Comply With Us

What Keeps Us Up at Night (a Look at What the DOL is Up To…)

August 12, 2021

One of our friendly clients often jokes that as his compliance advisors, we always bring the ants to his picnic. Our standard reply is no, what we bring is the weather report (and kick-ass cookie brownies). 

Since we’ve spent a good chunk of our summer helping clients through Department of Labor (DOL) audits related to compliance with the Mental Health Parity and Addiction Equity Act and its Non-quantitative Treatment Limitation Comparative Analysis requirement, the compliance forecast has been top of mind lately. 

The Government Accountability Office (GAO) also wants people like us to know about the DOL’s enforcement patterns and priorities.  Earlier this summer, they published both a top ten list of group health plan violations addressed by the Employee Benefit Security Administration in fiscal year 2020 and a list of the DOL’s top enforcement priorities for the year ahead.  We thought both could use a little friendly review.  

DOL’s Current Top Health Plan Enforcement Priorities

According to the DOL, many of their enforcement and audit activities are going to revolve around (or start with) these four key topics in the year ahead.

  1. MEWA Financial Solvency and Fraud:  Running a multi-employer plan is complicated, and sadly insolvent and/or fraudulent MEWAs have been a problem for years.  That’s why the DOL devotes significant resources to investigating abusive MEWAs who sell the promise of inexpensive health benefit insurance, but default on their obligations. 
  2. Mental Health Parity:  We can personally attest to how serious the DOL about enforcing mental health and substance use disorder parity violations this year!  The new federal requirement that all health plans have a comparative analysis of all non-quantitative treatment limitations at the ready went into effect on February 10, 2021, and parity audit letters started flowing freely from DOL regional offices  this past Spring.  We’ve honestly been shocked by: (1) the volume of audits; (2) the extremely serious (some might even say threatening) tone of the audit letters; and (3) the quick turn-around time plans need to follow (7-10 days is the norm – if you are lucky, you might get an extension of a week or two).  
  3. Emergency Services:  How a plan covers emergency care benefits is on the hot topic list, and we’re guessing it has something to do with the No Surprises Act and how the interim final rule on surprise billing will change emergency care for plans moving forward!
  4. Service Provider Self-Dealing: Plan fiduciaries must always act in the best interest of the plan and its participants, and not in their personal best interest, including when hiring a service provider.  So, the DOL is spending time in the year ahead making sure things like fiduciaries getting commissions or consideration from service providers do not happen.

Most Common Violations

Beyond that, they’ve also spelled out the most common plan violations they encounter, both when dealing with their specific audit hot topics, and during plan enforcement activities generally.

  1. Fiduciary Imprudence: A group health plan must have at least one named fiduciary.  It can be a person or entity, and its typically the plan administrator.  (You can also become a plan fiduciary unwittingly if you engage in activities that show you have control of the plan, but that’s a story for a different blog post.) Plan fiduciaries are required to act solely in the interest of plan participants and beneficiaries and with the care, skill, prudence, and diligence.  If they don’t, they can be held personally liable for their actions.
  2. Exclusive Purpose: Similarly, plan fiduciaries must act for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of plan administration.  This means things like keeping tabs on service providers, making sure that the plan doesn’t pay too much for things, and always keeping what’s in the best interest of plan participants as their top priority.
  3. Fiduciary Self-Dealing: This one’s self-explanatory. Plan fiduciaries aren’t allowed to manage the plan’s assets with their own interest in mind. They always must act in the best financial interest of the plan and its participants.  However, things can get a little murky when a company is the named fiduciary for its own group benefit plan. 
  4. Prohibited Transactions with a Party-in-Interest: Plan fiduciaries are not allowed to engage in a transaction on behalf of the plan that directly benefits another fiduciary, a plan service provider, or their affiliates at the expense of the plan. So, no hiring a plan consultant just because they happen to be your brother.
  5. Failure to Follow Plan Documents: One of our favorites!  How important are plan documents?  Repeat after us – CRITICALLY IMPORTANT!  It always comes back to the plan document.  If a fiduciary or plan is not following their plan document, many, many, many problems can (and almost always do) result. Lawsuits, stop-loss problems, and DOL audit and fine liability top the list. So, make sure your plan’s SPD and Wrap are up-to-date and that you are following them!
  6. Improper Benefit to Employer: A violation that ties closely with “exclusive purpose,” improper benefit to the employer happens when a plan uses its assets to benefit the employer sponsoring the plan and not for the exclusive purpose of providing benefits to the participants and beneficiaries of the plan.
  7. Duty of Disclosure: Another one of our personal favorites!  Did you know that those boring plan documents we love so much need to be written “in a manner reasonably calculated to be understood by the average plan participant”?  AKA “making the complex simple!”  Not only that, but you also must make these documents available to plan participants and meet specific delivery requirements.
  8. Bonding: Some plan fiduciaries who handle plan funds or other plan property need to be covered by a bond to protect the plan against loss because of fraudulent or dishonest acts.  However, in many cases, people dealing with group health plans that pay benefits from the general assets of an employer or union, and group health plans that offer fully insured coverage are exempt from the ERISA bonding requirement.  If you are not sure if the exemption applies, check out this DOL publication.
  9. Annual Reports:  The annual report of a group health plan is its Form 5500 filing.  Many smaller group health plans are exempt from the Form 5500 requirement, since you must have at least 100 participants on the first day of the plan year.  However, if you meet this threshold, you need to file your Form 5500 by the last day of the seventh month after the start of the plan year. In addition, plan administrators generally need to distribute a summary of this report (aka the SAR) within nine months after the end of the plan year.  Otherwise, fines and enforcement action may be in your future!
  10. Failure to Establish a Trust:  ERISA generally requires all assets of an employee benefit plan must be held in trust by one or more trustees.  In many cases, group health plans can avoid the ERISA trust requirements, but this involves understanding what they are, and how to avoid accidentally triggering them.  

What do you think, friends? We hope you don’t lose too much sleep after reading this. The truth is, we don’t really (we just thought the title to this post was catchy). Personally, we like to know what might be coming and what common mistakes others are making so that we can prepare and adjust if needed.But we’re just super-fun like that! Tell us, how are you preparing to keep the group health plans you work with compliant? If there is any way we can help you out, please let us know!