The COBRA Blog

Ready for PPACA compliance 2.0? What you need to know about the coming labor audits

Posted by Robert Meyers on Wed, Jan 07, 2015 @ 13:01 PM

ppaca complianceIt’s time again to bid farewell to another year and sing another chorus of Auld Lang Syne. And after the whirlwind of PPACA challenges in 2014, many employers are probably happy to move on.

But while 2014 is in the history books, 2015 ushers in a whole new era of PPACA compliance challenges.

In fact, you may become more intimately familiar with PPACA reporting requirements in 2015 than you ever wanted to, as the government’s watchful eye grows ever more watchful. For starters, the employer mandate that was postponed from 2014 goes into effect this year.

The big three federal agencies in charge of PPACA compliance -- the U.S. Labor Department's Employee Benefits Security Administration (EBSA), the Internal Revenue Service (IRS), and the U.S. Department of Health and Human Services (HHS) – will also be ramping up their auditing efforts to monitor compliance.

What does that mean for employers?
Unfortunately for many, DOL audits may mean fines and penalties. For example, the reporting and disclosure requirements under the Employee Retirement Income Security Act (ERISA) carry a penalty of up to $110 per person, per day, per violation, for every plan participant affected by a violation.  And most fines for noncompliance are not tax-deductible.

For a rundown on the EBSA PPACA audit program, check out this helpful slide presentation by, a PPACA compliance automation firm. Here are a few highlights:

  • PPACA enforcement will be handled by a new Health Benefits Security Project team set up by the EBSA.
  • EBSA can investigate any fully insured or self-insured Employee Retirement Income Security Act (ERISA) plan.
  • Late filings become a costly risk. An employer can face fines of up to $1,100 per day for each IRS Form 5500 that it files late. The penalty is $110 per day for late delivery of an SPD, SMM, or SAR to a participant, and penalties apply to each plan. For late filing of Annual Report Form 5500, the DOL can fine you $300 per day, up to $30,000 maximum per filing; the IRS can assess a penalty of $25 per day, up to $15,000 maximum per filing.

Investigators will be looking carefully at notices, plan documents, and any gaps between what a plan promises and what it delivers.

What should you do if you receive notice of an audit or investigation?
First, notify your insurance carrier and your attorney, and provide a timely and thorough response. You’ll be asked to provide a host of documents for review, so make sure your paperwork is in order. Cooperate fully with the auditors, but don’t provide more information than they request. If the investigator finds compliance issues, penalties may be waived or reduced if you agree to a settlement (and/or other corrective measures).

How to ensure you’re prepared for an audit or investigation.
Whether it’s your HR person or other staff, designate specific people to handle your healthcare plan and make sure they’re familiar with plan documents, plan operations, and legal requirements. Establish written procedures for plan administration, document everything, conduct periodic internal audits, seek advice as necessary, respond to employee’s questions, and get all required participant notices sent out in a timely manner. And don’t forget to protect yourself with insurance (fidelity bonds, as required under ERISA; fiduciary liability insurance; employee benefit plan administration liability insurance, etc.).

Be proactive about plan maintenance, and you can identify and correct compliance issues before the auditor comes knocking.

To learn more about PPACA compliance and COBRA administration, subscribe to the COBRAGuard blog in the upper right hand corner of this screen.

Tags: PPACA compliance, labor audits, PPACA audit program

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