Are You Prepared for a DOL Audit?

Audit. That’s a scary word. Especially if you’re an employer facing an audit of your employee benefit plans by the Department of Labor (DOL). When it comes to the compliance of your employee benefit plans, are you prepared for a DOL audit?

The Purpose of a DOL Audit

For government contractors, there are two types of DOL audits. One, the DOL’s Wage & Hour Division (W&H) performs an audit to ensure ongoing compliance with the McNamara-O’Hara Services Contract Act( SCA) and the Davis-Bacon Act (DBA), which focuses on confirmation that the employer health and welfare fringe benefit contributions are made to the individual employee with the correct amounts. Two, the DOL’s Employee Benefits Security Association (EBSA) audits to ensure compliance with the Employee Retirement Income Security Act (ERISA) and corresponding regulations. EBSA focuses primarily on plan documentation and accurate filings.

Preparing for a DOL Audit

An employer can take steps to proactively help an audit run smoothly.

To get ready for a W&H audit, it helps to have a consistent process that accurately tracks the hours worked for each contract. The process should be documented, and the data calculations for the welfare fringe benefit amounts confirmed on a regular basis. . This includes discussions around the viability of benefits currently offered, the confirmation of SCA compliance, and the employer’s certified payrolls for DBA compliance

Regarding an EBSA audit, it is helpful for a plan sponsor to have all plan documentation organized and readily available for review. An auditor will typically request summary plan descriptions, certificates of coverage, service provider documents, premium contribution payment schedules, and previous DOL filings. Having them ready and available will show the auditor that you are organized and prepared.Documentation to show the ongoing review of trustee expenses to confirm the reasonableness of the fees. It is also helpful to have a standard process to review and confirm the accuracy of participant (and beneficiary) data for annual filings, such as the Form 5500.

You can learn more about the annual Form 5500 filing in this previous blog post. Click here.

These proactive steps can make a difference in a DOL audit. If the Plan sponsor is unable to provide the necessary documents or the plan is otherwise found not to be in compliance, the DOL can impose penalties. The severity of those fines can vary, depending on certain factors, but nobody likes having to pay a penalty.

The Solution: Compliance for Government Contractors

DOL audits can happen to any employer that is subject to the SCA or DBA, including those that offer health and welfare benefit to comply with the SCA and its regulations for providing benefits. For government contractors, keeping track of the hours worked and the corresponding fringe benefit contribution, the subsequent calculations, and making sure that the plan documents are updated as needed, is a rigorous task that requires the knowledge of what is needed and constant monitoring. The constantly evolving landscape of laws and regulations can easily cause businesses to become overwhelmed.

Luckily, a benefits broker or carrier can be a huge help in maintaining the necessary documentation to show that the employer complied with its obligations.

What Boon Can Do For You

When your benefit solutions are provided through Boon, upon notification of an upcoming audit, you should reach out to us, so that we can begin pulling the requested documentation and also reach out to the carriers, trustees, as applicable sponsor to notify them of potential upcoming interviews. The Boon team is prepared to consult, serve, and facilitate the conversations with the DOL. Regardless of whether you use Boon, it’s very important to respond timely and be as forthcoming as possible. A DOL audit must be handled with care and expertise.

For more than 35 years, Boon has handled the heavy lifting for our clients when it comes to employee benefit administration and compliance. As a result, our clients have the ability to focus their energy on growing their business. Compliance is at the center of what we do. Our benefit solutions are designed to streamline employer compliance, while delivering a competitive edge.

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