The Department of Labor is responsible for enforcing and administering a plethora of federal laws including The Fair Labor Act, The Family and Medical Leave Act, and certain parts of the Occupational Safety and Health Act. If selected for an investigation, companies can be responsible for major fines and settlements plus the costs of responding to inquiries and defending positions.
It would be in everyone’s best interest to avoid such investigations, and there are steps you can take to reduce your risk. Listed below are three of the top reasons an investigation would be initiated by the Department of Labor and by addressing your company’s situation now, you can save you time and significant money later.
Filling out forms correctly
The first situation that can get you on the Department of Labor’s radar is not accurately or timely completing the Form 5500 that is a required information return filed for most retirement plans. The initial due date for the return with calendar year end plan is July 31, which can be extended to Oct. 15. Plan administrators and trustees should monitor these dates to ensure filings are made timely. Other common errors when filing the form include not attaching all required schedules; failing to completely answer questions, particularly those with various parts; and improperly signing the return when filing electronically. Ensuring that qualified staff are completing the filings and that they are reviewed carefully can reduce this risk. Many third-party administrators complete this form on behalf of the clients they work for. A detailed review is vitally important in this situation as they may be intimately knowledgeable about the Form 5500 but they do now know your plan and company as well as you do; by signing the form you are taking responsibility for the information it contains.
The second situation that can have the Department of Labor shine a spotlight on you is through reporting from employees, both current and past. It’s always best to take all complaints seriously and see any agreed-upon resolutions through to the end. Employees most commonly complain about job descriptions not accurately reflecting what they are being asked to do and not being compensated for the hours they are asked to work. It’s important for employers to review job descriptions and hour requirements to ensure they accurately reflect the employers’ expectations and that employees understand those expectations. Further, employers should ensure such expectations are in accordance with current employment law.
The third most common way to get into trouble with the Department of Labor is by improperly administering your retirement plan. Ensure that you understand the plan document and that the eligibility for participation in the plan is appropriately determined and that employer contributions are accurately calculated. Employees’ deferral percentages and investment selections need to be accurate. A plan without diverse investment options can trigger action by participants against the trustees of the plan for failing to perform their fiduciary duties. The timely remittance of participant contributions must occur as soon as administratively feasible, and all fees must be clearly communicated to the participants.
During 2013, 73 percent of investigations resulted in fines or other corrective actions, with 111 ending with lawsuits filed. Failure to perform proper housekeeping as described above can be a costly mistake, one that can be avoided with proper planning and execution to ensure your company stays off the Department of Labor’s radar. The Department of Labor provides resources at no cost on their website, dol.gov, and conducts many seminars. Always remember that you are not on an island; reach out to your business advisers today to avoid notifying them of an investigation notice tomorrow.
Ryan Snyder, CPA, is a manager at Mengel, Metzger, Barr & Co. LLP. He can be reached at Rsnyder@mmb-co.com.