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What the DOL Wants During a DOL Audit

Original post ubabenefits.com

No two Department of Labor (DOL) audits are the same, yet there are typical questions asked and documents requested. See our recent blog on the Seven Common Mistakes That Could Trigger a DOL Audit. If you are audited, it’s recommended that questions received be sorted and color-coded based on what the question references (for example, third-party administrator, client answered, etc.). In addition, keep a log of each request and the document(s) provided in response to that request. A separate file folder for each request will help organize that task. Luckily, the DOL seems to be very receptive to an organization’s preparedness. It certainly makes the auditor’s job easier when a company has everything already in place and doesn’t require time to gather it all.

When a company is audited, the auditor sent by the DOL will vary in his or her experience of conducting audits. If the person is a novice, then that often means the auditor might ask for more information, whereas someone more experienced knows exactly what they want. Regardless, the audit will almost always take between two to three days of reviewing documents and conducting interviews. The auditor should be placed in a room that, while not necessarily secluded, is out of the line of traffic so that the auditor can work uninterrupted and limit staff interaction.

The human element is just part of the audit. One of the most important pieces of preparation is a putting a “wrap document” in place if one doesn’t already exist. The lack of a wrap document can indicate deeper issues with the plan. Conversely, up-to-date and complete wrap documents can indicate the employer’s due diligence in administering its plan and staying compliant. A wrap document is a legal document that basically wraps around an insurance carrier’s certificate with required ERISA language. This required language is typically not included in the insurance carrier certificate(s).

ERISA has two primary requirements, and satisfying this burden falls on the plan administrator (usually this is the employer). The first requirement is that group health plans have a written plan document and the second requirement is that a Summary Plan Description (SPD) is provided to all plan participants upon enrollment (and at other various times). A written plan document is what the plan administrator uses to operate the plan.

The SPD is what’s used to notify plan enrollees of the many plan terms, including who is eligible, how it’s funded, and what benefits are included. Some employers use a separate plan document and an SPD, while others use a combination approach.

Another item that the DOL is apt to be looking for is communications to employees. Because of this, employers should keep track of its communications. A company should keep records of who received notices along with the dates; don’t just say it was given to “everyone.” Be proactive with documents such as ERISA notices and the Summary of Benefits and Coverage (SBC) by including them in every new hire packet. In this age of technology where companies are moving communications to an Intranet, simply posting notices on an Intranet or company shared drive is not compliant unless you follow the electronic distribution rules, especially if participants may not have access to a computer as an integral part of their work day (for example, factory employees).