Your Fiduciary Responsibility: What to Expect from a DOL Audit

Aug 23, 2023

If you’re a fiduciary for your company, you must be up-to-speed not only on your fiduciary responsibility but the importance of compliance and the implications of any violations. As a health plan fiduciary, your responsibility is to administer the company’s health plan per the plan document and for the benefit of plan participants — your employees. 

To put things plainly, you must be precise, consistent and prepared. Department of Labor (DOL) audits are implemented to ensure businesses comply with all DOL regulations. 

Key items covered in a DOL audit include:

  • 401k and employee benefits regulation
  • Family and Medical Leave Act (FMLA) compliance
  • Employee Retirement Income Security Act (ERISA) compliance
  • Employee timekeeping
  • Wage and hour compliance
  • Child labor law compliance
  • Wage deduction processes
  • Accurate payroll and recordkeeping 

The fiduciary responsibility includes preparing for a DOL audit and knowing what to expect. With the DOL increasing its audit activities, keeping compliance as your top priority and thoroughly understanding the repercussions of not passing the audit is critical. 

Common fines include:

  • $2,486 per day for failure to file a 5500 Form
  • $110 per day for failure to provide Suspicious Activity Reports (SARs)
  • $100 – $110 per day per participant for failure to maintain a plan document
  • $127 to $63,973 per HIPAA Privacy violation
  • $137 per day, per individual, for Genetic Information Nondiscrimination Act (GINA) violations
  • $290 per return for failing to adhere to the Affordable Care Act (ACA) and filing appropriate forms by the deadline date

At our 2023 Employee Benefits Summit, Michelle Barki, Senior Legal Counsel and Director of Health & Wellness Compliance at Medcom Benefits, presented a session on what to expect from a DOL audit. In this session, she briefed attendees on a case study of an Industrial Equipment Wholesaler who underwent a DOL audit.

This wholesaler comprised two separate employers, employing about 550 personnel. When the audit was completed, the organization failed, with the following issues identified:

  • No cafeteria plan document
  • HRA was discontinued/Plan document still in force
  • Inconsistent waiting periods (one month v. 30 days)
  • Wrap document “stopped in process” or never finalized or adopted
    • No Plan Number
    • No Effective Date
    • No ACA eligibility provisions
    • No Plan Sponsor identified
  • The contradictory notification period for election changes (30 v. 31 days)
  • No offer of COBRA for EAP, Wellness Plan, or Health FSA
  • Two Opposing Medicare D notices
  • No support for consolidated Form 5500 filings without the adoption of the wrap document
  • Nondiscrimination testing was never conducted
  • Stop Loss coverage gap during a personal leave of absence

Unfortunately, this case study clearly represents what commonly occurs when companies undergo a DOL audit. Fiduciaries are not fully prepared, leaving a gap in the care for employees and putting fiduciaries and companies at risk of legal and financial implications. Below are key points all fiduciaries should clearly understand to pass a DOL audit successfully.

Fiduciary Responsibility Information You Need to Know:

  • The enticement of employees to enroll in Medicare and decline the employer’s plan is not permitted
  • FMLA and ACA apply to all public agencies, public and private elementary and secondary schools, and companies with 50 or more employees
  • Form 5500 is required for employers with 100 or more employees
  • Fully Insured Health Plan Requirements:
    • Wrap Document
    • Cafeteria Plan Document
    • Form 5500
    • Section 125 NDT
  • Self-Funded Health Plan Requirements
    • Wrap Document
    • Cafeteria Plan Document
    • Form 5500
    • Section 125 NDT
    • Section 105(h) NDT
    • HIPAA Privacy and security
    • Review of Plan Documents
    • PCORI Fees
  • Nondiscrimination testing is applicable for:
    • Self-funded medical, dental and vision plans
    • HRAs, Healthcare FSAs and Dependent Care FSAs
    • Cafeteria Plans
    • HSA Contributions
    • Voluntary Benefits like Group Term Life Insurance Plans, Adoption Assistance Programs and Educational Assistance Programs

DOL audits are no walk in the park. They are extensive and require a tremendous amount of preparation. If you’re unfamiliar with fiduciary responsibilities regarding a DOL audit, fully insured companies can request assistance from their carriers, and those with self-funded plans can request help from a third-party administrator. 

Are you prepared for a DOL audit? We hope you feel more comfortable with the idea after reading this article. If you’re interested in connecting with one of our team members, click here to get in contact.

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