Compliance Audits: How to Avoid Penalties
Within the past several years, compliance, with all the provisions set forth by ERISA, the IRS, the Department of Labor (DOL) and now Health & Human Services, can be an incredibly daunting task which places a sizeable administrative burden on employers sponsoring a health plan.
All employers subject to these provisions are also subject to a compliance audit by the DOL. Employers may be chosen at random for an audit, but there are other factors that can lead to an audit. The most common event to trigger a DOL audit are complaints from former (and possibly disgruntled) employees due to late or incorrect COBRA notices – or possibly COBRA notices that were never received. Additionally, with the recent requirement of employers to provide reporting under the ACA’s employer mandate, many complaints of incorrect 1095 reports from employees have triggered DOL audits.
The concern here is that when the DOL audits an employer, they won’t audit just one portion of your health plan, they’ll audit every aspect of your plan, which is included but not limited to:
- All Affordable Care Act (ACA) provisions including affordability and reporting
- W2 reporting of healthcare costs
- Employer mandate reporting
- Plan documents
- Required ERISA disclosure documents
- Form 5500 reporting
- Section 125 and cafeteria plan compliance
- Non-discrimination testing
The Cost of Non-Compliance
Penalties for non-compliance can really add up. Common penalties include:
¹Small businesses definition for W-2 penalty is a business with an average annual gross receipts for the 3 most recent tax years ending before the calendar year in which the W-2s are due are $5 million or less
²$100 per W-2 if correctly filed more than 30 days after the due date, but by August first; maximum penalty is $1,500,00 per year ($500,000 for small business). $250 per W-2 if filed after August 1 or do not file at all; maximum penalty is $3 million per year ($1,500,000 for small business)
How to Avoid Penalties
The best practice here is to be proactive. Make sure you have all the required documents in order so that if you’re subject to a DOL audit, you’re prepared. Since there really isn’t a way to prevent an audit, the best way to protect yourself and your organization is to perform an internal compliance audit of your health plan. There are numerous resources and checklists available from the DOL website, however your Assurance team is happy to help. We can review your plan against our Compliance Checklists to let you know the areas in which your health plan is compliant and where you have gaps. Contact a member of your ‘A’ Team, and we’ll work with you to help get your plans compliant.
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