Dive Brief:
- Employee Benefits News reports that in the 2015 fiscal year, the Employee Benefits Security Administration reported that 67.2% of employee benefit plans investigated resulted in financial penalties or other corrective actions.
- One way to avoid that expensive outcome is through an operational compliance review, writes author Rhonda Berg, senior defined contribution consultant at Pavilion Advisory Group Inc. As opposed to a financial audit, operational compliance reviews look to validate the process being reviewed, unrelated to financial impact.
- Bottom line, Berg says that an operational compliance reviewer wants to know if the process is consistent (with the plan document), whether it's replicable and, most importantly, if it works.
Dive Insight:
Berg offers several basic strategies for plan sponsors, including ideas in defining a plan's scope, followed by several steps, including a review of the plan document and amendments, along with summary plan descriptions and a summary of material modifications, and a review of required notices sent to participants.
She adds that doing an operational compliance review can uncover errors that come as a surprise. The upside, apart from fixing those mistakes, is gaining "perspective and overall confidence" on a plan’s operations. While it may a bit scary, a successful review outcome also will short-circuit any IRS or DOL penalties or fines.
