It's not common, but it happens, and for various reasons, such as a participant complaint that escalates to a case opening, information in Form 5500, bankruptcy or extreme financial distress, and targeting performed by the DOL regional offices.

A call from the DOL is not something a plan administrator looks forward to, probably like getting a call from the IRS. I will try to summarize the process in this article. [1]

As a DOL federal Investigator, the first thing I did when assigned a case was to notify the plan sponsor. I would call the person listed in the Form 5500 as the plan administrator, introduce myself and inform them that the DOL was investigating their plan.

The narrative was something like this: "My name is Justine Kim. I'm a Senior Investigator for the U.S. Department of Labor, Employee Benefits Security Administration (DOL), and I'm calling to let you know that we're investigating XYZ 401k Plan. We're asking for your voluntary cooperation, and any information obtained during this investigation may be referred to other government agencies."

I would usually hear a silence on the other end of the line, a short pause, and then he or she would say, "okay." I could almost feel the terror. I would then let them know that the investigation would consist of an onsite visit, and that I need to schedule an appointment. I'd send them a list of documents they would need to prepare by the appointment date for review and retention. I usually gave them about two weeks to prepare the documents. I let the company know that the onsite portion would last about two or three days (more depending on the size of the plan). I also let the company know that I needed to interview whoever was in charge of the plan (which is usually the plan administrator), whoever is most knowledgeable regarding the plan, the person in charge of payroll, and the person in charge of forwarding the contributions.

List of needed documents
I emailed and sent the plan sponsor/company a list of documents, usually about 20 items including, but not limited to:

- plan document
- summary plan description,
- copies of Form 5500
- IRS determination letter
- documents showing the plan's rate of return
- quarterly investment reports
- blackout notice (if applicable)
- fidelity bond or fiduciary bond (if any)
- payroll summaries showing the total employee contributions withheld for each pay period
- trust statements showing each deposit made to the plan's trust account date deposited
- service agreements or contracts for each service provider (including TPA, auditors, financial/investment advisors, record keepers, etc.)
- list showing plans investments

For many of these items-like the Form 5500, payroll record and trust statements, and more-we would request it for a period going back to about three years to present.

Gathering the correct documentation is particularly important because if any documents are missing or the company provided the wrong documents, the DOL would have to request it again, delaying the investigation.

Onsite activities
The audit days onsite would look something like this:

On the first day, I would review all the company's documents to ensure I had everything. I usually tried to notify the company of any missing documents they'd need to provide during my onsite visit.

In addition, DOL has a set of checklists that investigators fill out to make sure the plan is meeting all the reporting and disclosure requirements which include but not limited to:

1) SPD checklist to make sure SPD is up to date, has certain required language and information,

2) fidelity bond checklist to make sure the fidelity bond meets DOL requirements,

3) reporting and disclosure checklist, which has a set of questions to ensure the plan is meeting all reporting and disclosure requirements promptly (including but not limited to distributing quarterly trust statements to participants, making plan records available for review by participants if requested, etc.).

I usually conducted the interviews on the first and the second day. Each present interview usually lasted approximately one hour. Large companies usually had an attorney present during the interview, but attorney representation is not required. Attorneys cannot answer for the interviewee or add statements unless clarifying a statement made by the interviewee.

I would spend the rest of the time onsite on document review. For each case, the documents we needed are voluminous (at least two business storage boxes for small plans). I usually tried to review the payroll records and trust statements onsite to ensure I have the correct type of payroll summaries and deposit statements. The DOL has a spreadsheet investigator to determine total lost interest due for any late remittances. For all 401k plans, DOL Investigators always examine the remittance of plan contributions to determine whether the company is making timely contributions to the plan's trust account.

Once the investigators returned to the office, we finished reviewing all the documents, which could take anywhere from two weeks to months depending on the size of the plan, investigator's caseload, and other factors. For a typical 401k case, some of the issues we needed to look at included delinquent employee and employer contributions, reporting and disclosure, whether there are any prohibited transactions, and plan's investment to see if the plan has a prudent investment process and whether it's monitored prudently.

Upon completing the review, the company would either get a voluntary compliance letter (VC letter) if a violation is found or a closing letter (if no violation is found). Sometimes, the investigator may notify the company of the violation before sending the VC letter to talk about correcting the violation (which I did and was able to do, but this can differ depending on the case and the regional office).

Once a company received the letter, the company usually had about two weeks to correct the violation (more depending on the issue). Once the violation was corrected, and the proof was provided to the DOL, the DOL sent a closing letter, and the case was closed.

The DOL can investigate a plan more than once, but only after one year passes after the first investigation.

It's hard to give an average length of time a DOL investigation lasts because of factors like the type of violation at hand, the size of the plan, and the investigator's caseload. Still, based on my personal experience, it usually takes at least a couple of months from start to finish.


[1] The investigation procedure differs depending on the specific regional office conducting the investigation and the investigator conducting the investigation. This is just a general process/procedure based on my experience at LARO.