As the IRS, U.S. Dept. of Labor and other federal agencies continue to step up enforcement of employer practices and employee benefit plans, the potential for an organization to be subject to an audit is very real. Employers have reported anecdotally an increase in audit activity around ERISA, HIPAA, PPACA, FLSA, and tax rules associated with employment and employer plans. In addition, some employers are seeing an increase in seemingly random requests from the agencies about the employer’s compliance requirements.
Typically, an organization will receive a letter from a regulator with a long list of required documents to be sent to the investigator with a very short response time requested – sometimes as little as 10 days from the date of the receipt of the letter. That can cause some consternation on the part of the recipients, some of whom freeze on receipt of the letters. Primarily because the list of requested documents is so long and the HR department person who receives the letter may have no idea where to start.
Often, the list of required documents includes things as basic as signed plan documents, summary plan descriptions, recent 5500s that were filed, documentation regarding grandfather status of the plan (if claimed) and the like. All of the documents should already exist for all employer plans.
Generally, employers may have no control over whether they are the subject of an audit and there is almost no plan that can be 100% in compliance with 100% of the rules. They are just too numerous and complex. However, employers that maintain appropriate documentation, keep the documentation organized and can gather it quickly are in a good place to alleviate the concerns of any investigator regarding the employer’s practices.
Therefore, in your “free” time (actually, HR should make the time to do this) all employers should take the opportunity, before an audit is commenced, to make sure its documentation is accessible. If you have trouble locating the documentation, it might require that you obtain copies of those documents to have ready in the event of an audit. Even if you are not actually audited, this is not lost time, as those documents are required for plan compliance in any event.
Keys Points to Remember About an Agency Audit
- Agencies have staff and intention to conduct random audits
- PPACA, ERISA and FLSA audits have seen uptick
- Review current practices and plans
- Gather required compliance documentation NOW!
- Prepare necessary documentation to provide back-up for those documents that cannot be located. They are legally required anyway, so it’s not JUST insurance
- Plan response process
- When you receive letter—do not wait to reply or seek assistance! Auditors are generally understandable regarding additional time to respond—just don’t wait until the day the response is due.