DOL Audits Triggering IRS Audits

[Guest Biko]

I recognize that the DOL has increased its audit activity and one of the issues it has been focusing on is whether employers are remitting contributions to the plan on a timely basis. If the DOL conducts an audit and uncovers such an issue, will this automatically trigger (or increase the chances of) an IRS audit. In particular, I am interested in whether such a DOL finding would trigger (or increase the chances of) an IRS audit of a not-for-profit located in the NYC area.

[Alf]

As I understand it, the DOL has to notify the employer of any IRS referral it makes as a result of an audit. There is probably an exception for criminal referrals.

We have been involved in several DOL audits that ranged from paper only audits to complaint originated week long fishing expeditions and I have not seen any correlation between the DOL audits and IRS audits. In fact, we have been notified a few times of IRS referrals after the DOL decided not to proceed with issues and we never heard from the IRS.

[Guest Biko]

Your experience is consistent with mine. ERISA Section 3003 requires the DOL to notify the IRS if it uncovers a prohibited transaction. However, I have not seen the IRS use this notification as a basis for initiating an audit. Perhaps others have had a different experience, but I appreciate your response.