5 Tips for Preparing for Department of Labor Audits

preparing for a Department of Labor audit

The Department of Labor (DOL) can conduct an audit on your company at any time, with or without warning. Since they are in charge of enforcing ERISA, Fair Labor Standards Act, items, and FMLA, there are a lot of things to keep track of in order to stay compliant at all times.

Maintaining compliance is non-negotiable. Not only do these standards exist for the best interest of your employees and business, but there are also serious penalties issued for violations. The DOL can issue fines up to $1,000 for some violations, but up to $10,000 for severe violations like breaking child labor regulations.

Avoid any possible issues by being prepared for a DOL audit at any time. Here are five tips for doing so:

  1. Update policies regularly. When was the last time your policies were updated? If you can’t remember, then you should take the time to update them. Even if you think you have updated them recently, regulations change at an alarming pace, and there’s a good chance something may be out of date. Having a single number or date incorrect on a document might seem minor but can get your company in a lot of legal trouble.
  2. Self-audit periodically. The best way to know if you will pass a surprise DOL audit is to audit yourself in a no-pressure situation regularly. There are tools available through the DOL that walk you through the items that an auditor would be looking for. That way, you can identify any errors or missing information in your plan documents before it’s too late. This may seem like an overwhelming process, but it’s much more overwhelming to be unprepared during a legitimate audit.
  3. Assign compliance roles. Being responsible for compliance across all regulatory and plan documents is a daunting task for one person. Human Resource professionals wear many hats, and often don’t have the time or resources to dedicate to self-audits and periodic reviews. Overcome this challenge by dividing and conquering. Assigning compliance roles breaks compliance down into manageable chunks. Be sure to clearly communicate roles and appoint one person to spearhead the project, to make sure all other team members are doing their part and hitting their deadlines.
  4. Act quickly when errors arise. Mistakes happen and plan documents become out of date – that’s normal. But what sets companies up for success is how they handle issues once they arise. Since DOL audits can happen at any time, fixing errors that you encounter on your own is crucial. And if you do find yourself facing penalties from a DOL audit, it’s even more important to act quickly. In some instances, you have a grace period to correct the issue before you face additional, more severe penalties.
  5. Consider an ERISA wrap document. ERISA wrap documents address all the mandatory plan document information (such as plan name, federal tax identification number, contact information, claims procedures, eligibility, plan summary, etc.) for all of your individual plans in one document. This eliminates repeat data entry which drastically reduces the likelihood of human error. It also automates the process of updating the information, since it only has to be done once and not on each plan document. ERISA wrap documents leave nothing to chance and streamline the process of ERISA compliance.

When it comes to DOL audit preparedness, you can never be too careful. Don’t leave anything to chance—people make mistakes. Clarity Benefit Solutions provides automated tools that streamline the process, ensure accuracy, and keep your company in compliance.