Best Practices to Support DOL Compliance

July 18, 2014 ( - A defined contribution plan is an excellent tool for helping employers acquire and retain top talent, but complying with the rules can be a challenge.

As an adviser and the designated plan sponsor at my own firm, my dual roles give me valuable insights into the opportunities—and many challenges—of building and maintaining a defined contribution plan that offers the greatest possible benefits to plan participants while also protecting the plan’s tax-favored status and the personal liability of plan sponsors themselves.

For many of the plan sponsors I advise (and myself as well), the recent move by the Department Of Labor (DOL) to step up compliance enforcement of company-sponsored retirement plans has them feeling less than confident about how well their plans adhere to current DOL rules and regulations. For those not already concerned, these statistics may cause some rethinking: According to the FY 2014 Congressional Budget Justification for the Employee Benefits Security Administration (EBSA), in 2013 alone, the agency collected more than $1.69 billion in fees for plan restorations, fines, and penalties. In 2013, 87% of the agency’s full-time staff was dedicated to compliance enforcement and participant assistance, and the 2014 budget appointed 875 full-time staff to support the DOL’s compliance enforcement efforts. Whether you are a business owner, chief financial officer (CFO), controller, or human resources lead, as a plan sponsor you hold personal fiduciary responsibility for plan compliance—making it more important than ever to take the right steps today to avoid liability in the future.

Of course, potential litigation isn’t the only reason to strive for compliance. Businesses offering qualified retirement plans do so to offer a valuable retirement benefit to their employees, and very few of the companies violating regulations are doing so with any actual intent. In fact, most violations are the result of some basic—though not always obvious—missteps by plan sponsors. The good news: by taking the time to review best practices, making necessary process adjustments to support compliance, and scheduling an annual review to stay educated about the DOL’s ever-changing rules and regulations, plan sponsors can set the stage for success in case of a formal plan audit.

From a best practices perspective, here are the three key areas to consider:

Procedural process. The basic foundation of fiduciary process is a written policy statement that documents the Investment Committee’s due diligence, including how investments are chosen and measured, and the mechanisms that are in place to trigger placing a fund manager on a watch list. But this policy statement is just the beginning, and plan sponsors would be wise to implement a few simple processes that further document the Committee’s intent to support the best possible participant outcomes:

  • Record minutes of the annual review meeting, including attendees, topics discussed, and any decisions made regarding plan structure or process.
  • Have employees sign an attendance sheet at each educational session to both demonstrate intent to provide investment education and identify employees who may not be taking full advantage of the plan.
  • Carefully manage quarterly reporting and continuous monitoring of plan performance to ensure adjustments are made as needed to protect plan investments and document due diligence.
  • Replace funds that fail to meet performance criteria to provide a straightforward menu of options to plan participants and demonstrate fiduciary responsibility.

Asset Allocation. While self-directed retirement plans such as 401(k) and 403(b) plans give plan participants the flexibility to select funds based on individual goals and time horizons, it is the responsibility of the plan sponsor to offer an appropriate menu of fund choices, as well as proper education regarding fund selection. Working with a qualified investment adviser, plan sponsors should, at a minimum, strive to:

  • Provide a variety of funds that offer a spectrum of risk and reward to enable plan participants to build the most appropriate portfolio to support their own financial objectives.
  • Offer a diversity of funds, fund families, and asset classes to limit undue exposure to performance fluctuations in any particular investment class.
  • Construct a menu of fund choices that fit together as a whole to simplify the process of selecting a proper mix based on plan participants’ risk tolerance, time horizon, and long-term goals.

Investment Analytics. Always tied closely to the written investment policy statement, investment analytics are used to determine if and when a fund should be replaced. To help ensure best practices and demonstrate fiduciary due diligence, plan sponsors must evaluate funds on a consistent basis. While performance benchmarks and fund management are at the top of the list, it’s important to include these less common considerations as part of the analytics process:

  • Confirm selected asset classes have a low correlation to each other to provide a high level of diversification and asset protection.
  • Verify each fund’s expense ratio and management fees to confirm they are in alignment with funds in the same peer group.


Plan compliance is a complex challenge, and while including these often overlooked best practices can help, it is critical that the entire team—including the plan sponsor, plan adviser, third-party administrator, recordkeeper, certified public accountant (CPA), property and casualty agent, and payroll provider—all communicate effectively to ensure the plan is operating as efficiently as possible. As a plan adviser, I typically gather these key contacts at the initial meeting, and consistently reach out to each party individually to facilitate ongoing communication. As a plan sponsor, I would encourage others in my role to ensure their advisers take a similar approach. It’s just one more step in helping to create and maintain a plan that is structured to not only protect plan sponsors but, ultimately, to support an optimal retirement income for employees.


Andrew Serzan, CLTC   

The plan sponsor for his firm’s own Qualified Retirement Plan, Andrew Serzan, CLTC, is a Senior Partner and COO at Atlas Advisory Group LLC, an independent planning firm based in Cranford, NJ. A Member Firm of M Financial Group, Atlas Advisory Group LLC specializes in investment tax planning and wealth transfer for executives. Independently owned and operated, Atlas Advisory Group LLC is registered with M Holdings Securities, a Registered Broker/Dealer and investment advisor (RIA). Member FINRA/SIPC.  

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the authors do not necessarily reflect the stance of Asset International or its affiliates.