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Department of Labor Audits: How to Prepare –Your Survival Guide

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Patrick HaynesEducationTemple 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.

Patrick Haynes is AP Benefit Advisors’ GC and Senior Vice President of Compliance. He advises employers and plan sponsors on a variety of health and welfare benefit plan compliance matters, including, but not limited to, tax qualification and other Internal Revenue Code issues, PPACA, ERISA, COBRA and HIPAA security and privacy issues. Mr. Haynes lectures frequently and has published many articles on health and welfare benefit plan compliance topics.

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

Admitted to Practice • U.S. Supreme Court• Federal and State Courts of

• New Jersey• Pennsylvania• Connecticut• District of Columbia

Today’s Presenter

4C O N S U L T I N G │ B R O K E R A G E │ A D M I N I S T R A T I O N │ C O M M U N I C A T I O N S │ C O M P L I A N C E │ E M P L O Y E E A D V O C A C Y

Table of Contents

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ERISA: Who does it apply to?.................................................................................3

Who is EBSA..............................................................................................................4

Investigative Powers.............................................................................7

Enforcement..........................................................................................7

The Audit Process……………………………….........................................................6

What are they looking for?....................................................................................11

What documents will they request?.....................................................................13

Case Study……………............................................................................................17

Poll Questions..........................................................................................................33

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.

Employers NOT Subject to ERISA

• Indian Tribal Governments (but, any for-profit commercial businesses/plans would be)

• Essential governmental functions (workers/plans) would be exempt from ERISA

• However, in performance of duties (workers/plans) of a commercial nature would be subject to ERISA

• Church Plans

• Governmental Entities subject to Public Health Service Act (PHSA)

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The Department of Labor

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The Employee Benefits Security Administration

Mission Statement

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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.”

Employee Benefits Security Administration

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• 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.

• Preston Rutledge currently leads

the agency as the Assistant

Secretary.

DOL Organization Chart

There are 10 program offices of

which the EBSA operates. The

Office of Enforcement is the

group responsible for conducting

national and field enforcement

of ERISA.

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 2019

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DOL Agency Results

Total Monetary Recoveries

Total RecoveriesRecoveries from

Enforcement ActionsVoluntary Fiduciary Correction Program

Abandoned Plan Program

Monetary Benefit Recoveries from

Informal Complaint Resolution

$2.57B $2.02B $14.6M $33.2M $510.0M

Correction Programs

VFCP Applications Received DFVCP Filings Received

1,600 20,088

Civil Investigations

Civil Investigations Closed

Civil Investigations Closed with Results

Percent Civil Investigations Closed

with Results

Civil Investigations Referred for Litigation

Civil Cases with Litigation Filed

1,329 860 64.7% 111 56

Criminal Investigations

Criminal Investigations ClosedNumber of Individuals with Guilty Pleas

or ConvictionsNumber of Individuals Indicted

275 80 76

The Audit Process

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From Start to Finish

The Audit Process

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Document Request Letter (either Limited

Targeting or an Open Investigation)

On-Site Interviews

Document Production

No Action/ Violation Letter

Closing LetterOne Way Closing

Letter/Settlement Agreement

Civil Litigation Referral or

Criminal Investigation

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 must 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 (or

whatever date/range the auditors select), 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

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• 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

• 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

Document Request Letter

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Walking through the DOL’s Checklist

Document Request Letter (either Limited Targeting or an Open Investigation)

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Document Request Letter: Requests 2-5(either Limited Targeting or an Open Investigation)

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Document Request Letter: Requests 6-10(either Limited Targeting or an Open Investigation)

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Document Request Letter: Request 11(either Limited Targeting or an Open Investigation)

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Moot post 2014

Document Request Letter: Request 11 Continued (either Limited Targeting or an Open Investigation)

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Moot post 2014

Document Request Letter: Requests 12-17(either Limited Targeting or an Open Investigation)

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Document Request Letter: Request 18(either Limited Targeting or an Open Investigation)

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TIP: Consider creating “cross-walk” documents – to show and better communicate year over year plan design changes, how you changed your plans, what the ER vs EE cost sharing was each year, and how those percentages didn’t exceed the maximum allowed to keep/maintain GF’d plan status.

Document Request Letter: Request 19(either Limited Targeting or an Open Investigation)

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Document Request Letter: Request 20(either Limited Targeting or an Open Investigation)

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Last 5 and

Last 3

Document Request Letter: Request 20 Continued(either Limited Targeting or an Open Investigation)

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Document Request Letter: Request 21(either Limited Targeting or an Open Investigation)

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Document Request Letter: Requests 22-24(either Limited Targeting or an Open Investigation)

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Document Request Letter: Requests 25-27(either Limited Targeting or an Open Investigation)

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Poll Questions

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Are you ready for a DOL Audit?

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 (or former EE) complaint

C) Both A and B

D) Neither A or B

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Question 2

In 2019, around 1,329 civil investigations closed. What percentage

of those closed with results?

A) 45.1 %

B) 64.7 %

C) 75.5 %

D) 95.1 %

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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) Both B & C

E) All of the above

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Best Practices Pg. 1 of 2

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1. Establish One Location for all documents related to your health & welfare benefit plans

a) Save updates to that location (dated updates)b) Save distribution notice logs/materials to that location

2. Designate a gate-keeper – the one person in your company that will take charge of this function, the updates, and the “inventory”

3. Respond – timely and in writing: a) To any/all participant and beneficiary requests and questions. b) Failure to respond to written participant and beneficiary requests for an SPD

and/or Plan Document within 30 days can/will subject you to a penalty of $110 per day per participant or beneficiary.

c) DOL auditors, HHS/OCR investigators, etc.4. Review and understand all plan documents. Know they difference between your:

a) WRAP SPD and our WRAP Plan Documentb) Cafeteria Plan (“POP” plan, PCP Plan, 125 plan) SPD and Plan Documentsc) Your “component plan” documents (aka Cert booklets, Coverage Certs, Medical

SPD, Dental SPD, etc.)

Best Practices Pg. 2 of 2

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5. Make certain that all ERISA-covered plans comply with ERISA, ACA and HIPAA.6. Distribute SPDs and with accompanying benefit plan component documents, such as

benefits booklets and certificates of insurance, to all plan participants within 90 days of their becoming covered under the plan, and once every 5 years, and after any changes/significant updates

7. SMM: Inform participants of any material changes to the plan either through a revised SPD or in SMM (Summary of Material Modifications) – and distributed those in accordance with DOL timelines.

8. Day-to-Day – make certain that the administration of these plans actually follows the written Plan Documents—don’t waive those provisions, and don’t apply them for “some” participants but for ALL participants.

9. Make certain your Form 5500 mirrors your written SPDs—same plan name, same plan sponsor, same plan number, and plan year. And, distribute your SAR (Summary Annual Report) as required.

10. Review your written procedures for:a) Privacy Complaintsb) Escalated claim and appeal issuesc) IRO – Independent Review Organizations (if applicable to your plan)

Takeaways

• With an increased auditing-force, post-ACA audits are going to become more

frequent… and more heavily influenced by ACA related compliance items.

• Employee complaints to the DOL centered around eligibility, communication, and

claims issues—are not rare—and can/are the start of many DOL actions.

Therefore, 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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If you have any further questions about the webinar slides, credits, etc., please feel free to contact us at:

AP Benefit Advisors, LLC

(800) 451-8519 | www.apbenefitadvisors.com

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For matters specific to your health and welfare benefit plans, please contact your AssuredPartners Account Executive and/or your Account Manager directly. Thank you.

Questions?