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DOL Health And Welfare Plan Audits: The Sobering Truth

Like it or not, they’re coming. The Department of Labor’s enforcement division is focused on plan sponsor compliance with federal laws and regulations and will be performing audits throughout the country. While retirement plan audits have been commonplace, health and welfare plan audits have been relatively scarce. No more. These audits are on the upswing, and the DOL has staffed up and increased their budget in order to cast a wide net and increase enforcement.


Employers in receipt of DOL audit letters will see a paragraph that states the following:

“Additionally, the Plan will be examined for the purpose of determining whether it is complying with the laws contained in Part 7 of ERISA, including the Health Insurance Portability and Accountability Act of 1996, the Newborns’ and Mothers’ Health Protection Act, the Women’s Health and Cancer Rights Act (WHCRA), the Mental Health Parity and Addiction Equity Act, the Genetic Information Nondiscrimination Act, the Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act (together, the Affordable Care Act).  These laws amended Part 7 of ERISA and provide requirements for group health plans.”

Are you fully prepared to respond to an audit request if you receive one? Is your company’s health and welfare plan in compliance? If you receive an audit request from the DOL you will be asked to provide a substantial amount of documentation for review. Typical items include, but are not limited to:

* SPD’s and Summary of Material Modifications, SBC’s

* Plan documents and amendments

* Form 5500’s, and proof of filing

* Summary of Annual Reports (SARs)

* List of Service Providers, along with any contracts

* Documentation of mandatory employee notices

* Enrollment packages for participants

* HIPAA certificate of creditable coverage

* Identity of plan trustees, administrators

* Transaction records such as bank statements, cancelled checks, premium payments

 The penalties for violations can be substantial and include fines and possible criminal penalties if egregious and willful violations are found.  In a recent article for Employee Benefit Adviser’s “Be Advised” blog, author Craig Davidson writes:

“ERISA’s reporting and disclosure requirements, for instance, carry a fine of $110 per day, per person, per violation for every plan participant who was covered under a single contract. That fine jumps to $200 for plan participants covered by a family contract."

According to a recent article on, over the past 12 years 32% of health and welfare plans audited received DOL fines in excess of $10,000 due to ERISA and Form 5500 violations. Looking for more information on penalties? Click here for the Civil Penalties chapter of the EBSA Enforcement Manual.

Are you in compliance? And how do you prepare if you receive an audit letter from the DOL? Here are few tips that our team recommends:

 1. Keep good records. Have one or more individuals familiar with the documents and legal requirements.

 2. Stay on top of the changing requirements and pay attention to information provided by benefit professionals (your broker, HR/industry associations, compliance professionals, etc.).

 3. Maintain a fidelity bond as required.

 4. File Form 5500 annually as required.

 5. Respond to inquiries from the DOL and Employee Benefits Security Administration (EBSA) in a timely fashion. Typically, a large amount of information is requested for delivery in a relatively short period of time. The key is to maintain and have these records available to produce.

6. Once you are notified that the DOL audit has begun, be sure to reach out to your broker and legal counsel for assistance and notification.

In summary, the numbers of audit notices employers are receiving for their health and welfare plans are on the rise. If you are selected, an organized approach to providing the information and responses may reduce the length of the audit, and will hopefully prevent your organization from facing a fine. Cooperation and preparedness is key. The DOL places a high value on good faith efforts to respond to their requests. This may be one occasion be where being an organized pack rat could be helpful!