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Understanding Health and Welfare Benefit Plan Audit Requirements, Areas of Focus and Required Information

Written by Missy Herbert on February 15, 2021


Health and welfare benefit plans provide companies with an important retention and recruitment tool. However, these plans carry many requirements and responsibilities that employers must consider, such as fiduciary obligations and reporting guidelines 

Whether youre a large company or a new startup, it is crucial to understand the health and welfare benefit plan audit requirements to prevent disruptions and penalties for non-compliance. 

Here, we’ve outlined the basics of what you need to know when it comes to health and welfare benefit plans—from audit requirements to things that may prompt an audit to the things the DOL will look for.  

Authority of the Department of Labor 

Employers should be aware that all health and welfare plans are subject to an audit from the Department of Labor and take proactive measures accordingly.  

The Employee Benefits Security Administration (EBSA) is part of the Department of Labor (DOL) that is responsible for monitoring health plans throughout the United States.  

The DOL has recently expanded its capacity to effectively regulate these plans, and the EBSA has focused their investigations specifically on the systemic problems associated with claims procedures, service providers, and the operations of health plans.  

Most dental, health, disability and vision plans fall under the authority of the DOL and the provisions outlined by the Employee Retirement Income Security Act (ERISA). 

What Could Prompt a DOL Health Plan Audit? 

An employee benefit plan review can be initiated through several different causes. Some common triggers for a DOL audit include: 

  • Complaints brought forth to the DOL – An example could include an employee complaining about the operation of a health and welfare benefit plan, which may trigger a DOL investigation. 
  • Missing any reporting deadline – If an organization fails to file an annual report or Form 5500, such actions may lead to an audit. 
  • Standard audit – There doesn’t have to be any specific event that triggers a DOL audit. The DOL may choose to conduct an audit as part of their normal operations. 
  • Other agencies may initiate an audit. – A common example is the IRS initiating an audit if anything they have found raises concerns that warrant a closer look.  

Required Information for a DOL Audit 

During the beginning stages of an audit, a corporate entity will receive notification from the DOL that will outline the documentation that is required. Typically, the relevant documentation will include: 

  • Summary plan descriptions 
  • Plan documents 
  • Service provider documents 
  • Certificates of coverage 
  • Claims data 
  • Financial documents for funded plans 
  • Premium contribution payment schedules 

Areas of Focus for an Audit 

A DOL audit determines whether a plan complies with relevant legislation and guidelines. These potential compliance issues cover areas that include:  

  • Patient protections, internal claims, market reforms, the extension of dependent coverage as well as appeals, grandfathered health plans, and external reviews 
  • Plan documents may involve ACA and ERISA compliant procedures and language but fail to operate health benefits within all legal requirements or requirements dictated by the plan document. 
  • Claims and plan administrators fail to provide required health benefits due to misapplication or lack of disclosure of the terms of the health plan. 

What the DOL Looks for in an Audit 

The required information above is not a simple checklist. There are specific areas in which the DOL will focus their efforts for a health and welfare benefit plan review.  

Itparamount for employers and plan administrators to understand the health and welfare benefit plan audit requirements to prevent any non-compliance issues and accompanying penalties. 

Some of the areas that the DOL focuses on include the full plan details, the plan document, and the Form 5500 filings. 

1. Full Plan Details

One of the ERISA requirements is that employees are provided a Summary Plan Description (SPD) that lays out in plain language the basic features and information of the plan.  

Employees must receive an SPD within 90 days of first becoming covered by the provisions of the plan. ERISA further requires that employees be given an updated SPD whenever the plan is amended within a specified number of years based on the plan. 

2. The Plan Document

Employers have flexibility in the design of benefits programs. Some benefit plans differentiate between insurance contracts or benefit type by forming separate plans or grouping together different insurance contracts or benefits as a separate plan.  

However, under ERISA, every health and welfare benefit plan must feature a Plan Document available in writing. The Plan Document must stipulate the plan sponsor, plan name, benefit(s), benefit funding, plan administrator, administration procedures, and eligibility requirements. 

3. Form 5500 Filings 

All health and welfare benefit plans involving more than 99 participants at the start of any plan year are required to file a Form 5500 with the Department of Labor.  

Form 5500 must be filed within seven calendar months from the end of the plan year. Note that deadlines have been granted special consideration during the COVID-19 pandemic, and special rules may apply for your Form 5500 filing. 

Employers Must Be Proactive in Ensuring Compliance 

 Simply because a third-party administrator or an insurance carrier is involved doesn’t mean that prepared documents will comply with DOL specifications.  

Its not enough for employers to gather required documents for an audit, such as summary plan documents, employee notices, and plan documents. Employers must ensure that these documents contain all required components for compliance with health and welfare benefit plan audit requirements.  

These measures include making sure that all claims are paid according to the plan documents.  

Also, employers must systematically review all practices and policies to verify that they follow all health and welfare laws that include HIPAA, COBRA, the Family and Medical Leave Act  (FMLA), and other relevant guidelines. 

Contacting a trusted advisor can assist in this process.   

Professional Help with Health and Welfare Benefit Plan Audit Requirements 

We know that the landscape concerning the health and welfare benefit plan requirements can be challenging to navigate. This is why it is smart to seek the help of experienced professionals. Contact Warren Averett today to ensure that you are prepared for your employee benefit plan review. 

Employee Benefit Plan Audit: Is Your Company's Form 5500 Accurate?

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