Editorial Team

By Mark Olsen, Managing Director at PlanPILOT

The use of loans within employer-sponsored retirement savings plans (commonly known as 401(k) loans) has transitioned from a rare emergency measure to a frequently used financial tool. Driven by rising cost-of-living pressures and insufficient emergency savings, loan usage has seen a consistent upward trend, surging 20% compared to 2022 levels. While these loans can offer short-term relief to employees, they present significant long-term risks to retirement readiness, often creating a “leakage” effect that erodes retirement stability.

At PlanPILOT, we believe that taking a proactive approach in understanding and mitigating these types of issues can help to maintain a robust and beneficial retirement plan for participants. Let’s take a look at the growing trend of participant reliance on retirement plan loans, how they can hamper retirement readiness, and potential solutions that can help solve this problem.

The Growing Trend: A Symptom of Financial Strain

Recent data highlights a steady increase in 401(k) loan activity. Studies indicate that as of late 2025, nearly 20% of participants had an outstanding loan from their retirement accounts. Average loan balances have also risen, with surveys placing them around $10,778, suggesting that participants are tapping into larger portions of their savings.

This trend is driven by a lack of accessible cash for emergencies. 60% of participants report being uncomfortable with the amount of emergency savings they have, likely making their 401(k) the only other available source of funds. Furthermore, the SECURE 2.0 Act, while promoting savings, has introduced provisions like penalty-free hardship withdrawals and relaxed rules that can inadvertently make it easier for employees to treat their retirement accounts as bank savings accounts.

Long-Term Impact on Retirement Readiness

While 401(k) loans are repaid with interest, that interest is paid back to the participant’s own account, making them seemingly harmless. However, the true damage to retirement readiness stems from two primary factors: lost opportunity cost and default risks.

1. Opportunity cost (lost growth): Money borrowed from a 401(k) is removed from the investment markets. During the loan period, that cash is not growing, meaning it misses out on potential compound investment gains. Given that loans can be outstanding for five years or more, this “lost time” can significantly reduce the final account balance at retirement, requiring higher future contributions to realize the same retirement goals or working longer than expected.
2. Default upon job change: A critical, often overlooked risk is the repayment requirement upon leaving a job. If an employee leaves or loses their job with an outstanding loan balance, they usually have a short window to repay it, or the loan defaults. A defaulted loan is treated as a taxable distribution, subjected to income taxes and, for those under 59½, a 10% early withdrawal penalty. Almost 40% of workers take a loan at some point, and 86% of those who change jobs do so with a loan default on the balance, per a 2019 study.
3. Reduced contributions: Although some research suggests contributions remain relatively stable after taking a loan, a subset of borrowers (roughly 26% in some studies) do decrease their contribution rates to accommodate loan repayments, thus further hindering their accumulation of savings. This points to the notion that participants are living “on the edge” of their income and savings capacity with little cushion for contingencies.

Solutions for Plan Sponsors to Mitigate Risks

Plan sponsors must balance providing flexibility to employees with their fiduciary duty to promote the long-term success of the retirement plan. Here are strategies to mitigate the downsides of 401(k) loans:

• Establish emergency savings accounts (ESAs): Implementing SECURE 2.0 provisions for pension-linked emergency savings accounts allows employees to build a “rainy day” fund alongside their retirement contributions. This may reduce the need to borrow from retirement funds to pay for unexpected expenses.
• Implement loan waiting periods: Introducing a mandatory waiting period for new hires or limiting the number of loans a participant can have outstanding at once (e.g., limiting to one loan) can discourage routine borrowing.
• Encourage continued contributions: Design plans so that participants must continue to make elective contributions during the repayment of a loan. Some plan designs allow for automatic contributions to continue uninterrupted.
• Enhance financial wellness programs: The root cause of most loans is a lack of financial literacy and liquidity. Providing robust financial wellness tools, including education on budgeting, debt management, and the high cost of defaulting on a 401(k) loan, can help employees build resilience before they encounter a crisis.
• Add non-loan financial products: Offering employer-negotiated, low-interest emergency loans through a third party can prevent employees from tapping into their retirement plans.

Plan Sponsors Must Understand the Downside of Participant Loans

401(k) loans are a double-edged sword. While they offer necessary liquidity for employees facing financial hardship, the long-term cost to their retirement readiness is often high. By shifting the focus to holistic financial wellness and providing alternative emergency resources, plan sponsors can help employees bridge the gap between financial stability today and confidence tomorrow, keeping 401(k) plans vehicles for retirement rather than short-term funding sources.

Are Loans a Problem in Your Retirement Plan? Talk With Us.

At PlanPILOT, we’re creating the standard for client experience. Independent and impartial by design, we apply our skill to each facet of plan development, governance, and implementation to help you enjoy meaningful results. Our client partnerships are built on trust, communication, and responsibility—cornerstones of a healthy, prosperous relationship. We’re committed to providing objective guidance, informed innovation, and an integrated approach tailored to your unique objectives.

Our team of seasoned professionals upholds the highest professional standards, so every strategy we recommend aims to support both your organization and the participants who depend on it.

To learn more about how we can help with fiduciary oversight and improving the effectiveness of your benefits program, reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.

By Mark Olsen, Managing Director at PlanPILOT

Many plan sponsors are discovering that traditional benefit programs are no longer resonating with younger employees. Low retirement plan participation, rising turnover, and disengagement can signal a disconnect between what employers offer and what Generation Z actually needs.

As members of Gen Z (born between 1997 and 2012) enter the workforce, they bring different financial pressures, expectations, and digital habits. Many are grappling with student debt, a high cost of living, and a desire for flexibility and meaningful impact, prioritizing financial stability and comprehensive financial wellness from day one of their careers. For plan sponsors, attracting and retaining this emerging talent requires rethinking retirement plans and broader benefits through more personalized, technology-driven engagement that supports both immediate financial needs and long-term goals.

At PlanPILOT, we have long-espoused the necessity of customizing employee benefits to fit the ever-changing demographics of a company’s workforce. The emergence of Gen Z illustrates why this approach is necessary to maintain a productive and supportive environment for employees.

Understand the Gen Z Financial Landscape

Gen Zers are pragmatic and often financially conservative, largely due to watching their parents struggle with financial crises and entering the workforce during economic turbulence. They face significant challenges, including: 

• Student loan debt: Many enter the workforce with substantial debt, hindering their ability to save for retirement or emergencies.
• Cost-of-living pressures: High inflation and housing costs make living paycheck to paycheck a reality for many, with 28% reporting this status.
• Anxiety about the future: A significant number of Gen Zers worry they won’t be able to achieve milestones like homeownership or retire comfortably, with 60% claiming their needs are not being met. Many have been struggling to purchase their first home and have low confidence that Social Security will provide them any meaningful income in retirement.

To support them, plan sponsors must move beyond traditional retirement education to offer holistic financial wellness, including budgeting tools, emergency savings assistance, and debt management resources.

Modernize Retirement Plans: Automation and Flexibility

Gen Z is open to saving for their own retirement, but the program needs to be convenient and relevant to their lifestyle and communication tendencies, including:

• Automated solutions: Implementing automatic enrollment and automatic escalation helps overcome inertia, with past studies showing 88% of Gen Zers who were auto-enrolled started saving earlier, at least 6% of their pay.
• Roth options: Providing a Roth contribution option is crucial, as many young workers are currently in lower tax brackets and prefer tax-free income in retirement.
• Portability: Given their propensity to change jobs, ensuring retirement accounts are easily portable is a key attractor.
• Student loan support: Leveraging SECURE Act 2.0, sponsors can offer matching contributions to a 401(k) based on an employee’s student loan payments, a benefit highly valued by this demographic.

Digital-First Communication

As true digital natives, Gen Z expects communication that works on mobile devices and is as seamless as their daily social media use.

• Gamification: Turn retirement planning into a game, with badges or rewards for reaching milestones like setting up an account or completing financial education modules.
• Bite-sized content: Replace long, jargon-heavy documents with short videos, infographics, and interactive apps that provide instant, personalized insights.
• Peer influence and social media: Leverage social media platforms to deliver tips and highlight testimonials from peers, as 85% of Gen Z value peer-based recommendations.

Holistic Well-being: Beyond the 401(k)

To be effective, employee benefit programs should evolve with generational changes. Traditional benefit programs that your parents knew won’t work here. Gen Z views mental health, physical health, and financial health as interconnected. To engage them, plan sponsors should consider integrating these areas:

• Mental health support: Offering access to teletherapy, mental health apps, and dedicated “mental health days” is essential, as this generation is proactive in seeking support, especially among their peers and like-age professionals who understand their unique challenges and needs.
• Financial literacy: Offer education on basic finance topics like investing basics, budgeting, and building credit. 

Create a Supportive Culture

The support structure extends beyond financial tools to workplace culture.

• Flexibility and work-life balance: Remote/hybrid work and flexible hours are non-negotiable for many, and these arrangements support their overall well-being. Gen Zers are more willing to walk away from employment opportunities that don’t support these lifestyle needs.
• Purpose-driven work: Gen Z wants to work for companies that make a positive impact. Connecting their role to the company’s broader mission and community involvement fosters engagement.
• Mentorship and growth: With 94% of Gen Z employees citing career growth as important, mentorship programs and clear paths for advancement are critical for retention.

What This Means for Plan Sponsors

Supporting Gen Z’s entry into the workforce requires plan sponsors to act as partners in their overall financial journey. By providing personalized, tech-enabled, and flexible benefits—paired with a strong focus on mental health and financial education—employers can not only attract top Gen Z talent but also help them build a stable and prosperous future.

Maintaining a robust and effective employee benefit program is a continuous process, not a one-time event. With regular attention and review of their plan and whether it is meeting the expectations and needs of their workforce, plan sponsors can provide a high-quality benefit program to their employees that will improve morale, increase productivity, and reduce employee attrition. Seeking guidance from an experienced plan consultant can help plan sponsors navigate through these challenges and implement meaningful updates as needed.

Does Your Plan Support the Growing Gen Z Workforce?

At PlanPILOT, we’re creating the standard for client experience. Independent and impartial by design, we apply our skill to each facet of plan development, governance, and implementation to help you enjoy meaningful results. Our client partnerships are built on trust, communication, and responsibility—cornerstones of a healthy, prosperous relationship. We’re committed to providing objective guidance, informed innovation, and an integrated approach tailored to your unique objectives.

Our team of seasoned professionals upholds the highest professional standards, so every strategy we recommend aims to support both your organization and the participants who depend on it.

Reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.

By Mark Olsen, Managing Director at PlanPILOT

Fulfilling fiduciary duties is the cornerstone of responsible retirement plan sponsorship. Under the Employee Retirement Income Security Act (ERISA), plan sponsors are legally obligated to act in the best interests of participants and their beneficiaries. 

Failure to meet these obligations can lead to personal and plan sponsor liability, significant penalties, and costly litigation. With regulatory focus increasing, particularly concerning fee transparency and investment performance, a proactive, documented approach is essential.

At PlanPILOT, we understand the depth of the responsibilities plan sponsors face as well as the complications that can arise due to changing regulations and legislation governing retirement plans. In our view, regular review and upgrades go a long way in maintaining a sound and successful retirement plan.

Here is a practical guide for plan sponsors on raising their standard for fulfilling fiduciary duties in 2026.

Fiduciary Duties Checklist

Plan sponsors must adhere to five core fiduciary principles. These are the core of every quality design of policies and procedures

• Act solely in the interest of participants: The primary purpose must be providing benefits and paying reasonable expenses.
• Prudent person standard: Act with the care, skill, prudence, and diligence of a “prudent expert.”
• Follow plan documents: Operate the plan according to its legal documents, unless they conflict with ERISA.
• Diversify investments: Minimize the risk of large losses.
• Pay reasonable expenses: Confirm fees paid for services are necessary and reasonable. 

Establishing and Running a Fiduciary Committee

Creating a formal committee is a best practice for managing fiduciary responsibility, allowing for collective decision-making and proficiency. 

• Composition: Committees should typically have three to seven members, including representatives from finance, human resources, or leadership.
• Charter: Adopt a formal committee charter defining its purpose, authority, and responsibilities.
• Regular meetings: Meet quarterly, or at least semi-annually, to review investment performance, fees, and administrative tasks.
• Training: Conduct regular training for committee members to understand their duties and stay updated on regulatory changes, such as SECURE 2.0. 

Documentation Best Practices

Because prudence is evaluated by the process rather than just the outcome, documentation is your best defense in an audit. 

• Meeting minutes: Maintain detailed minutes for every meeting. Document what was discussed, data reviewed, decisions made, and the rationale behind them.
• Investment policy statement (IPS): Establish an IPS that outlines investment strategy, objectives, and benchmarks for monitoring performance.
• Service provider selection: Document the process for hiring, evaluating, and monitoring service providers, including RFP processes and fee benchmarking.
• Secure record retention: Keep records of all committee meetings, participant communications, and fee disclosures for at least six years. 

Avoiding Common Fiduciary Pitfalls

Even well-meaning sponsors can fall into traps. Be aware of these common mistakes we often see in retirement plans:

• “Set it and forget it” investments: Failing to review the investment menu regularly, allowing underperforming or high-cost funds to remain
• Failing to benchmark fees: Not comparing plan fees (both direct and indirect/revenue sharing) to industry standards, resulting in overpayment
• Delayed contribution deposits: Failing to deposit employee deferrals on the earliest date they can reasonably be segregated from general assets; this is a high-risk area.
• Inadequate monitoring: Assuming that hiring a third-party administrator (TPA) or advisor removes all responsibility; sponsors must monitor the monitors.
• Ignoring operational defects: Failing to correct errors, such as missing a deadline for non-discrimination testing or ignoring participant complaints

Key 2026 Considerations

Taking steps now to review your plan can go a long way in heading off potential issues later in the year.

• SECURE 2.0 implementation: Verify your plan is updated to comply with SECURE 2.0 provisions, which have introduced new administrative, eligibility, and reporting requirements. Take note of changes from the One Big Beautiful Bill Act (OBBBA) legislation last year, one of which was the tax treatment of catch-up contributions.
• Data security: With the rise of cyber threats, fiduciaries are increasingly responsible for ensuring service providers have robust cybersecurity measures in place to protect participant data.
• Proactive oversight: As the regulatory environment becomes more complex, consider engaging an independent fiduciary professional to help with benchmarking and compliance reviews. 

Summary

Fiduciary duty is a continuous process, not a one-time event. By establishing a dedicated committee, thoroughly documenting decisions, and proactively monitoring fees and performance, plan sponsors can minimize risk and provide a high-quality retirement benefit to their employees. Seeking guidance from an experienced plan consultant can help plan sponsors navigate changes to regulations and requirements and streamline their oversight responsibilities.

How Robust Is Your Plan Oversight?

At PlanPILOT, we’re creating the standard for client experience. Independent and impartial by design, we apply our skill to each facet of plan development, governance, and implementation to help you enjoy meaningful results. Our client partnerships are built on trust, communication, and responsibility—cornerstones of a healthy, prosperous relationship. We’re committed to providing objective guidance, informed innovation, and an integrated approach tailored to your unique objectives.

Our team of seasoned professionals upholds the highest professional standards, so every strategy we recommend aims to support both your organization and the participants who depend on it.

Reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.

By Mark Olsen, Managing Director at PlanPILOT

While plan committees normally have the best of intentions in administering the employer retirement plan, common missteps often arise from a lack of proper design and full understanding about the requirements of a successful and well-functioning program. These include the lack of formal structure, inadequate documentation of decisions, and insufficient oversight of plan operations and service providers. 

In our long experience at PlanPILOT, adopting best practices for governance, documentation, and expert consultation can significantly mitigate fiduciary risk for plan sponsors, streamline administration and oversight processes, and improve plan health for participants.

Let’s explore what may be overlooked and steps committees can take to correct these issues.

Common Missteps

• Failure to formalize the committee: Operating without a formal committee structure or charter leads to confusion over roles, responsibilities, and decision-making authority.
• Lack of fiduciary training: Committee members may not fully understand their personal fiduciary responsibilities and potential liabilities under the Employee Retirement Income Security Act (ERISA), assuming third-party providers handle all risk.
• Inadequate documentation: Failing to maintain detailed meeting minutes that record discussions, decisions, and the rationale behind them leaves the committee vulnerable in audits or lawsuits, as it cannot demonstrate a “prudent process.”
• Ignoring plan documents: Operating the plan inconsistently with the terms outlined in the official plan document (e.g., incorrect compensation definitions, not following loan rules) is a common operational failure.
• Infrequent or nonexistent meetings: Irregular meeting schedules or “committee collapse” indicates a lack of commitment and makes it difficult to conduct regular oversight and address issues promptly.
• “Set it and forget it” mentality: Neglecting to regularly benchmark fees, review investment performance, or stay updated on legislative changes (like the SECURE Act) can result in excessive costs or underperforming options for participants.
• Failure to use experts wisely: Not leveraging external experts (advisors, legal counsel, actuaries, plan consultants) for specialized guidance, or allowing internal current committee members to control the entire process (e.g., running their own RFP), can lead to conflicts of interest or missed opportunities for improvement. 

Best Practices for Improvement

• Establish a Formal Committee and Charter
  • Formalize the committee’s existence, purpose, size (ideally 3-7 members), and the specific roles/titles of members (e.g., CFO, HR Director) in a written committee charter or bylaws.
  • Ensure the charter defines authorities, operational procedures, and a process for removing inactive members.
• Prioritize Fiduciary Education and Training
  • Provide initial orientation and ongoing, regular training (perhaps quarterly) to confirm all members understand their fiduciary duties and stay abreast of regulatory changes.
  • Consider obtaining fiduciary liability insurance for an added layer of protection.
• Implement Rigorous Documentation Procedures
  • Designate a secretary to take comprehensive meeting minutes to document all topics discussed, data reviewed (e.g., benchmarking reports), decisions made, and the reasoning for those decisions.
  • Retain all supporting documentation and records consistently.
• Adopt and Follow Key Documents
  • Create and adhere to a well-defined Investment Policy Statement (IPS) that outlines investment objectives, risk tolerance, and performance benchmarks.
  • Verify all plan operations align with the official plan document; conduct annual reviews to confirm compliance.
• Establish Regular, Structured Oversight
  • Schedule meetings at least quarterly using a consistent agenda to ensure key areas like investment monitoring, fee reviews, and compliance updates are covered.
  • Run test files and perform quarterly spot-checks on payroll data to prevent common errors like late deferral deposits or incorrect eligibility/compensation calculations.
• Leverage Expert Consultants and Providers
  • Engage external, credentialed experts (e.g., a 3(21) or 3(38) investment advisor) to assist with complex tasks and provide objective insights.
  • Conduct a full Request for Proposal (RFP) process for recordkeeping and other services every 3-5 years to ensure fees remain competitive and services are adequate.
• Promote Transparency and Diversity
  • Verify the committee’s composition is diverse (across functions, levels, and demographics) to bring different perspectives and better represent the participant base, depending upon company objectives and employee demographics.
  • Implement clear processes for communication with the board of directors and plan participants. 

How to Determine the Health of Your Plan Committee

Waiting until underlying issues become readily apparent and harmful is usually a recipe for bigger problems down the road, especially if your plan and committee functions haven’t been assessed in a long time. ERISA and IRS regulations change often, so keeping your plan up to date is essential to avoid violating fiduciary duties and maintaining effective plan governance. Scheduling a review with an experienced plan consultant could reveal important gaps in plan design or functionality.

How Well Does Your Plan Committee Function?

No one likes to discover issues with plan oversight, but knowing your plan and plan committee is well-designed, compliant with ERISA regulations, and operating smoothly can provide confidence and assurance that the result of a DOL or ERISA audit will likely be a “No Violation” closing letter. 

At PlanPILOT, we’re creating the standard for client experience. Independent and impartial by design, we apply our skill to each facet of plan development, governance, and implementation to help you enjoy meaningful results. Our client partnerships are built on trust, communication, and responsibility—cornerstones of a healthy, prosperous relationship. We’re committed to providing objective guidance, informed innovation, and an integrated approach tailored to your unique objectives.

Our team of seasoned professionals upholds the highest professional standards, so every strategy we recommend aims to support both your organization and the participants who depend on it.

Reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.

By Mark Olsen, Managing Director at PlanPILOT

For retirement and benefit plan sponsors, a Department of Labor (DOL) audit is normally not a welcomed event. Audits, though, are designed to make sure plans such as 401(k)s, 403(b)s, and pension programs are administered properly and comply with ERISA and tax rules. 

Under ERISA, the DOL enforces fiduciary and reporting standards. Every covered plan must file an annual Form 5500, and plans of 100 or more participants must include an independent audit as part of their policies and procedures.

At PlanPILOT, “plan governance” is a core service we deliver to our plan sponsor clients. In our view, having a well-designed program with efficient documentation procedures and fiduciary training can help mitigate and avoid issues with ERISA regulations and auditors. 

Let’s take a look at how sponsors can plan and prepare for the inevitable audit examination.

Prepare to Succeed 

Plan sponsors should first establish robust internal controls and proactively organize comprehensive documentation. The best approach is to maintain compliance with ERISA regulations ahead of time and have a systematic, audit-ready recordkeeping system in place. 

Internal Preparation

Effective internal preparation focuses on ongoing compliance and organization, not just a last-minute scramble. 

• Designate a point of contact: Appoint one primary internal contact to manage all communications and document requests.
• Engage legal counsel and advisors: Consider engaging experienced ERISA legal counsel and experienced plan consultants. Consultants can assist in documentation preparation and advise on audit procedures and responses while attorneys can provide guidance, representation, and help maintain attorney-client privilege.
• Conduct self-audits: Periodically review plan operations against plan documents and regulatory requirements to identify and correct issues proactively. Utilize plan consultants and use periodic “mock audits” to test the program’s procedures and documentation.
• Establish strong internal controls: Implement and document clear policies and procedures for all plan activities, including eligibility, contributions, distributions, and loans.
• Document fiduciary meetings: Maintain detailed minutes of all board and/or administrative committee meetings where plan decisions (e.g., investment choices, fee reviews, service provider selection) are discussed and approved.
• Ensure proper bonding: Annually verify and document that all individuals who handle plan funds or property are covered by an adequate ERISA fidelity bond (typically at least 10% of the funds handled, with a minimum of $1,000 and generally a maximum of $500,000 unless the plan holds employer securities).
• Communicate with service providers: Confirm that third-party administrators (TPAs), recordkeepers, and other vendors can readily provide their records or a SOC 1 report upon request. 

Keep Essential Documentation

The DOL typically sends an initial letter outlining the required documentation. Having these items organized and readily accessible helps streamline the process. 

• Plan Legal Documents
  • Executed Plan Document and all amendments
  • Summary Plan Description (SPD) and any Summaries of Material Modification (SMMs)
  • Current IRS determination or opinion letter
  • Trust Agreement
• Financial and Operational Records
  • Prior years’ Form 5500 filings, including all associated schedules (e.g., Schedule H/I, Schedule A, Schedule C) and the independent auditor’s report (if applicable)
  • Plan financial statements, general ledgers, account statements, and ledgers
  • Payroll records and employee census data (list of all employees, including hire dates, compensation, and demographics)
  • Detailed records of contributions remitted to the trust, by pay period, with proof of timely deposit
  • Documentation of participant activity (enrollment forms, loan agreements, distribution paperwork)
• Service Provider and Compliance Documentation

• • All contracts and service agreements with plan providers (TPAs, investment managers, etc.), including fee schedules and compensation details
  • The plan’s Investment Policy Statement (IPS) and documentation of adherence to a prudent process for selecting and monitoring investments
  • Results of non-discrimination testing (ADP/ACP, top-heavy, coverage)
  • Proof of the plan’s fidelity bond and fiduciary liability insurance policies 

By proactively preparing this documentation and establishing clear internal procedures, plan sponsors can navigate a DOL audit efficiently and demonstrate a strong commitment to their fiduciary responsibilities.

When the Audit Notification Arrives

An audit of your retirement plan typically involves a thorough, multi-stage review of your plan’s compliance with the ERISA regulations, focusing heavily on documentation, fiduciary practices, and participant interactions. The process can take weeks to several months, depending on the complexity of the plan and any issues found. 

The Audit Process: Step-by-Step

1. Initial Contact: You will receive a formal letter from the DOL’s Employee Benefits Security Administration (EBSA) notifying you of the audit and requesting a comprehensive list of documents to be submitted by a certain date.
2. Document Submission & Review: You must gather and provide extensive documentation, including plan documents and amendments, Form 5500 filings, payroll records, participant communications (e.g., Summary Plan Descriptions), and records of fiduciary meetings. An auditor will review these records and may request additional information.
3. On-Site or Virtual Interviews: The investigator may conduct interviews with plan fiduciaries, administrators, and potentially even participant-employees to verify that actual operations match the plan’s written documents and legal requirements.
4. Findings & Resolution
   1. No Violations: You will receive a formal closing letter stating the investigation is complete.
   2. Violations Found: EBSA will issue a letter detailing the violations and asking plan officials to voluntarily correct them. This may involve using programs like the Voluntary Fiduciary Correction Program (VFCP) to correct certain fiduciary breaches.
5. Penalties and Closing: After corrections are made and any penalties are paid, EBSA will issue a final closing letter. If plan sponsors refuse to cooperate or if the violations are severe (e.g., fraud), the case can be referred for litigation. 

Key Areas of Focus

Auditors will primarily focus on:

• Timeliness of contributions: Ensuring employee deferrals and loan repayments are deposited into the plan’s trust as soon as administratively possible (but no later than the 15th business day of the following month)
• Fiduciary oversight: Verifying plan fiduciaries are acting in the best interest of participants by prudently selecting and monitoring investments, ensuring reasonable fees, and documenting all decisions
• Compliance with plan documents: Confirming that the plan’s operations (e.g., eligibility, vesting, distributions) strictly adhere to the terms outlined in the official plan document
• Reporting and disclosure: Checking that all required filings (Form 5500) were complete and timely, and all required participant notices were distributed 

What to Do Initially

Your best initial response would be to cooperate promptly: respond to information requests quickly and professionally. As mentioned, designate a single point of contact to streamline communication with the investigator. Consult with your experienced legal counsel and plan consultant to help navigate the process.

Are You Prepared for a Visit From the DOL?

No one likes to learn they have been selected for a DOL audit, but knowing your plan is well-designed, compliant with ERISA regulations, and operating smoothly can provide confidence and assurance that the result of the audit will likely be a “No Violation” closing letter. 

At PlanPILOT, we’re creating the standard for client experience. Independent and impartial by design, we apply our skill to every facet of plan development, governance, and implementation to help you enjoy meaningful results. Our client partnerships are built on trust, communication, and responsibility—cornerstones of a healthy, prosperous relationship. We’re committed to providing objective guidance, informed innovation, and an integrated approach tailored to your unique objectives.

Our team of seasoned professionals upholds the highest professional standards, so every strategy we recommend aims to support both your organization and the participants who depend on it.

Reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.