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ERISA Compliance Is Getting Harder, and the DOL is Getting Serious

February 23, 2021

We’re the kind of compliance people who like to say "yes!" whenever possible. Using scare tactics isn't one of our preferred methods of motivation. Don't get us wrong; we're still nerds who can spin out about precise requirements and liability concerns at a moment's notice. It's just that we are also quite willing to engage in discussions about relative business risks. 

That all being said, we are all about informing our friends of compliance trends and facts. So we'd be remiss if we did not discuss with all of you what's been going on lately with the Department of Labor's Employee Benefits Security Administration (EBSA). Long story short, things are getting real when it comes to enforcement of the Employee Retirement Income Security Act (ERISA), aka the federal law that governs almost all group health and welfare benefit plans.

Recently the EBSA issued a report and a related news release about its recent ERISA enforcement efforts. They’ve been busy over the past four years, taking more action and levying more fines against non-compliant group employee benefit plans than ever before. Between fiscal years 2016 and 2020, the EBSA recovered over $8 billion from employer-sponsored plans, increasing its recoveries by 175 percent from FY 2017 to 2020 and 310 percent from FY 2016 to FY 2020. In 2020, the EBSA brought in over $3.1 billion through benefit plan enforcement action—the most in agency history. $2.602 billion came from enforcement actions and $456 million from benefit recoveries through informal complaint resolution. Meanwhile, fines for a wide variety of ERISA violations just went up

The way the EBSA makes these plan recoveries is through direct interaction with group health plan sponsors. In 2020 alone, the DOL conducted 1,122 formal ERISA civil investigations and closed 230 ERISA criminal investigations. While those numbers are significant, we're really paying attention to a statistic that involves a much higher one. Over the past 12 months, the EBSA handled more than 171,000 employee benefit plan “compliance inquiries.” 

EBSA “compliance inquiries” (colloquially called audits) are what most employers and benefit plan advisors think of when they imagine the DOL reaching out with questions about a benefit plan. An EBSA inquiry is a less formal process than a full civil or criminal investigation, but it is still very serious business involving full employer cooperation. They typically begin when the agency becomes aware of a potential issue with the plan. Sometimes it is an employee complaint that commands their attention. Other times it’s the plan’s association with a particular vendor, product, or program that leads EBSA to wonder if there might be a looming issue. Inquiries can also stem from data the plan submits to the federal government through a required plan disclosure, such as a Form 5500 filing. No matter what the trigger, the EBSA will always attempt to obtain voluntary compliance from a plan first. But make no mistake about it; full compliance is the ultimate goal. Both fines and corrective action may be part of the process, and inquiries can lead to full-blown investigations if mismanaged.

Making things even more complicated for plan sponsors are the new federal requirements for plan sponsors regarding enforcement of the Mental Health Parity and Addiction Equity Act.  The Consolidated Appropriations Act of 2021 requires group health plan sponsors and individual and group health insurance carriers to perform and document comparative analyses of how every plan design they offer applies non-quantitative treatment limitations (NQTL) for mental health and substance use disorders. Employers need to be ready to make this and other parity compliance information available to the federal Departments of Health and Human Services and Labor upon request.

Mental health parity compliance was already a large part of the EBSA’s compliance enforcement efforts. In 2020, federal regulators closed formal 129 mental health parity investigations.  According to the DOL, “Self-insured health plans accounted for over two-thirds of the investigations…Plans were required to remove offending plan provisions, reprocess claims using permissible criteria, and reimburse participants for claims that were improperly denied.” For 2021, the DOL has identified three areas to emphasize as part of its 2021 national enforcement initiative: 

  1. Processes for determining whether provider reimbursement rates might indicate an MHPAEA violation;
  2. Accuracy of provider network directories; and 
  3. Treatment limitations regarding autism spectrum disorder. 

When we put this information together with the new NQTL comparison documentation requirement, we know that many plans might need to do a little bit of work to ensure their parity compliance is up to snuff.

So you know what this all means, friends. It’s time to get your ducks in a row. If you are a broker, start thinking about which clients of yours might be at risk. If you are an employer plan sponsor and are worried you might be missing something, an excellent place to start is with a self-review of compliance efforts and plan documents. It will help you proactively identify any outstanding issues to work on and potential compliance liabilities. Finally, if you find all of this a little overwhelming, have questions, or want to climb back into bed and eat carbs and cheese exclusively until things stop being bonkers, please phone or email a friend! COVID may prevent us from delivering homemade mac and cheese right to your office, but we will be happy to use  our powers to sort out all of your benefit plan compliance problems!