DOL Audits
By: Ann Mcadam
The DOL does not take a back seat during the Fall season. This year, besides working feverishly on the potential changes stemming from the Associated Health Plan (AHP) final rule (Wrangle’s DOL contact noted that they have been reworking the Form M1 which is used for MEWAs; AHPs are MEWAs), there is something possibly brewing. Come October and November, Wrangle has noticed that historically the DOL issues hundreds of letters of inquiries to Plan Administrators on their Form 5500 filings. These letters typically require a response sometimes as little as 10-15 business days. Ultimately Wrangle gets the sense that the DOL is fishing for candidates for a DOL Audit and resulting penalty income.
The DOL Audit can take any client even with Herculean strength down to its knees. The audit will review not just the Form 5500 and Plan Documents, but scores of other materials that fall under ERISA. See the side bar to the right for an example of what would be required.
Who Gets Picked?
Generally speaking, Plan Sponsors cannot control if an auditor will send a letter of inquiry to them. However, the audit selection is not necessarily just based on the principles of random selection.
Here are the top 5 reasons why the DOL may select your client:
1. With the e-filing process of the 5500s, the DOL can quickly:
- Compare Pension Plan Form 5500s and Health and Welfare filed Form 5500s. Often times, a Plan Sponsor will complete the requirements for the Pension / 401(k) but fail on the Health and Welfare Plan side.
- Compare notes with the IRS and other government entities with their e-filing reports and see if there are any mistakes
- Assess if the Plan Administrator failed to complete the Form 5500 report(s)
- Notice inconsistencies in the Form 5500 Schedules, negative auditor’s opinions, etc.
Example: Per ASPPA.org : In 2015, the Employee Benefit Security Administration (EBSA) sent about 1,200 letters by email to filers of 2014 Form 5500 that did not properly include the report of an independent accountant.
For those who do not comply they will receive the Notice of Rejection letter and can expect that they are on the DOL’s radar for an audit.
Source:Â https://www.asppa.org/News/Article/ArticleID/5554
2. The DOL also tracks companies in the news, periodicals and other media outlets and if these lead to questions, an inquiry may be the end result.
3. Other governmental entities may advise the DOL to pursue an audit based on their gathered data.
4. The plan participants enrolled in the Group Health and Welfare Plan may file a complaint drawing in the DOL’s attention.
In FY 2017, EBSA’s benefits advisors closed more than 174,000 inquiries and recovered $418.7 million in benefits on behalf of workers and their families through informal resolution of individual complaints.
5. Finally yes, the DOL may have randomly selected the Plan Sponsor to participate in its audit process.
Source:Â https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/enforcement/oe-manual/chapter-53
Preventive Steps:
Why do some Plan Sponsors have no issues during an audit? For Plan Sponsors to have a successful outcome, their approach included preventive steps taken ahead of time. Three key steps are:
- Determine who is responsible to understand and manage the Plan’s ERISA material as well as serve as the Spokesperson with DOL.
- Hire an ERISA attorney to review and advise on the Plan’s ERISA documents and procedures on reporting and disclosure.
- Hire an outside firm that specializes in ERISA to run a DOL-like audit to find holes and voids. The DOL provides guidelines on this type of auditing process as well as references the American Institute of Certified Public Accountants, Employee Benefit Plan Audit Quality Center to search for an auditor. (Helpful link:Â https://www.aicpa.org/interestareas/employeebenefitplanauditquality.html)
Overall, correcting any areas proactively could make a positive impact on the actual DOL audit.
How Can Wrangle Help
We cannot provide legal advice on how to handle the audit. Never the less, if the matter concerns the Health and Welfare Form 5500s, we will gather and provide those 5500s and SARs that we prepared and still have readily available.  Other years may need to be pulled from the DOL’s EFAST site or from the company’s files.
Wrangle can also assist in the delinquent filer voluntary compliance program (DFVC) once the green light is provided by the Plan Sponsor. Please note: the DFVC program is only an option presuming the DOL did not send a letter outside of the audit specifying that their 5500 status is out of compliance. (If the Plan Sponsor did receive a letter stating noncompliance, the DOL does not allow the DFVC program to be utilized). The DFVC does require a penalty fee, but it is substantially less than the $2,140 per day that the DOL could impose. The most to pay under the DFVC program is $4,000 total per ERISA Plan.
For more details from the DOL on their audit process, click on this link:
https://www.oig.dol.gov/auditprocess.htm
For more information on DOL Audits or to receive this Blog in the form of a PDF copy, feel free to reach out to Ann McAdam, Wrangle’s Technical Consultant at amcadam@wrangle5500.com
Typical Materials Requested During a DOL Audit:
ERISA Plan Documents, Wrap SPDs, Form 5500s and Summary Annual Reports (SAR)
Insurance contracts, bills for premiums & copies of checks to insurance carriers
Trust Agreements and Mergers & Acquisitions
List of Service Providers as well as their contracts & fee schedules
Enrollment forms, Eligibility criteria and ERISA Mandatory Notices to EEs such as Notice of Special Enrollment & HIPAA Certificate of Coverage