Few letters make a business owner more nervous than an audit notice. When it comes from the U.S. Department of Labor or the IRS and concerns your employee benefit plans, the stakes can feel especially high.

Benefits compliance involves a long list of federal rules, and many employers aren’t sure whether they’re meeting all of them.

The good news is that an audit doesn’t have to be a crisis. Employers who keep organized records and review their compliance regularly are far better positioned to respond quickly and confidently. Here’s how to prepare.

Who Conducts Benefits Audits?

Several agencies may review your employee benefit plans:

The Department of Labor (DOL), through its Employee Benefits Security Administration, enforces ERISA requirements for health and retirement plans.
The IRS reviews tax-qualified retirement plans, cafeteria plans, and Affordable Care Act reporting.
The Department of Health and Human Services (HHS) oversees HIPAA privacy and security rules for health plans.

Each agency focuses on different requirements, but they often overlap.

What Triggers an Audit?

Audits can be random, but certain red flags increase the likelihood of a review:

Employee complaints to the DOL about denied claims or missing documents
Late, missing, or inconsistent Form 5500 filings
Late deposits of employee 401(k) contributions
Errors in ACA reporting on Forms 1094-C and 1095-C
Discrepancies between plan documents and how the plan actually operates

Avoiding these issues won’t guarantee you’re never audited, but it significantly lowers your risk.

Documents You Should Have Ready

Auditors typically request documentation for each plan year under review. Make sure you can quickly produce:

Plan documents and all amendments
Summary Plan Descriptions (SPDs) and Summaries of Material Modifications
Summaries of Benefits and Coverage (SBCs)
Form 5500 filings, if required, with any attachments
Section 125 cafeteria plan document
COBRA notices and proof of distribution
Required annual notices, such as CHIP, Medicare Part D, and WHCRA
Nondiscrimination testing results
Mental health parity documentation
HIPAA privacy policies and business associate agreements
ACA reporting forms
Records of fiduciary decisions, such as meeting notes and vendor reviews

If you can’t locate a document, that’s a signal to address the gap now, before an auditor asks.

Steps to Prepare Before an Audit Happens

Conduct a Self-Audit

Review each plan against current requirements at least once a year. Compare your written plan documents to how the plan actually works in practice.

Assign Clear Responsibility

Make sure someone is accountable for each compliance task, from filing deadlines to notice distribution. Gaps often occur when responsibilities fall between HR, payroll, and outside vendors.

Centralize Your Records

Store plan documents, notices, filings, and fiduciary records in one secure, organized location. Retain records for at least six years, consistent with ERISA requirements.

Keep a Compliance Calendar

Many requirements recur on a fixed schedule: annual notices before open enrollment, Form 5500 filings, ACA reporting, and nondiscrimination testing. A shared calendar with deadlines and owners turns a long list of rules into a manageable routine and makes it easy to show an auditor that your process is consistent.

Correct Mistakes Proactively

Government correction programs, such as the DOL’s Delinquent Filer Voluntary Compliance Program for late Form 5500s, often reduce penalties for employers who fix errors before an audit.

What to Do If You Receive an Audit Notice

Don’t panic, and don’t ignore it. Read the notice carefully, note the deadlines, and contact your benefits advisor and legal counsel right away. Respond within the requested timeframe and provide only the documents requested. A calm, organized response sets the tone for the entire review.

Frequently Asked Questions

How long should I keep benefits plan records? ERISA generally requires employers to retain plan records for at least six years.

Can small employers be audited? Yes. Businesses of any size that sponsor benefit plans can be selected for review.

What’s the most common audit finding? Missing or outdated plan documents and notices are among the most frequent issues.

How Beckham Ellis Can Help

Beckham Ellis Insurance Group helps employers in Charleston, Mount Pleasant, Greenville, and St. Simons Island stay organized and audit-ready. Our team can review your plan documents, identify compliance gaps, and help you build a calendar of required notices and filings so nothing slips through the cracks.

Contact Beckham Ellis to schedule a compliance review before an auditor does it for you.

This article is intended for general informational purposes and is not legal or tax advice.