Rumor has it that the Department of Labor recently hired a lot of new field auditors, which could only mean one thing — more audits. I think it’s safe to say that more 403(b) plans will be put on the firing line as well. Just what we need, right? Well, a little work now and some knowledge may help, so keep reading.

Get inside the auditor’s head

One area that might raise an auditor’s red flag? Something called “legacy plan assets.” In a nutshell — these are the retirement funds left behind when you change service providers. Unfortunately, lots of plan participants don’t sign off on moving the money, so it gets left behind with the previous provider. Fiduciaries’ hands are tied because they legally can’t touch the money.

As you can imagine, these retirement funds tend to make it difficult to handle loan administration and other day-to-day tasks. But they also create major headaches around annual reporting, regular CPA audits, participant disclosure ... and as I mentioned regulatory audits.

While the DOL has offered some relief which eases some of these requirements, that relief is narrow, so you still need to be cautious in this area.

Role of the financial professional

While legacy plan assets are one potential area of focus for an auditor, there will no doubt be a long list of other items on tap as well. Financial professionals typically provide the expertise in guiding plan sponsors through compliance requirements.

Financial professionals can also help plan sponsors steer clear of service providers who claim to “do it all.” This article by Jeffrey Bauer from Angell Pensions is a good one. He points out that most providers can’t do it all because they’re at the mercy of other providers. If coordination among several providers it critical for the plan, it might be smart to also pull in an independent TPA.

Remember, now is a great time to get a handle on plan compliance ... before those DOL audits start.

So, are you ready for an audit? Are you currently dealing with legacy plan assets? I’d love to hear what thoughts you have on this topic in the comments.

Friedman is the tax-exempt national practice leader with the Principal Financial Group, and investment management and retirement leader. A noted expert on 403(b) plan design, he has been consulting with tax-exempt organizations for over 19 years and has been in the retirement plan business since 1986. This blog orginally ran on The Principal blog.

Insurance products and plan administrative services are provided by Principal Life Insurance Company.  Securities are offered through Princor Financial Services Corporation, 1-800-547-7754, member SIPC and/or independent broker dealers.  Securities sold by a Princor® Registered Representative are offered through Princor.  Princor and Principal Life are members of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.

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