Generally, the DOL's first step in the audit process is to send an audit letter from its enforcement arm – the Employee Benefits Security Administration (EBSA). The letter details a list of "plan-related materials" the plan must produce within 10 days of the letter's receipt. It includes questions specifically designed to determine whether a plan is in compliance with PPACA. For example plans are being asked to produce documentation of:
- Grandfathered status;
- Coverage of children to age 26;
- Compliance with lifetime and annual limits;
- Rescission rule compliance;
- Provider choice disclosures;
- Updated appeals notices;
- External review compliance; and
- Summary of benefits and coverage (SBC).
In addition to questions about PPACA compliance, the audit letter may also demand production of documents that show whether a plan is complying with COBRA, HIPAA (e.g., creditable coverage, preexisting condition exclusions, and special enrollment rights), and other, maybe lesser-known provisions of ERISA such as:
- Genetic Information Nondiscrimination Act;
- Newborns and Mothers' Health Protection Act;
- Women's Health and Cancer Rights Act;
- Mental Health Parity Act; and
- Mental Health Parity and Addiction Equity Act (in particular whether the plan has analyzed parity of non-qualitative or quantitative treatment limitations versus medical/surgical limitations).
Because of the wide scope of these audit letter demands, the response will usually involve pulling together an enormous amount of documents and information. The letter request usually goes well beyond just a request for the plan document, amendments, summary plan descriptions, and Form 5500 filings. It can also include things like e-mails to employees about plan information, required notices, supporting data used to generate a Form 5500, and log books listing the recipients of creditable coverage certificates.
The DOL routinely grants extensions of time to respond beyond the 10-day deadline in the audit letter. However, the sheer volume of information to be gathered may push the limits of even an extended response deadline – typically only a week or two beyond the original deadline. Further, gathering the people and other resources needed to respond to an audit letter can be a severe strain. An "audit team" of employees who can handle the job efficiently must be charged with the tasks necessary to respond to the audit. Employees who work with the plans must be trained to respond to the almost-inevitable DOL site visit and interviews. Third party administrators and other service providers will have to be notified.
Small employers who think that they may not be at risk of audit should reconsider – the DOL is aware that small plans tend to make more mistakes.
For all of these reasons, we recommend getting your plan documents and administration in order now – don't wait until the audit letter arrives.
Please contact us if you would like more information, review of your plans for compliance, or assistance with a DOL audit.