How To Survive A DOL Audit

One of our most requested issues by our clients is help with a Department of Labor audit, and it’s easy to see why. The fines for submitting documents incorrectly or without critical information can easily create an add up to hundreds of thousands of dollars, and that’s without taking into account the lost time from administrators and lawyers fees.

This article will make you as prepared as you can be without hiring a lawyer to go over your accounting and documentation. Don’t worry though, it’s not complicated, it just requires some planning and a small amount of organization.

A Department of Labor (DOL) audit is essentially a check that certain documents are kept for the appropriate amount of time, certain documents are sent to appropriate parties, and that the numbers add up - checking that there isn’t embezzlement or forged records.

The key to surviving the Audit and making it as quick as possible is having certain records easily found, copied (physically and electronically), and shown to the auditor. Before that process though, I’ll tell you how to keep these time consuming and expensive audits to a minimum.

These few things trigger most DOL Audits - Is your company committing any of them?

We’ve noticed a few mistakes that employers have made over the years that trigger audits. We’ve put together the most common reasons here:

1. Respond in a timely fashion to all participant and beneficiary questions. (Complaints by welfare benefit plan participants to the Employee Benefits Security Administration (EBSA) are the most common cause we’ve seen for triggering an audit)

2. Maintain all documents related to welfare benefit plans in one location. Designate one person at the company to take charge of the welfare benefit plans.

3. Make sure all ERISA-covered benefit plans comply with relevant laws such as Health Care Reform and HIPAA. Distribute Summary Plan Descriptions (SPDs), with accompanying benefit plan component documents such as benefits booklets and certificates of insurance, to all plan participants within 90 days of becoming covered under the plan.

4. Respond to participant and beneficiary requests for an SPD and Plan Document within 30 days after a written request or risk a penalty of $110 per day, per participant or beneficiary for each violation.

5. Inform participants of any material change to the plan either through a revised SPD or in a separate document, called a Summary of Material Modifications (SMM).

6 Distribute required notices, such as COBRA and SBC notices, within required timeframes.

7. Administer all ERISA-covered benefit plans, including group health plans and other welfare plans, in accordance with a written Plan Document.

8. If Form 5500 must be filed, be sure to complete all components accurately and file before the required deadline.

9. Establish written procedures for disputes and claims resolution.

Please Note: This list is for general reference purposes only and is not all-inclusive. The information is subject to change based on new requirements and amendments to the law.

1 Week of these DOL fines adds up to over $100,000 - Here’s how to avoid them.

There are thousands of pages of records that might be requested so organization is the name of the game. The way to know if you are organized enough is to “Self-Audit” once a year.

Simply print out this checklist and see how long it takes to gather each set of documents. This will let you say to the auditor with confidence when they will get what they’re asking for. Giving people more time is a normal practice for auditors, but only if you they thin you aren’t just putting them off. Download the DOL Audit Checklist here.

How DOL Audits Are Resolved

​A range of outcomes can result from a DOL audit of a welfare benefit plan:

No Violations Found If no violations are found, the employer/plan sponsor or plan administrator will be informed of the results by letter.

Minimal Violations Found Violations in areas such as reporting and disclosure, or improper administrative practices of a de minimis nature, generally will be resolved as long as corrective steps were taken and are documented in the case file. Generally, if all documents are provided to the DOL as requested and all changes are made to the documentation per the DOL's direction, and are submitted to the DOL in a timely manner, no further action will be taken.

Other Violations Found Examples of violations found during a DOL audit of a welfare benefit plan include: • Failure to properly select and monitor service providers; • Taking any adverse action against an individual for exercising his or her rights under the plan (e.g., being fired or otherwise discriminated against); or • Failure to comply with ERISA Part 7, including the ACA.

Criminal Violations Found The EBSA also conducts investigations of criminal violations regarding welfare benefit plans such as embezzlement, kickbacks, and false statements under Title 18 of the U.S. Criminal Code. Prosecution of these criminal violations is handled by U.S. Attorneys' offices.

If an investigation reveals an ERISA violation, the DOL takes action to obtain correction of the violation. It is the policy of the DOL to promote voluntary compliance whenever possible so it is highly unlikely that they will take you straight to court.

Making corrections to the plan includes: Ensuring that claims are properly processed and paid; and Paying penalty amounts (when applicable). If corrective actions are taken, the DOL rarely brings a civil lawsuit.

Best Wishes,
Charles Best
Senior Broker at BRbenefits.com