73%) of these investigations resulted in fines or other corrective action for the employers that were involved.

DOL investigations also resulted in litigation like civil lawsuits in 111 cases. With the increased funding and an enforcement focus on 401(k) administration, employers can expect to see even more results like this moving forward.

2 common errors

For the most part, the employers the DOL looks into aren’t being fined for egregious errors.

In fact, Assistant Secretary of Labor Phyllis Borzi said:

“Most fiduciaries — people who have key responsibilities and obligations to an employees benefit plan — and employers want to do the right thing. However, inadvertent mistakes can create significant problems for fiduciaries and participants.”

The most common situations the DOL investigated involved employer errors when administering 401(k) plans. Specifically, the errors that triggered the majority of 401(k) investigations were:

• failing to make a timely remittance to the 401(k) plan, and
• not getting employee their 401(k) statements in a timely manner.

One proven way employers can safeguard themselves DOL investigation: self-auditing their 401(k) administration practices. Employee Benefits Legal Blog offers an excellent checklist on all of the documents plan sponsors should have regarding their 401(k) plan.

This post originally appeared on our sister site, HR Benefits Alert.