DOL Increases Audits of Apprenticeship and Training Plans: Is Your Plan Prepared?

Jason Edwards, CPA

Apprenticeship and other training plans covered under the US Employee Retirement Income Security Act of 1974 (ERISA) have been a recent focus of the US Department of Labor (DOL).  Programs for private sector workers and financed from trust funds are considered ERISA apprenticeship and training plans.

Increased Audits
The DOL is increasing regulation enforcement with audits of these plans, specifically focusing on kickbacks and other fiduciary violations.  A kickback is defined as an illegal, secret payment made in return for a recommendation which results in a contact or a transaction.  For example, a trustee of an apprenticeship plan receiving payment from one of the plan’s advisors for the advisor’s service relationship with the plan would be considered a kickback.

Lack of oversight of plan assets is the predominant issue identified from DOL audits.  The most common ERISA violations identified were prohibited transfers of properties, improper loan transactions, improper leasing of facilities, financial mismanagement, and payment for improper expenses.  The DOL states that improper expenses include excessive food and travel expenditures.  Other fiduciary violations drawing the interest of the DOL are those involving gifts and gratuities.

How to Prepare
Your plan should have written policies which detail the receipt of items of value, such as meals, entertainment, gifts, and educational conferences.  Many plans prohibit trustees and plan employees from receiving anything of value from service providers.

Another way to prepare for the eventuality of a DOL audit is to have an operational audit performed.  This is a preventive measure and should be carried out by a knowledgeable outsider who can help your plan avoid, and if necessary, address any compliance problems and issues.  Apprenticeship and training plans with self-identified violations can enter the DOL’s Voluntary Compliance Program that allows for correction of 15 specific transactions, including improper plan expenses.

Prepare now for the possibility of a DOL audit by talking with your plan’s accountant to ensure that the proper policies and controls are in place for your plan.

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