Department of Labor audits of employee benefit plans are on the rise and experts agree benefit advisers should be preparing their employer clients now for that impending knock on the door.

The Affordable Care Act’s reporting requirements have brought increased scrutiny of employer-sponsored health care plans and the government is largely expected to respond to anomalies or red flags with an employer audit. But industry experts agree the government won’t limit its inquiries to ACA-related information only, and employers should be prepared for full-blown audits of health care plans.

“The opportunity for a DOL audit has greatly increased with the focus on compliance with the ACA; and when they come looking they will not look for just one thing,” says Mark Lam, vice president of employee benefits compliance for Schaumburg, Ill.-based insurance brokerage Assurance. “They’re going to look at everything. So whatever it is that kicks off the audit, it opens the door to review the entire plan.”

See related: 10 scary mistakes that could trigger a 401(k) plan audit

Many employers, he adds, are not prepared for a DOL audit, which is why he recommends they work with their advisers and legal counsel to conduct a mock audit to ensure, amongst other things, that all documents related to the plan are up-to-date and compliant.

Erin Turley, a partner in the benefits, ESOPs and executive compensation group of law firm K&L Gates, agrees, adding, “We recommend self-audit every few years to ensure both documentary and operational compliance.”

The self-audit, she says, can be solely internal or can be completed by ERISA counsel for the employer to identify areas of potential exposure and/or non-compliance. 

“It also provides a good outline of the compliance areas where the employer should be focused,” she adds.

The DOL has the authority to audit for compliance with several laws, including the ACA, HIPAA and the Mental Health Parity and Addiction Equity Act, says Turley. They also have the authority to audit for minimum loss ratio rebates and PECORI fees, she adds.

Document compliance

Lam suggests employers work with their advisers and their ERISA attorneys to prepare a binder of documents typically requested by the DOL during an audit, including the plan document.

“The very first thing the auditor will want to review is the employer’s plan document,” says Lam. “It’s the No. 1 thing, because it governs everything. It sets the rules for the plan.”

Other documents the DOL will likely request to see include summary plan descriptions and summary material modifications.

Turley says they will likely ask to review employer notices, including COBRA notices, HIPAA notices and summary of benefits coverage, etc. The DOL will also audit for disclosure compliance, including Form 5500 reports, summary annual reports, copies of insurance company invoices, etc.

As it audits for compliance with the ACA, the DOL will also ask to review an employer’s enrollment notice for dependents up to age 26, lifetime limit notice, copies of choice of provider notices and a list of employees who have received notices, etc.

See related: ACA reporting requirements are around the corner: Are you ready?

“The best defense is knowledge,” says Turley, “Know the rules and know that you are complying with the rules.”

If, during a self-audit areas of concern are identified, Turley says they can then be addressed and/or corrected through DOL correction programs such as the Voluntary Fiduciary Correction Program and the Delinquent Filer Voluntary Compliance Program.

“These programs allow the employer to self-report areas of non-compliance and in exchange for self-reporting and correction, receive clearance from the DOL on a go forward basis for a significantly reduced penalty assessment,” says Turley.

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