DOL: Whatcha Gonna Do When They Come For You…
Growing up in a family business, I learned that you are only as good as the people you surround yourself with. To quote my father Paul Federico, “My employees are my greatest asset. I make sure they know that every day.” Most companies put retirement plans in place to retain and reward their employees, but what they don’t realize is that they need to constantly monitor those plans. If they don’t, not only can it hurt their employees, but it can also hurt them.
Over the last few weeks, I met with a myriad of companies and left feeling discouraged and confused. Many of them have no clear process around their retirement plans. Why did I find this so upsetting? Because participants bear the majority of the cost associated with their 401(k)s. As a result, the Department of Labor (DOL) is making it their mission to audit employers/plan sponsors to ensure they are complying with retirement plan regulations.
An estimated 75% of retirement plans audited by the DOL last year were fined. In fact, the average fine last year was $600,000 per plan. That’s a jump of nearly $150,000 from four years ago.
In the past few years, the DOL’s Employee Benefits Security Administration (EBSA) has redoubled its efforts to promote compliance among plan sponsors. In fiscal 2013, the EBSA collected $1.69 billion in plan restorations, fines and penalties from retirement plans, according to the DOL.
The DOL expects that figure to keep rising. Last year, the agency added nearly 1,000 employees, most of them assigned to enforce compliance among plan sponsors. This means more 401(k) plans will face an audit this year, and potentially hefty fines if their plans are mismanaged.
It’s truly in employers’ best interests to take a closer look at their company retirement plans because: 1) they should do right by their employees, and 2) to ensure they would pass muster in the event of a DOL audit.
As for me, I’m back on my merry way contacting HR Directors, CFOs and CEOs to help them monitor their plans, and if my booming Italian voice can’t get through to them, then all I can say is…”Bad boys, bad boys — whatcha gonna do, whatcha gonna do when they come for you!”