In recent weeks the DOL has issued a number of notices to plan sponsors for both retirement and health & welfare plans.
Retirement plans – the notices relate to Form 5500 filings. These notices relate to the information reported on the Schedule H vs the information reported on the Schedule C. Specifically, plans that report investments in mutual funds are not reporting direct and/or indirect compensation on Schedule C. Typically, mutual funds incur investment related fees and expenses such as 12b-1 fees, investment management fees and transfer agent fees. Such expenses are generally reported in the prospectus enabling the plan sponsor to indicate that eligible indirect compensation was paid. The DOL is requesting a response within 15 days of the date of the DOL letter.
Another area of focus is late contributions and VFCP filings. If a Form 5500 indicates that there were late contributions and no VFCP filing, you may be visited by the DOL.
A word of caution: answer all DOL requests promptly and provide the information requested. Failure to do so could not only result in penalties but could result in a 401(k) review extending to a health & welfare plan review.
Health & Welfare plans – we have seen a very interesting notice in which the DOL is questioning the number of persons covered as reported on a Schedule A vs the number of participants reported on line 6 of the Form 5500. The letter was sent to plan that is funded via a combination insured and self-insured coverages; not an unusual scenario. The notice requires a response as to why there is a difference. The notice also requested information regarding stop loss insurance. Stop loss was not indicated on any of the Schedules A submitted. In addition, the instructions to the Schedule A indicate the circumstances when a Schedule A is required for stop loss and most times it is not required as most stop loss policies are paid out of the general assets of the employer without any employee contributions.
At the end of 2007, we issued an ErisaALERT which contained many of the items in a DOL audit letter. The latest letters include Affordable Care Act (ACA) questions relating to grandfathering. If the plan is grandfathered, you will have to prove it. If the plan is not grandfathered you will be asked to provide evidence of ACA related notices, procedures and contracts (claims appeals, preventive services description, IRO contracts). Regardless of whether the plan is grandfathered, you will be asked to provide ACA information such as the dependent coverage to age 26 notices, list of any coverage rescissions and information regarding annual limits.
Bottom line: begin to gather all the data typically requested by the DOL. If you should receive an audit notice, you will not face a mad scramble to locate the requested information. The DOL typically requests a 10 business day turnaround but you should be able to get an extension.
You may want to check our new blog periodically for quick updates on compliance issues.
Note: all links are active as of the date of issuance of this ErisaALERT.
Disclaimer: This material is for the sole purpose of providing general information and does not under any circumstances constitute legal advice and should not be used as a substitute for legal advice. You should seek the advice of counsel when applying the requirements to your plan. For more information on this ErisaALERT contact us by phone at 610-524-5351 and ask for Mary Andersen or 973-994-7539 and ask for Theresa Borzelli.
