One word – Penalties! What employer has extra cash that they want to send to the government? Yet, few are prepared for a DOL audit. And DOL audits have become increasingly complex, adding components of PPACA and making it more difficult than ever to be compliant.
The government has established internal initiatives like the Health Benefits Security Project and is making it easier than ever to file complaints. The DOL is increasing its audit staff — you need to be in compliance.
What triggers an audit? Participant complaints are the primary indicator, recent press or public visibility of the employer, lack of or inconsistent Form 5500 reports, etc. — and to make matters worse, information is shared among government agencies.
Results show that three out of four audits have an ERISA violation, and 70% result in fines for the employer. Failure to provide an SPD or Plan Document within 30 days of a request from a plan participant can result in penalties of up to $110/day per participant for each violation. Having documentation in order protects against disgruntled employees who believe they’re entitled to coverage or benefits.
What are the requirements? ERISA-covered plans must be maintained in accordance with a written Plan Document. ERISA also requires that employers/plan administrators provide an SPD to each plan participant.
Most employers do not comply with the SPD or Plan Document requirements. Why? Many assume that insurance contracts, certificates of insurance, and benefit summaries fulfill ERISA requirements — but they don’t.
What benefits are subject to ERISA? The most common are medical (HMO & PPO), dental, vision, prescription drug, health FSAs, HSAs, HRAs, life insurance, and disability insurance. Other plans include severance pay, employee assistance, business travel, wellness programs, pre-paid legal, retiree medical, voluntary benefits, etc.
As if that wasn’t enough, there are over 30 possible disclosures required with specific distribution and reporting time frames. Complicated is an understatement. Large employers may have internal counsel, or a retained law firm — but most corporate or transaction attorneys won’t touch this level of compliance.
Employee Benefit Advisors generates both a Wrap SPD and a Wrap Plan Document that wrap around existing insurance certificates, policies, contracts, and benefit plan booklets. Our ERISA attorneys develop documents with the necessary provisions to ensure compliance.
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