A DOL audit can stem from a variety of things, but they are most often triggered after an employee complaint to the DOL. The IRS may also report some companies to the DOL, plus the DOL sometimes focuses in on some low-wage industries where violations have been common. Audits can be about wage and hour violations, employee classification, and benefits administration, among many other reasons.
Just offering a 401k retirement plan can open your business up to audit-causing problems. Employers offering a 401k plan must regularly offer educational information to participating employees. They also must have a clear, current investment policy statement. These requirements shouldn’t stop you from offering your employees a great benefits plan; these benefits attract and keep top talent. Make sure that you provide employees the required notices, like a summary of benefits.
How you fill out Form 5500 for the IRS could trigger a DOL audit. This form covers employee benefits, so it is important to fill it out completely and correctly so it will not get flagged. Also make sure to submit it on time.
Performing payroll audits regularly should also help to prevent DOL audits. If you are already working with a PEO, this can be a major audit trigger. Not performing payroll audits is the most common reason that multi-employer plans (ones that include a PEO and client company) get audited by the DOL. Before partnering with a PEO, ask them how often they conduct payroll audits (this can save a lot of trouble later.)
Partnering with a PEO can help to prevent many DOL audit triggers. If a PEO administers your benefits and payroll, they should take care of legally mandated notices and regular payroll audits. It can be difficult to stay up to date with all of the ever-changing labor laws when you are also running a business, but a PEO will ensure that the services they cover stay in compliance. They will also keep records that will be needed if your company is audited. Also, if an audit does occur, your PEO may have a legal team that can help.
It is important to stay in compliance to avoid a DOL audit, so if you are having trouble keeping up with all of the regulations, it may be best to get help from a PEO.