9 tips for employee benefits compliance

9 tips for employee benefits compliance

9 tips for employee benefits compliance: Employers are not only being faced with the huge burden of the Affordable Care Act, but they are starting to see DOL Audits Increasing for all business sizes with employee benefits.  The businesses that thought they didn’t have to worry about being audited are scrambling around to meet requirements from a DOL Investigator.  Health Plan Auditing will continue to grow in the next few years.  The transition time is over.  These steps will help you to be ready for a DOL Audit.  It is better to be safe then sorry. Get Your Employee Benefits Right or Pay Up 

1. Define It

So let’s get some terms out of the way. 

*ERISA or Employee Retirement Income Security Act is a federal law that sets minimum standards for most voluntarily established pension and all health plans in private industry to provide protection for individuals in these plans.

*EBSA or Employee Benefits Security Administration is the Department of Labor’s (DOL) enforcement body.  They perform audits for the DOL on ERISA required regulations.  The DOL has broad authority to investigate/audit an employer’s benefit plans’ compliance with ERISA along with other ERISA requirements.

 *Department of Labor (DOL) audits center on ERISA’s fiduciary responsibilities and reporting/disclosure requirement violations.  Also, the audits concentrate on benefit plan compliance with ERISA’s protections for participants in the plan. 

A DOL audit conducted by the EBSA can take so much time away from Managers and/or HR department’s normal workload.  These audits not only require specific documents and large amounts of information, they also require their request to be met in a very short period of time.  This can also require staff to work extra hours.  And not to mention the stress involved with the deadlines and required accuracy of “every t being crossed and every i dotted.”  All of these headaches can truly affect a business’ daily culture for days, weeks and even months.

2. Increase in Audits

Since ERISA’s enactment in 1974, benefit plan audits have been focused on the enforcement of retirement plan requirements.  So why are we discussing this topic after all of these years? Good question.  Since the Affordable Care Act has ERISA regulations, the EBSA has been given authority (under the DOL) to enforce ACA requirements.  Enforcing is not all that they are doing.  They are also trying to meet expectations to pay for ACA through National Enforcement.  The DOL announced that they intend to audit all employers by 2018.  These audits will fill the funding gap created from the Affordable Care Act (ACA).   In their October 2015 report the Congressional Budget Office projected that “the IRS will collect $130 billion in penalties from employers to fund the ACA over the next decade.”  The audits are not only affecting large businesses, but they are now moving to auditing smaller businesses.  More details below for smaller businesses.  In case you are wondering: The EBSA has requested over a $24.7 million increase in their 2017 budget for “necessary expenses.”   2016:  $181,000,000 AND 2017:  $205,761,000

3. Triggers Targets

Triggers can be anything from employee complaints to making mistakes on 5500 filings.  Here is a list of some other possible triggers.

    • Employee/Participant compliant: Oftentimes when employees do not receive a timely response regarding questions about their health plan, they will file a complaint.
    • Incorrect or not filing 5500 Form
    • Grandfather Status – companies must retain information verifying their status and notices.
    • Rescissions – Retroactive coverage takeaways – If a plan rescinded coverage, a list of affected participants and written notices must be given within 30 days of prior notice.
    • Age 26 Coverage – provide sample of the notice including enrollment rights for dependent children up to 26 years of age since 9/23/10.
    • Waiting Periods – cannot delay past 90 days from hire.
    • There are also IRS triggers: ACA Reporting & Hours Tracked. Investigations are often coordinated between federal agencies (and sometimes state agencies), with one agency making other agencies aware of violations within their jurisdictions. 
  • Targets: As stated earlier, large businesses are not the only ones getting audited.   Small group plans should note that the DOL knows that they usually do not have Human Resources Professionals onsite.  The DOL has stated that they are aware that smaller groups often have more mistakes.  This can be an easy target for an investigator.  For the ACA, Non Grandfathered status is not only a trigger, but Non-Grandfathered status allows employers to keep the same cost.  Agencies are not fond of these grandfathered plans, and they will dig deeper to find violations from these plans.

Affordable Care Act: Are You Ready?

4. Appointment or Audit Letter from EBSA DOL

These DOL/EBSA Audit Letters have a very cold, formal tone. The audit letter can be either limited or full scale investigations.  Employers are told to call the EBSA office if here are any questions or clarity is needed.  The Letter will contain a timeframe requiring the business to submit documents to the EBSA or face fines/penalties.  The timeframe is usually 7 to 10 calendar days depending on the circumstances.   (Businesses can request extensions, but that usually only buys the business – at the most – 2 weeks.)  The letter will also request plan documents.  Requested Documents also differ depending on the company’s size, plans, etc.  Here are some of the possible requested documents that the company will have to provide:

  • Exchange Notices, Annual CHIP Notices, Women’s Health & Cancer Rights Notice
  • Newborns’ and Mothers’ Heath Protection Act Notice (can be in SPD)
  • Summary Plan Descriptions (SPD) & updates/summaries of material modifications (SMMs)
  • Summary annual report (if required)
  • Summary of benefits and a coverage explanation (SBC)
  • Form 5500 filings and documentation (if over 100 employees)
  • Plan Documents
  • Records of contributions and benefit payments
  • Plan Provisions on Lifetime and annual limits and notice of enrollment requirements
  • Age 26 Coverage Notice for plans with dependent coverage
  • For Grandfathered plans: Notice and documents that verify status
  • For Non-Grandfathered plans: Notice of Patient Protection and selection of providers & information on the plan’s claims and appeals procedures
  • Any Rescission Documentation
  • Materials regarding wellness programs and disease management under the plan
  • Insurance Company Contracts and Plan service providers & contracts
  • Open Enrollment materials and cost data
  • Also request information concerning (but not limited to) COBRA, HIPAA, Genetic Information Nondiscrimination Act; Mental Health Parity Act; and Mental Health Parity and Addiction Equity Act

NOTE:  The letter may not only request your normal documents such as the SPDs, plan docs, amendments, 5500filings; but they may request email correspondence, notices, supporting data and record books.

Facts Understood Now Slides for COBRA      AND      Facts Understood Now Slides for HIPAA

5. Response

Responding to the letter properly is very important. Late or insufficient responses can (and probably will) trigger additional request, interviews, onsite visits and other enforcement actions.  If the request is for 10 days; within 10 days the business must submit the requested plan related materials and documents on time.  The company should also establish who will be the point person for this audit.  It can be an HR Manager, CFO, Plan Administrator.  It all depends on the company’s structure.  Contacting brokers, TPAs and even legal counsel is always a great idea.  After the point person have read over and understands all requirements of the letter, they must be sure to gather copies of requested documents to submit.  If any issues arise, be sure to explain the situation and why the information is not available or correct. The staff should be prepared for an onsite interview and visit.  This may or may not take place, but it is very important to consider. 

6. Interviews and Reviews

The investigator interviews employees who make decisions about the plan and its operation.  An auditor may conduct an onsite review based upon the submitted information. Their findings will depend upon what level the investigation will progress. There are basically three levels: Limited Review (no violations found in the docs received); Investigative Review (violations discovered in docs); or Criminal Investigation.

7. Making Corrections and Closing Audit

If the findings result in violations, a Voluntary Compliance Letter will be sent to the business.  It will detail the violations and provide a specific timetable for the business to make corrections.   The final letter is the Closing Letter.  The Closing Letter officially closes the audit or investigation.   Please note that the audit/investigation is not over until the business receives this letter.

8. Penalties

Not only does a business lose time, energy and focus because of an audit; but they may also face penalties.  According to DOL estimates, three out of four plans they audit have an ERISA violation, and about 70 percent of audits with violations result in monetary fines. Some infractions can cost you up to $100/day for every employee affected by a violation until the violation is corrected. The penalty for late delivery of SPD can be as high as $110/day per plan. And late filing of Form 5500 can cost you $1,100/day. Also, EBSA applies 20% civil penalties on fiduciary regulations and can file civil suits. For more serious cases, criminal action can be taken.

9. PREPARE with these tips

In order to avoid investigators lingering around a place of business, Managers and/or HR should be prepared for a possible audit from the DOL at any time.  Conducting a self-audit is my first recommendation.  Gathering plan documents and required notices regarding ERISA can save so much time, stress and frustration.  When a business is prepared, they are equipped to provide a quick response, reducing the time of the audit.  Having organized procedures and processes written out is one way to ensure compliance.  Also document all files, notices, plans…everything that you can to fulfill all requirements of ERISA.   Best practices are to retain documents for 7 years, but plan documents should be retained indefinitely.  It is also important to protect yourself with insurance (fidelity bonds as required under ERISA, fiduciary liability insurance, employee benefit plan administration liability insurance, etc.).  Since a business has no idea when they can be faced with an audit, the business should do everything in its power to prepare for an audit.

Extra Note:  Two programs can help businesses bring their 5500 filings into compliance before an audit is conducted:  They are the Delinquent Filer Voluntary Compliance Program and the Voluntary Fiduciary Corrections Program. 9 tips for employee benefits compliance

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