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How to Prevent Employee Benefits Security Administration Audits

auditanalysis
Alexandre Diard
auditanalysis

The Employee Benefits Security Administration (EBSA) has the authority to conduct an investigation, or employee benefits audit, of a company’s health and welfare plan at any time to ensure that the plan is in compliance with federal laws, including the Employee Retirement Income Security Act (ERISA), Patient Protection and Affordable Care Act (ACA), and Health Insurance Portability and Accountability Act (HIPAA).

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Employee Benefits Security Administration

In 2017, the Employee Benefits Security Administration restored a total of $1.1 billion to employee benefits plans, participants, and beneficiaries. Of that amount, $682.3 million resulted from agency enforcement actions, $10 million from the Voluntary Fiduciary Correction Program, $27.9 million from the Abandoned Plan Program, and $418.7 million from informal complaint resolutions.

That same year, EBSA closed 1,707 civil investigations. More than 65 percent of those cases led to monetary recoveries or some other type of corrective action, demonstrating EBSA’s tenacity in tracking down and penalizing employee benefits plan violators.

As an employer that offers group employee benefits, you should know the likely triggers of an Employee Benefits Security Administration audit and understand the steps you can take to minimize the chances of being audited by the Employee Benefits Security Administration.

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Common Employee Benefits Security Administration audit triggers

Following are some of the more common triggers for EBSA audits:

- Employee complaints to the Department of Labor (DOL)
- Suspicious information reported on Form 5500, or filing inconsistencies
- Issues with Summary Plan Description compliance
- HIPAA compliance problems
- Press tips received on the employer
- Public visibility of the company or its vendors
- Enforcement priorities by the DOL
- Random selection

If your company never has been audited by the DOL, you might wonder how you would know whether you’re the target of an Employee Benefits Security Administration audit. EBSA sends an investigatory letter to inform employers of a pending audit. Usually, the letter includes a list of documents that the employer must submit by a specific date. Failure to respond appropriately could lead to requests for more documents, onsite visits, or enforcement actions by EBSA.

Although some employee benefits audits are unavoidable, those stemming from mistakes made by the employer can be prevented.

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Employee Benefits Security Administration audit prevention tips

You may be able to prevent unnecessary Employee Benefits Security Administration audits in the following ways:

- Conduct frequent internal assessments of areas susceptible to audit, such as employee notices, employer reporting, retirement plan limits, and health insurance coverages.

- Use the DOL’s self-compliance tool to determine whether your group health plan satisfies certain aspects of ERISA.

- Fix all issues identified during your internal evaluations. The DOL has programs, such as the Delinquent Filer Voluntary Compliance Program, that employers can use to correct specific violations discovered before the audit.

- Stay abreast of relevant regulations and update your plan accordingly.

- Maintain organized, easily accessible records.

- Distribute employee notices and file Form 5500 accurately and on time.

- Require that your vendors, such as your third-party administrator, inform you immediately if noncompliance occurs on their end.

-Respond promptly to employees’ questions about their employee benefits.

The consequences of breaching EBSA rules vary by violation. For failing to hand over information requested by EBSA, an employer can be fined up to $110 per day but no more than $1,100 per request. Employee Benefits Security Administration audits mean business.

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