The Dreaded ERISA Audit:
Are you Prepared?
Sue Mathiesen, Director of Research, McGraw
Wentworth
Audit Activity is Ramping Up
DOL actively auditing employer plans and letters getting worse
2010 – audits, what audits?
2013 letters asking for more than 2012 letters (HIPAA added)
Typical audit letter includes 6 pages of requested materials
with several years of documents requested
Typically 30 to 45 days to produce requested documents
Have seen documents requested in as little as 10 DAYS
Employers can request an extension of time – request this extension if
you need extra time
Be sure to organize the information requested – auditors
appreciate an organized submission
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How Can You Survive An Audit?
You will survive an audit if prepare for the items they request
Focus on the scope of items requested
Today we will review the elements in the typical audit letter
Review and explain the requirement
Provide you with DOL resources, model language and
recommendations
You may have a number of areas that you need to address
You will not be able to fix everything overnight-schedule time
each week to tackle areas that you need to address
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1. ERISA Plan Document
The plan administrator must furnish copies of certain documents
upon written request and must have copies available for
examination
Plan document establishes an employer’s ERISA plan
Must indicate the 500 series plan number
Must specify the plan name – “Health and Welfare plan of ABC
Company”
Can consist of more than one benefit (health, dental, life, etc)
This document is very similar to the SPD or is a document that
will refer to each SPD for every benefit covered by the plan
More information on ERISA can be found at:
http://www.dol.gov/ebsa/compliance_assistance.html
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2. ERISA Summary Plan Description
Primary vehicle for informing participants and beneficiaries
about their plan and how it operates – many rules
Must be written for average participant and apprise covered persons of their
benefits, rights, and obligations under the plan
Must accurately reflect the plan’s contents as of the date not earlier than 120
days prior to the date the SPD is disclosed
Summary of required content:
Cost-sharing provisions, including premiums, deductibles, coinsurance and
copayment amounts
Annual or lifetime caps or other limits on benefits under the plan
The extent to which preventive services are covered under the plan
Whether, and under what circumstances, existing and new drugs are covered
under the plan
Statement of ERISA rights under the plan
Conditions or limits applicable to obtaining emergency medical care
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2. ERISA Summary Plan Description
Required SPD content (continued):
Whether, and under what circumstances, coverage is provided for medical tests,
devices and procedures
Provisions governing the use of network providers and under what circumstances,
coverage is provided for out-of-network services
Conditions or limits on the selection of primary care providers or providers of
specialty medical care
Provisions requiring preauthorizations or utilization review
How plan benefits may be obtained and the process for appealing denied
benefits
Distribution rules
To participants within 90 days of becoming covered by the plan
Updated SPD must be furnished every 5 years if changes made to SPD
information or plan is amended
If no changes made, must be furnished every 10 years
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3. Form 5500s
Typically request the last 3 years of 5500s
Not all plans have to file 5500s
Exemption for small unfunded, insured, and combination unfunded/insured
welfare plans
“Small” for these purposes is defined as fewer than 100 participants at
the beginning of the plan year
Unfunded – no plan assets (this could be an issue if a plan uses a trust
account or separate account to fund benefits)
More details on 5500s http://www.dol.gov/ebsa/5500main.html
Troubleshooting guide to filing 5500s http://www.dol.gov/ebsa/pdf/troubleshootersguide.pdf
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4. All Insurance Contracts
For insured plans, this would include all insurance contracts
governing benefits and detailing employer rules
Remember, many employers have a number of different
benefits covered under one ERISA plan
For example, ABC’s Health and Welfare Plan 501 covers life, medical,
disability, and dental benefits
All the insurance contracts associated with these benefits must be
provided
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5. All Contracts – Self-funded Plans
Most employers that self-fund any of their benefits hire service
providers for specific plan services
Administrative services contract for eligibility and claims payment
Reinsurance contracts (both specific and aggregate)
PPO network contracts (if direct relationships)
Contracts with any vendors that provide Independent Reviews for appeals
under the self-funded medical plan
Please note, if a plan is self-funded that must be disclosed in the
ERISA plan document and SPD
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6. Cost Sharing Provisions
Many of the benefits offered under an ERISA plan are
contributory
ERISA requires employer plan documents to outline the cost
sharing splits between employee/employer
Applies to premium (if split is percentage, share percentage)
For any other type of contribution arrangement, the funding split
needs to be disclosed-this can be done in an addendum to the SPD
Cost-sharing related to services covered by the plan must also
be disclosed (typically included in SPD)
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7. A Number of HIPAA Disclosures
A copy of eligibility and enrollment rules for the plan
Certificates of creditable coverage (requirement expires
12/31/2014)
Sample certificate of creditable coverage
Record of certificates of creditable coverage provided
Copy of written procedures to request/receive certificates of creditable
coverage
Pre-existing condition requirements (only applies if plan has
pre-existing condition limitation-can’t have pre-ex after 2014)
General notice of pre-existing condition limitation
Copies of individual notices relating to pre-ex limitation
Criteria to demonstrate creditable coverage by an alternative means
Records of claims denied due to a pre-existing condition
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7. A Number of HIPAA Disclosures
Copy of written procedures that provide special enrollment
rights under the plan
Information regarding benefit claim determinations
Adverse benefit determinations must include required disclosures
The specific reason(s) for the denial of a claim
• Reference to the specific plan provisions on which the benefit determination is
based
• A description of the plan’s appeal procedures
•
A copy of the written appeal procedures established by the
plan
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8. Mental Health Parity Provisions
Copy of the plan provisions related to benefits for
medical/surgical services and mental health/substance abuse
Mental Health Parity and Addiction Equity Act applies to most
employers
Small group (under 50 lives) self-funded exemption
Cost increase exemption (but must comply every other year)
Requires parity between medical/surgical services and mental
health/substance abuse services
Cost-sharing elements
Non-quantitative rules (pre-certification, requirement to use outpatient
facilities, and so on
More information at
http://www.dol.gov/ebsa/mentalhealthparity/
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9. Newborns’ Mothers’ Protection Act
Plan language on the Newborns’ and Mothers’ Health
Protection Act (NMPA)
Group health plans and health insurance issuers generally may not, under
federal law, restrict benefits for any hospital length of stay in connection with
childbirth for the mother or newborn child to less than 48 hours following a
vaginal delivery, or less than 96 hours following a cesarean section. However,
federal law generally does not prohibit the mother's or newborn's attending
provider, after consulting with the mother, from discharging the mother or her
newborn earlier than 48 hours (or 96 hours as applicable). In any case, plans
and issuers may not, under federal law, require that a provider obtain
authorization from the plan or the issuer for prescribing a length of stay not in
excess of 48 hours (or 96 hours).
Must be included in SPD
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10. Prior Authorization Rules
Copy of SPD language and rules for pre-authorization
requirements
Specific to hospital stay in connection with childbirth (meets NMPA
requirements)
Specific to mental health and substance abuse treatment (make sure it
is parity with medical/surgical requirements)
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11. WHCRA Information
Written description of benefits mandated by the Women's
Health and Cancer Rights Act (WHCRA) that is provided upon
enrollment
Can be included with enrollment materials or in SPD (but only if SPD is
distributed at enrollment)
Notice must include key elements required by WHCRA
•
•
•
If a plan provides coverage for mastectomies, it must also provide coverage for
reconstructive surgery
Coverage must be provided for surgery and reconstruction on the other breast to
provide a symmetrical appearance
Coverage must be provided for prostheses
Elaws resources (included model notice language)
http://www.dol.gov/elaws/ebsa/health/employer/NewMenu.asp
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12. WHCRA Information
Language provided as required by WHCRA to participants on
an annual basis
Should be included with open enrollment materials-more of a
summary
Do you know that your plan, as required by the Women’s Health and
Cancer Rights Act of 1998, provides benefits for mastectomy-related
services, including all stages of reconstruction and surgery to achieve
symmetry between the breasts, prostheses, and complications resulting
from a mastectomy, including lymphedema? Call your plan administrator
at [insert phone number] for more information.
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13. Wellness Plans Information
Wellness and disease management program descriptions
The plan language must address any rewards provided by
these programs
Reward programs must contain all the details
How rewards are earned
Amount of any potential rewards (make sure in line with HIPAA
nondiscrimination requirements)
Health contingent wellness plans
•
•
•
When individuals can qualify for the rewards (must be allowed annually)
If criteria for reward is based on the achievement of a health factor, an
alternative standard must be offered
Depending on the type of wellness plan
• Alternative must be provided only if medically necessary (activity-only wellness plans)
• Alternative must be provided to everyone in an outcomes-based wellness plan
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14. COBRA Notices
All Notices
General Notice (initial notice)
COBRA Election Notice
Notice of Unavailability of COBRA
Notice of Insufficient Payment
Notice of Early Termination of COBRA
Helpful COBRA Guide for Employers
http://www.dol.gov/ebsa/publications/cobraemployer.html
Model notices
http://www.dol.gov/ebsa/compliance_assistance.html#section2
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15. Grandfathered Plan
Disclosure of grandfathered status statement required for any
plan documents (newsletters and SPDs)
This [group health plan or health insurance issuer] believes this [plan or coverage] is a “grandfathered health
plan” under the Patient Protection and Affordable Care Act (the Affordable Care Act). As permitted by the
Affordable Care Act, a grandfathered health plan can preserve certain basic health coverage that was already
in effect when that law was enacted. Being a grandfathered health plan means that your [plan or policy] may
not include certain consumer protections of the Affordable Care Act that apply to other plans, for example, the
requirement for the provision of preventive health services without any cost sharing. However, grandfathered
health plans must comply with certain other consumer protections in the Affordable Care Act, for example, the
elimination of lifetime limits on benefits.
Questions regarding which protections apply and which protections do not apply to a grandfathered health
plan and what might cause a plan to change from grandfathered health plan status can be directed to the plan
administrator at [insert contact information]. [For ERISA plans, insert: You may also contact the Employee Benefits
Security Administration, U.S. Department of Labor at 1-866-444-3272 or www.dol.gov/ebsa/healthreform.
This website has a table summarizing which protections do and do not apply to grandfathered health plans.]
[For individual market policies and nonfederal governmental plans, insert: You may also contact the U.S.
Department of Health and Human Services at www.healthreform.gov.]
Records documenting terms of the plan as of March 21, 2010
and must demonstrate plan maintenance of grandfathered status
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16. Notices for Health Reform
Written notice of dependents enrollment opportunity when plan
extended coverage to age 26
Individuals whose coverage ended, or who were denied coverage (or were not eligible for
coverage), because the availability of dependent coverage of children ended before
attainment of age 26 are eligible to enroll in [Insert name of group health plan or health
insurance coverage]. Individuals may request enrollment for such children for 30 days from the
date of notice. Enrollment will be effective retroactively to [insert date that is the first day of
the first plan year beginning on or after September 23, 2010.] For more information contact
the [insert plan administrator or issuer] at [insert contact information].
Copies of coverage rescissions showing 30 day advance notice
Show annual and lifetime dollar limits for the plan (9/23/2010)
Show notice of lifetime dollar limit no longer applying
The lifetime limit on the dollar value of benefits under [Insert name of group health plan or
health insurance issuer] no longer applies. Individuals whose coverage ended by reason of
reaching a lifetime limit under the plan are eligible to enroll in the plan. Individuals have 30
days from the date of this notice to request enrollment. For more information contact the [insert
plan administrator or issuer] at [insert contact information].
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17. Medical Loss Rebates
All documents related to the receipt and disposition of any
medical loss rebates paid by an insurance carrier
ERISA plans need to be cautious with Medical Loss Ratio rebates
Rebates tied to employee contributions to the plan will likely be
considered plan assets
ERISA requires that plan assets be held in trust until the point when they
are needed to fund eligible claims or administrative expenses
Trust non-enforcement stance will apply to premium rebates if they are
used within three months of receipt.
The employer can use them to pay premiums or to issue rebates to plan
participants.
Fiduciaries must act prudently and solely in the interest of plan members,
rebates tied to employee contributions should be used to offset employee
contributions or be provided as a rebate
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19. Non-Grandfathered Plans
Notice of rights to designate any participating primary care
physician – model language
[Name of group health plan or health insurance issuer] generally [requires/allows] the designation of a
primary care provider. You have the right to designate any primary care provider who participates in our
network and who is available to accept you or your family members. [If the plan or health insurance
coverage designates a primary care provider automatically, insert: Until you make this designation, [name of
group health plan or health insurance issuer] designates one for you.] For information on how to select a
primary care provider, and for a list of the participating primary care providers, contact the [plan
administrator or issuer] at [insert contact information].
For plans and issuers that require or allow for the designation of a primary care provider for a child, add:
For children, you may designate a pediatrician as the primary care provider.
For plans and issuers that provide coverage for obstetric or gynecological care and require the designation
by a participant or beneficiary of a primary care provider, add:
You do not need prior authorization from [name of group health plan or issuer] or from any other person
(including a primary care provider) in order to obtain access to obstetrical or gynecological care from a
health care professional in our network who specializes in obstetrics or gynecology. The health care
professional, however, may be required to comply with certain procedures, including obtaining prior
authorization for certain services, following a pre-approved treatment plan, or procedures for making
referrals. For a list of participating health care professionals who specialize in obstetrics or gynecology,
contact the [plan administrator or issuer] at [insert contact information].
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19. Non-Grandfathered Plans
Copies of documents relating to the coverage of preventive
care services as of the first day of the first plan year on or
after 9/23/2010
Remember coverage requirements can change (expansion of well
woman services)
New requirement to cover preventive breast cancer medications for
high risk women
Copy of the plan’s internal claim appeals and external review
processes
Copy of a notice of initial and final adverse benefit
determinations and notice of final external review decision
If applicable, any contract with independent review organization
or TPA providing external review
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21. Genetic Information
All documents related to use or collection of genetic information
for any reason with respect to the plan
GINA information must be included in EEOC poster
Any request for medical information
Request for genetic information for toxic substance monitoring
Notice of disclosure
EEOC poster – model can be found at
http://www.dol.gov/ofccp/regs/compliance/posters/pdf/eeop
ost.pdf
GINA FAQs http://www.dol.gov/ebsa/pdf/faq-GINA.pdf
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New Information May Be Added
Summary of Benefits and Coverage (SBCs)
Marketplace Notices
HIPAA Special Enrollment Rights, CHIP and Medicaid notices
Medicare Part D Notices of Creditable Coverage
More HIPAA – Privacy Requirements (may be separate audit)
Notice of HIPAA Privacy Practices
Notice of breaches of unsecured protected health information
Policies and procedures related to Privacy and Security compliance
Qualified Medical Child Support Order Notices
FMLA Notices and Policies
USERRA Notice (poster)
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Potential Penalties
ERISA includes both civil and criminal penalties
Potential ERISA Civil Violations
Failing to operate plan prudently & for the exclusive benefit of participants
Using plan assets to benefit certain related parties to the plan
Failing to follow the terms of the plan (unless inconsistent with ERISA);
Taking any adverse action against an individual for exercising his or her
rights under the plan
Failure to comply with ERISA Part 7 and the Affordable Care Act (welfare
plans only)
ERISA Criminal Provisions
EBSA also conducts investigations of criminal violations regarding employee
benefit plans such as embezzlement, kickbacks, and false statements under
Title 18 of the U.S. Criminal Code
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More Resources
More details on DOL ERISA enforcement
http://www.dol.gov/ebsa/erisa_enforcement.html
More details on requirements for health plans
http://www.dol.gov/ebsa/publications/CAG.html
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Summary Insights
Is that all? Most employers will have at least one aspect that
will be audited that they should address more thoroughly
It also makes sense to document the process that is used to
distribute all required publications and notices
If you are audited-don’t panic
Gather and submit the materials requested
Good faith compliance efforts are recognized - most audits result in the
DOL making recommendations to improve materials
Rarely are penalties assessed unless you don’t cooperate or have not
made efforts to comply
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