DOL/IRS Audits Alert
Retirement Plan Advisors recently reported that according to a Willis Towers Watson survey, nearly 30% of their survey respondents have had their retirement plans audited by DOL or IRS, and the rate is steeper among larger plans.
The Willis Towers Watson U.S. Retirement Plan Governance Survey was conducted in February and March of this year and the results are based on responses from over 300 sponsors across a wide range of industries.
- 53% of sponsors ranked investment volatility as one of the top three current risks.
- 49% said retirement benefit costs were their top concern.
- 47%, the third top concern, was regulatory compliance:
- o Approximately half of employers with 25,000-up employees endured an audit over the last two years.
David Speier, Senior Retirement Consultant at Willis Towers Watson stated, “The fact that one in three retirement plans have been audited should send a wake-up call to many plan sponsors. Regulatory compliance is a top concern, and there is room for a fair number of employers to improve the management of this risk. Proactive reviews of plan operations and compliance processes, for example, should be given a much higher priority at organizations that do not have a structure in place to conduct proactive reviews”.
According to the survey findings, 44% of plan sponsors haven’t conducted an operational compliance review of their defined benefit (DB) plans in the past two years. 42% are in the same situation with their defined contribution (DC) plans. Approximately one-third of the respondents cited limited budgets and resources as the reasons for failing to conduct reviews over these past two years.
Plan Advisor reported, “Half of sponsors have separate committees for plan administration and investment governance. Plan sponsors understand that training is a critical component of a strong governance framework. More than half of members are formally trained, either when they join the committee (26%) or on a scheduled basis (36%).”
The survey findings also included:
- Almost 90% of DC sponsors use a third-party advisor to assist with investment options offered to participants.
- 33% of DB sponsors outsource all or part of at least one facet of their investment services, as do 26% of DC sponsors.
- Over half of DC sponsors monitor the following quarterly or more often:
- Investment managers
- Goals and objectives
- Participant asset allocation
- Fees and expenses
- Participation and contribution rates
- Only 2% of employers have dealt with fee and stock drop lawsuits over the past two years.