Tips for Navigating a DOL Audit

Keeping up with the compliance requirements for your employee benefits plan is a year-round effort! Employers face an intimidating range of obligations on their employee health and welfare plans with the Employee Retirement Income Security Act (ERISA), the Affordable Care Act (ACA), and for federal contractors, the Services Contract Act (SCA) and Davis-Bacon Act (DBA). Failure to comply comes with potential for steep penalties, and there are few greater headaches for an employer than an audit by the Department of Labor (DOL).

Fortunately, it is possible to stay out ahead of benefits compliance! Here are some tips to prepare your business for a DOL audit:

1. Provide All Required Notifications and Documents to Employees

Be prepared to prove that eligible employees and plan participants were furnished all necessary documents in a way “reasonably calculated to ensure actual receipt,” using a method that is likely to result in full distribution. Acceptable methods include: first-class mail, hand-delivery, and electronic distribution.

Such documents include but are not limited to: Summary Plan Description (SPD), Summary of Benefits and Coverage (SBC), Summary Annual Report, and Notice of Material Modification, which applies to mid-year changes affecting SBC content.

2. Mind Your Form 5500 Filing Requirements

Plans with at least 100 participants must file a Form 5500, which is an annual report of information regarding an employee benefit plan. The Form 5500 must be submitted to the Department of Labor (DOL) on an annual basis on or before the last day of the 7th month after the Plan year ends (July 31st for a calendar year plan).

Check out this previous blog post to learn more about Form 5500.

3. Annual PCORI Filing

On July 1st, the annual fee to fund the Patient-Centered Outcomes Research Institute (PCORI) must be paid to the Internal Revenue Service (IRS). This fee is paid by employers that sponsor self-insured health plans or by group health insurance providers. PCORI fees apply to health plans, as well as health reimbursement arrangements (HRAs) and flexible spending accounts (FSAs).

4.  Determine Your Applicable Large Employer (ALE) Status, In Case of a DOL Audit

Employers that had 50 or more full-time employees (including full-time equivalent employees) in the previous calendar year are subject to the ACA’s employer-shared responsibility provisions. Per the ACA, an ALE-employer must offer an affordable health plan that provides minimum value to at least 95% of its “full-time” employees (and their dependents). A full-time employee is defined as 30 or more hours per week. Employers that are close to the 50-full-time employee threshold should maintain documentation that provides accurate calculation of employee work hours per month so that the status could be defended, upon request by the DOL or IRS. Proper tracking and administration make a big difference.

5. Take a Close Look at Your Current Plan

The affordability percentage is an often-overlooked factor in compliance that can make a difference in surviving a DOL audit. ALE employers that are subject to ACA’s employer-shared responsibility provisions should confirm that current health plans provide affordable minimum essential coverage that provides minimum value.  The affordability percentage places a limit on what percent of an employee’s income can be charged for employer-sponsored coverage and this amount is adjusted annual as a result of inflation. For 2022 plan years, the affordability percentage index is 9.61%. If an ALE employer doesn’t provide affordable minimum essential coverage that provides minimum value, it will potentially owe an employer-shared responsibility payment to the IRS.

6. Proper Administration is Vital in Navigating a DOL Audit

Proper administration is an absolute must for any business. Employers that document a compliance review process that includes details as to the manner and timing of the above listed requirements are a step ahead in the preparation for a DOL audit.  In addition, government contractors should track the hours worked for each employee, the nature of the work performed, benefits provided, etc. If that sounds like a lot, it’s because it is. Many employers are unprepared when required to provide plan documents, summary plan descriptions, certificates of insurance policies, payment schedules, upon request by the DOL. It’s of the utmost importance that all of the necessary information be accounted for and accurate!

We’re Here to Help

At Boon, compliance is our top priority. We are prepared to consult on matters involving the DOL. More importantly, we provide streamlined healthcare solutions and employee benefits administration that keeps businesses ahead. A DOL audit can happen to any employer and often at the most inconvenient of times. We are here to help – before an audit occurs and when you need an expert in your corner.

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