Health Plan DOL Audits on the Rise

August 5th, 2014 by Laura Noonan

Recently reported on Employee Benefit Adviser that the DOL is aggressively pursuing 1,000’s of health plan administrators to determine if they Plan is compliant with Federal law.

Some of the documents reported to be of specific interest include the following:

  • Summary Plan Descriptions
  • Plan Documents
  • 5500 Filings
  • Listing of all service providers
  • HIPAA Certificates
  • Notice of Special Open Enrollment Rights
  • Mandatory employee notices
  • Insurance contracts

For one of our clients that was faced with a burdensome audit of all of their administrative documents, it required our account management team to assemble two, three inch binders of details. In the end, our client passed the audit without any findings (and certainly no penalties); however, it is without question that these audits take a deep dive into all aspects of the plan.

Why is the Federal Government allocating resources to place employer administration of a health plan under such a microscope?

Some would speculate that revenue that is necessary to pay for health care reform will be (partially) the result of extraordinary fines and penalties imposed on employers that are not compliant. At Landmark Benefits, we believe more significant driving force is toward a greater protection of employees. The fact is, as it is in other walks of life, an overwhelming number of employers take great pride in ensuring the protection of their employees; however, the few that do not share this philosophy have caused the transformation at the DOL to audit countless employers.

What are the potential penalties? According to the Compliance Bug, “After examining the DOL’s enforcement database, ComplianceBug found nearly 32% of the health and welfare plans penalized over the past 12 years were in excess of $10,000 and 5% in excess of $50,000”. Additionally, “47% of plans have fines between $10,000 – $50,000 with nearly 5% of those being greater than $100,000”

When visiting with non-clients of Landmark Benefits, what are we seeing for the most significant omissions?

  1. Summary Plan Descriptions: Many employers are overwhelmed with the management of the employee benefits and the overload of document retention and duplicative names of documents result in employers not understanding the variety of documents. When visiting a non-client, I would ask for their Summary Plan Description but I would receive, in return, their “summary of benefits” or “summary of benefits and coverage (SBC)”.
  2. COBRA notification for new employees: Employers and their TPA’s have historically been 99% compliant with COBRA notification for former employees by sending a COBRA notification within 14 days of the last day of employment. Interesting that many employers are not aware that the COBRA notification must also be delivered upon eligibility for the health plan. Of course, this notice must be mailed by USPS to the last known address – not hand delivered – and addressed to the employee and eligible dependents.
  3. WHCRA Notice: The Women’s Health and Cancer Rights requires that plan administrators provide notice of available mastectomy related benefits upon enrollment in the plan and annually thereafter. Although most health plans will provide this notice, it is the responsibility of the employer to ensure proper delivery to the members of the plan.
  4. 5500 Documents: It is required for any employer with more than 100 employees enrolled on the health plan at the beginning of the plan year to submit to the IRS a 5500 document at the end of the 7th month following the end of the plan year. This requirement, to most employers, is an inconvenience; however, employers continue to receive substantial fines for not submitting to this requirement.

Bottom line – the management of employee benefits will continue to witness an escalation in compliance. At Landmark Benefits, we maintain a comprehensive portfolio of compliance documents for each of our clients; however, we also have in our library the DOL Audit Guide for Employee Benefit Plans. If you would appreciate a copy, please contact our office and we will be happy to forward.

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