department of labor audits: how to prepare · 5/5/2014  · • the employee benefit security...

Presented by

Patrick C. Haynes, Jr., Esq., LL.M.

Consulting | Brokerage | Compliance | Communication | Administration

Department of Labor Audits:

How to Prepare

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Patrick C. Haynes, Jr.

As counsel for Crawford Advisors’ Employee Benefits and Executive Compensation Group, Mr. Haynes advises employers and plan sponsors in a variety of health and welfare benefit plan compliance matters, including, but not limited to, tax qualification and other Internal Revenue Code issues, ERISA, COBRA and HIPAA portability and privacy issues. Mr. Haynes lectures frequently and has published many articles on health and welfare benefit plan compliance topics.

Today’s presenter

Practice Areas Employee Benefits & Exec Comp, ERISA, COBRA, HIPAA, §125, and §§ 105, 106, 129, 132

Education Temple University School of Law, LL.M.

Rutgers University School of Law, J.D.

Rutgers University School of Business, M.B.A.

Rutgers University College of Arts & Sciences, B.A.

Admitted to Practice U.S. Supreme Court

Federal and State Courts of

New Jersey

Pennsylvania

Connecticut

District of Columbia

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Roadmap

• ERISA: Who does it apply to?

• Who is EBSA?

• Investigative Powers

• Enforcement

• How does an employer plan

get targeted?

• What are they looking for?

• What documents will they

request?

• Case Study

• Poll Questions

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Who is Subject to ERISA?

Employers Subject to ERISA • ERISA Section 4(a) states that the provisions of ERISA Title I apply to any

employee welfare benefit plan if it is established or maintained:

• by an employer engaged in commerce or in any industry or activity affecting commerce;

• by any employee organization(s) representing employees engaged in commerce or in any industry or activity affecting commerce; or

• by both.

Exemptions • Indian Tribal Governments

• Church Plans

• Governmental Entities subject to Public

Health Service Act (PHSA)

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The Employee Benefits Security Administration

The Department of Labor

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“The mission of the Employee Benefits

Security Administration is to assure the

security of the retirement, health and other

workplace related benefits of America's

workers and their families. We will accomplish

this mission by developing effective

regulations; assisting and educating workers,

plan sponsors, fiduciaries and service

providers; and vigorously enforcing the law.”

Mission Statement

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Employee Benefits Security Administration

• The Employee Benefit Security Administration is an agency under the Department of Labor that oversees the enforcement of Title 1 of ERISA.

• The department has over 700 auditors.

• EBSA was formerly known as the Pension and Welfare Benefits Association (PWBA) until its name change in 2003.

• Phyllis Borzi currently leads the agency as the Assistant Secretary.

DOL Gov Organization Chart

There are 9 program offices of which the EBSA operates. The Office of Enforcement is the group responsible for conducting national and field enforcement of ERISA.

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Authority

The DOL’s investigative power derives from ERISA §504

Investigative power

• Provides the Agency with the power to investigate whether “any person has violated or is about to violate any provision of ERISA Title I or any regulation or order issued under Title 1”

No probable cause needed

• The DOL may commence an investigation and require records whether or not it has reasonable cause to believe any particular violation exists.

Make information available to stakeholders

• DOL may make available to any person actually affected by any matter which is the subject of an investigation (and to any department or agency of the United States), information concerning any matter which may be the subject of an investigation.

Document requests

• In addition to its power to obtain documents in connection with an investigation, the DOL has the broad general authority to request production of documents “relating to” an ERISA plan.

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Targeting Results for FY 2013

DOl.gov Agency Results

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From Start to Finish

Audit Process

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The Audit Process

Document Request Letter

(either Limited Targeting or an Open

Investigation)

Document Production

No Action/ Violation

Letter

Closing Letter

One Way Closing Letter/

Settlement Agreement

Civil Litigation

Referral or Criminal

Investigation

On Site Interviews

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What are they looking for?

EBSA audits examine compliance with a range of federal statutes and regulations, such as ERISA, HIPAA, COBRA, Newborns’ & Mothers’ Protection Act, and the Women's Health and Cancer Rights Act.

Many will be facing audits on the full range of PPACA mandates.

The DOL's audit letters are looking for information and documentation concerning particular aspects of the PPACA, such as the plan's grandfather status, coverage for adult children, lifetime and annual limits, and claims & appeals procedures.

The DOL also is looking at the design of wellness programs offered in connection with group health plans and the related, required notices that have to be provided with outcome-based programs.

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Best Compliance Practices

Generally, plan sponsors and administrators must be able to demonstrate that their plans comply with PPACA, which requires documentary evidence from plans, record keepers and/or service providers.

E.g. Written records of the steps taken to comply with PPACA since Sept. 23, 2010, including detailed records of participation information and communications with participants; about enrollment periods and coverage; etc.

• These should be retained in a readily accessible fashion.

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Document Request

A standard request includes: 49 potential items for review, 26 to be copied and provided in advance of the audit

• Plan documents, including amendments

• SPD, Benefits Booklet and other docs describing eligibility

• Summary of Material Modifications (SMMs)

• IRS determination letters (if applicable)

• Signed/Filed 5500s

• Summary Annual Reports (SARs)

• Transaction records (bank statements, cancelled checks)

• List of plan service providers and associated contracts

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Document Request (cont.)

• Participant enrollment packages

• Identity of plan administrators, trustees (if applicable), etc.

• All Policies and Procedures (P&Ps) related to ERISA Title I (HIPAA, MHPA, COBRA, etc.) • P&Ps related to determining plan eligibility

• P&Ps related to claims and appeals

• Sample HIPAA certificate of coverage

• Newborns’ Act and WHCRA notices

• HIPAA Special Enrollment notices

• Claims incurred reports

• Materials/Plan Docs describing wellness programs

• Required Health Reform notices

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Walking through the DOL’s checklist

Document Request Letter

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Document

Request Letter

Document Request Letter

(either Limited Targeting or an Open

Investigation)

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Document

Request Letter

Document Request Letter

(either Limited Targeting or an Open

Investigation)

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Requests 2-5 Document

Request Letter (either Limited

Targeting or an Open Investigation)

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Requests 6-10 Document

Request Letter (either Limited

Targeting or an Open Investigation)

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Request 11 Document

Request Letter (either Limited

Targeting or an Open Investigation)

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Request 11

continued

Document Request Letter

(either Limited Targeting or an Open

Investigation)

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Request 11

continued

Document Request Letter

(either Limited Targeting or an Open

Investigation)

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Requests 12-17 Document

Request Letter (either Limited

Targeting or an Open Investigation)

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Requests 12-17 Document

Request Letter (either Limited

Targeting or an Open Investigation)

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Request 18 Document

Request Letter (either Limited

Targeting or an Open Investigation)

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Request 19 Document

Request Letter (either Limited

Targeting or an Open Investigation)

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Request 20 Document

Request Letter (either Limited

Targeting or an Open Investigation)

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Request 20

continued

Document Request Letter

(either Limited Targeting or an Open

Investigation)

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Request 21 Document

Request Letter (either Limited

Targeting or an Open Investigation)

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Requests 22-24 Document

Request Letter (either Limited

Targeting or an Open Investigation)

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Requests 25-27 Document

Request Letter (either Limited

Targeting or an Open Investigation)

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Are you ready for a DOL Audit?

Poll Questions

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Question 1

Which of the following is a reason for the DOL to perform an audit?

A) The auditor would like to look at a specific industry

B) An employee complaint

C) Both A and B

D) Neither A or B

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Question 2

In 2013, around 3,677 civil investigations closed. What percentage of those closed with results?

A) 58.9%

B) 72.8%

C) 33.7%

D) 95%

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Question 3

True or False: All private employer health plans must comply with ERISA Title 1 and are therefore open to DOL audit.

A) True

B) False

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Question 4

Which of the following statutes does EBSA audit?

A) HIPAA

B) ERISA Title I

C) COBRA

D) All of the above

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Takeaways

• With an increased force of auditors Post-PPACA audits are going to become more frequent… and more heavily influenced by PPACA related compliance items.

• In 2013 there were over 200,000 employee complaints to the DOL centering around eligibility, communication, and claims issues. Taking preemptive steps to effectively comply with mandates and communicate/document plans are needed to avoid complaint liability.

• The DOL does not need probable cause to justify an employer investigation.

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Devon Square Two, 744 West Lancaster Avenue, Suite 215

Wayne, PA 19087

800.451.8519 • www.CrawfordAdvisors.com

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