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How To Lower the Risk of a DOL Audit


A U.S. Department of Labor (DOL) audit of your welfare benefit plan could happen at any time. The checklist below can help you prevent and be prepared for a DOL audit:



  • Maintain all documents related to welfare benefit plans in one location.

  • Designate one person at the company to take charge of the welfare benefit plans.

  • Respond in a timely fashion to all participant and beneficiary questions.

  • Review and understand all plan documents.

  • Make sure all ERISA-covered benefit plans comply with relevant laws such as Health Care Reform and HIPAA.

  • Distribute Summary Plan Descriptions (SPDs), with accompanying benefit plan component documents such as benefits booklets and certificates of insurance, to all plan participants within 90 days of becoming covered under the plan.

  • Administer all ERISA-covered benefit plans, including group health plans and other welfare plans, in accordance with a written Plan Document.

  • Respond to participant and beneficiary requests for an SPD and Plan Document within 30 days after a written request or risk a penalty of $110 per day, per participant or beneficiary for each violation.

  • Inform participants of any material change to the plan either through a revised SPD or in a separate document, called a Summary of Material Modifications (SMM).

  • Distribute required notices, such as COBRA and SBC notices, within required timeframes.

  • If Form 5500 must be filed, be sure to complete all components accurately and file before the required deadline.

  • Establish written procedures for disputes and claims resolution.


Please Note: This list is for general reference purposes only and is not all-inclusive. The information is subject to change based on new requirements and amendments to the law.

DOL audit
summary plan

Summary Plan Description Requirement


ERISA requires the administrator of an employee benefit plan to furnish participants and beneficiaries with a summary plan description (SPD). An SPD describe certain provisions of the written plan document in understandable terms. Among other information, an SPD must describe:

  • Cost-sharing provisions, including premium, deductible, coinsurance, and copayment amounts for which the participant or beneficiary will be responsible

  • The extent to which preventive services are covered under the plan

  • Whether, and under what circumstances, existing and new drugs are covered under the plan

  • Whether, and under what circumstances, coverage is provided for medical tests, devices, and procedures

  • Provisions governing the use of network providers, the composition of provider networks and whether, and under what circumstances, coverage is provided for out-of-network services

  • Provisions requiring pre-authorizations or utilization review as a condition to obtaining a benefit or service under the plan


Many employers wrongly assume that documents provided by an insurance company for fully insured products satisfy the SPD requirements. As a result, employers must draft an entire SPD or create a "wrap" SPD to meet ERISA's requirements. A wrap SPD is designed to meet ERISA's requirements by incorporating and supplementing documents provided by insurance companies.   


SPDs must be provided to plan participants as follows:

  • Within 90 days after the employee becomes a participant in the plan.

  • Within 60 days of adopting a material reduction in covered services or benefits. A material reduction in covered services generally includes increases in premiums, deductibles, coinsurance amounts, and copayment amounts. Alternatively, you can provide notice of a material reduction in covered services via a Summary of Material Reduction in Covered Services or Benefits document during the same time period instead of a new SPD.

  • No later than 210 days after the end of a plan year in which a material modification that is not a material reduction in covered services or benefits is adopted. Material modifications include a change in carriers, eligibility requirements, or participant contributions. Alternatively, you can provide notice of a material modification via a Summary of Material Modifications (SMM) document during the same time period instead of a new SPD.

  • Every 5 years if changes are made to SPD information or the plan that are not material modifications or reductions in covered services or benefits.

  • Every 10 years if no changes are made to SPD information or the plan.


An SPD generally may be distributed electronically if the plan administrator takes steps to ensure that the system for furnishing documents results in actual receipt of the material. Ways to ensure receipt of an SPD include using return-receipt or notice of undelivered email features, or conducting periodic reviews or surveys to confirm receipt. In addition, in order to provide materials electronically:


  • The administrator must take steps reasonably calculated to ensure that the system protects the confidentiality of personal information relating to the individual's accounts and benefits;

  • The electronically delivered documents must be prepared and furnished in a manner consistent with the style, format and content requirements applicable to the particular document;

  • Notice must be provided to each participant, beneficiary or other individual, at the time a document is furnished electronically, that informs the individual of the significance of the document when it is not otherwise reasonably evident as transmitted (e.g., "The attached document describes changes in the benefits provided by your plan.") and of the right to request and obtain a paper version of such document; and

  • Upon request, the participant, beneficiary or other individual must be furnished a paper version of the electronically furnished documents.


Unless an individual has the ability to effectively access documents furnished in electronic form at any location where the individual is reasonably expected to perform his or her duties as an employee, and access to the employer or plan sponsor's electronic information system is an integral part of an individual's job duties, he or she must affirmatively consent to receive documents through electronic media. In the case of documents to be furnished through the Internet or other electronic communication network, consent must be given in a manner that reasonably demonstrates the individual's ability to access information in the electronic form that will be used to provide the information. Prior to consenting, the individual must be provided with a clear and conspicuous statement indicating:

  • The types of documents to which the consent would apply;

  • That consent can be withdrawn at any time without charge;    

  • The procedures for withdrawing consent and for updating the individual's address for receipt of electronically furnished documents or other information;

  • The right to request and obtain a paper version of an electronically furnished document, including whether the paper version will be provided free of charge; and

  • Any hardware and software requirements for accessing and retaining the documents.


Understanding your Letter 226-J


Letter 226-J is the initial letter issued to Applicable Large Employers (ALEs) to notify them that they may be liable for an Employer Shared Responsibility Payment (ESRP). The determination of whether an ALE may be liable for an ESRP and the amount of the proposed ESRP in Letter 226-J are based on information from Forms 1094-C and 1095-C filed by the ALE and the individual income tax returns filed by the ALE’s employees.


What you need to do


  • Read your letter and attachments carefully. These documents explain the ESRP process and how the information received affects the computation.

  • The letter fully explains the steps to take if you agree or disagree with the proposed ESRP computation.

  • Complete the response form (Form 14764) indicating your agreement or disagreement with the letter.

  • If you disagree with the proposed ESRP liability, you must provide a full explanation of your disagreement and/or indicate changes needed on Form 14765 (PTC Listing). Return all documents as instructed in the letter by the response date.

  • If you agree with the proposed ESRP liability, follow the instructions to sign the response form and return with full payment in the envelope provided.



You may want to


  • Review the information reported on Forms 1094-C and 1095-C for the applicable year to confirm that the information filed with the IRS was accurate because the IRS uses that information to compute the ESRP.

  • Keep a copy of the letter and any documents you submit.

  • Contact us using the information provided in the letter if you have any questions or need additional time to respond.

  • Send us a Form 2848 (Power of Attorney and Declaration of Representative) to allow someone to contact us on your behalf. Note that the Form 2848 must state specifically the year and that it is for the Section 4980H Shared Responsibility Payment.



Answers to Common Questions


Why did I receive this letter?
The IRS used the information you provided on Forms 1094/5-C and determined that you are potentially liable for an ESRP.


Where did the IRS get the information used to compute the ESRP?
The IRS used form 1094/5-C filed by the ALE and the individual income tax returns of your full-time employees to identify if they were allowed a premium tax credit.


Is this letter a bill?
No, the letter is the initial proposal of the ESRP


What do I need to do?
Review the letter and attachments carefully and complete the response form by the date provided.


What do I do if the information is wrong or I disagree?
Follow the instructions in the letter to provide corrected information for consideration by the IRS. The IRS will reply with an acknowledgment letter informing you of their final determination.


Do I have appeal rights?
Yes, the 
acknowledgment letter that you receive will spell out all your rights, including your right to appeal.

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