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DOL Increases Audits to Enforce ACA Compliance

Reproduced with permission from Infinisource, Inc., www.infinisource.com, 800-300-3838.

Employers subject to COBRA can also be subject to a DOL audit of the documents, procedures and processes related to those benefits. In March 2012, the IRS provided a plan for COBRA audits and published a guide on audit techniques for examiners to determine an employer’s COBRA compliance.

The DOL’s audit scope has expanded to include Affordable Care Act (ACA) compliance. Employers (plan sponsors) should maintain a binder or electronic file that provides easy access to written records of all the ACA compliance steps and procedures they’ve made.

If the plan has grandfathered health plan status (§1251 of the ACA), the examiner will want to review a copy of the grandfathered health plan status disclosure that was included in plan materials as well as any other documents to verify grandfathered health plan status.

The examiner will want to review other pertinent documents in accordance with ACA, regardless of grandfathered health plan status:

  • A sample of the written notice you send regarding dependent coverage to children to age 26
  • A copy of any notice regarding coverage denial and the list of participants it was sent to
  • Plan limits for each plan year on or after September 23, 2010
  • Any notice you sent advising that the lifetime limit on the dollar value of benefits no longer
  • applies and the individual may once again be eligible for coverage
  • Any documents showing annual limits for each plan year on or after September 23, 2010

If your plan does not claim grandfather status under §1251 of the ACA, the examiner will also need these documents for review:

  • The choice of provider notice regarding pediatrics or obstetrics/gynecology
  • Documents related to emergency services
  • Document related to preventive services
  • The plan’s review procedure
  • Notices of adverse benefit determinations
  • Agreement with any vendor that provides external review

Based on your procedures, the examiner may explore other areas for noncompliance:

  • The number of qualifying events for the time frame under examination
  • The method you use to notify qualified beneficiaries of their COBRA rights
  • How you notify the plan administrator that a qualifying event has occurred
  • The qualified beneficiaries coverage election to continue health care coverage
  • The premium paid by qualified beneficiaries for COBRA coverage

Other documents can provide useful audit information. Federal and state employment tax returns will show changes in the number of employees on the payroll between the period under examination and the preceding year.

When you receive an audit notice, you may want to find answers before the examiner arrives. Review your personnel records and confirm:

  • How many qualifying events occurred in the audit timeframe
  • Documentation that qualified beneficiary was notified of their rights to continuing health coverage
  • Your process of notifying plan administrator that a qualifying event occurred
  • Coverage that each qualified beneficiary elected
  • COBRA premium payments that have been paid or are due from the qualified beneficiary
  • Reasons for termination of COBRA coverage properly elected by the beneficiary

On a regular basis, employers should audit the plans and processes to assure compliance, which now includes the ACA. Your organized and efficient procedures may result in an easy resolution to the DOL audit.

Have you received a DOL audit notice? What would be your biggest audit concern?