ERISA AufitWould your benefit plans survive an ERISA audit? The latest audits, related to employee benefit plans, are not the same audits that have historically been done for a 401k plan. These newer audits are far more comprehensive and probing in nature and if not done properly, fines of $1,000 to $1 million could be imposed.

What is ERISA?
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.

ERISA requires plans to provide participants with plan information including important information about plan features and funding; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a grievance and appeals process for participants to get benefits from their plans; and gives participants the right to sue for benefits and breaches of fiduciary duty.

What agencies are involved?

There are a number of agencies with jurisdiction over or connected to ERISA plans including;

  • U.S. Department of Labor (DOL)
  • Employee Benefits Security Administration (EBSA)
  • U.S. Department of Labor (“DOL”)
  • U.S. Internal Revenue Service (“IRS”)
  • Health and Human Services (“HHS”)
  • States Attorney General (“AGs”)

I haven’t heard of EBSA before what is it?
EBSA is falls under the DOL umbrella with a mission statement of “assure the security of the retirement, health and other workplace related benefits of America’s workers and their families. We will accomplish this mission by developing effective regulations; assisting and educating workers, plan sponsors, fiduciaries and service providers; and vigorously enforcing the law.” EBSA enforces ERISA and oversees and audits retirement plans, health plans and welfare benefit plans.

Who gets Audited?
Every year thousands of ERISA-governed plans are selected for audit by governmental agencies.

DOL has significantly increased audit enforcement and IRS announced it is stepping up examination and enforcement activities and plans to dramatically increase the number of plan returns audited in the current and next fiscal year. HHS is now getting into the Act, along with States Attorney Generals Offices.

What have been some of the results plan investigations? Are there examples of some of the fines?
In FY 2013, EBSA closed 3,677 civil investigations with 2,677 (72.8%) resulting in monetary penalty for plans or other corrective action, exhibiting its ability to effectively target ERISA violators in the employee benefit plan universe.

EBSA Investigations Led To The Indictment Of 88 Persons For Crimes Related To Employee Benefit Plans in FY 2013

    • $55,760 – Incompetence and neglect delivering insurance contracts to Participants17
    • $62,250 – Failure to deliver SPD to Participant in manner required by DOL18
    • $64,900 – Provided SPD, but failed to provide requested full Plan Document19
    • $86,500 – Failure to file complete and accurate Form 550020
    • $105,840 – Plaintiff’s attorney’s fees in LTD claim case; award unknown21
    • $159,000 – Late entrant; employer gave employee wrong waiting period & ordered to pay claim22

Check with your Employee Benefits Insurance Broker to see what they are doing to prepare you for an ERISA audit. If they haven’t even mentioned it, then it’s time for you to look at a new broker – like RogersGray (yes, shameless plug we know!)

If you don’t believe us…here’s a great letter we received!

Our broker and consultant, RogersGray, had previously created a wrap document for Feeney Brothers containing our plan documents, summary plan descriptions, contracts, claims appeals processes, noticing procedures and more….This document was a major focus. We are pleased to say that Feeney Brothers satisfied every request of the DOL and received no fines as a result of the audit.

In the words of the attending auditor, “Thank you for making my job easy.”

RogersGray’s proactive preparation and attention to detail made this a smooth and painless process for Feeney Brothers. Without their involvement, we feel the result would have been very different.

 Rachel Li, CPA, CFP
Feeney Brothers Excavation LLC