Steps to Avoid — or Survive — a DOL Health Plan Audit

U.S. Department of Labor audits of employer health and welfare plans are increasing. Applicable large employers can protect themselves by maintaining current plan documents, distributing required notices, tracking full-time equivalents accurately, filing Form 5500, paying PCORI fees, and filing Affordable Care Act (ACA) information returns on time.

A DOL audit can arrive without warning. For applicable large employers (ALEs) — those with 50 or more full-time equivalents — the stakes are especially high. Between Employee Retirement Income Security Act (ERISA) requirements, ACA mandates, and IRS filing obligations, the compliance landscape is layered and unforgiving.

Gary Kushner, president of Kushner & Company, a benefits consultancy based in Portage, Mich., spoke at SHRM26 in Orlando about the items HR professionals should review to avoid or respond to a DOL audit. He emphasized the importance of keeping a contemporaneous record of every time HR sends out notices to employees.

“When the Department of Labor comes in, this is one of their gotchas,” Kushner said. “They’re going to ask for proof. You whip out the document and say, ‘See, I sent it to all my employees on this date.’ They’ll go, ‘OK, check.’ It’ll come in very handy.”

The good news: Most audit vulnerabilities are preventable. Here is what auditors look for and where employers most often fall short:

The DOL focuses heavily on ERISA-covered plans, which include most employer-sponsored health and welfare plans. Governmental entities and church plans are excluded, but the vast majority of private-sector employers fall within ERISA's reach.

For ALEs specifically, auditors will scrutinize three ACA pillars:

• Minimum essential coverage: Was coverage offered to at least 95% of full-time employees?
• Minimum value: Does the plan cover at least 60% of the actuarial value of benefits?
• Affordability: Is employee cost within acceptable limits under one of the three safe harbors?

“First off, you never want to not offer 95% of your employees coverage that clears all three bars,” Kushner said. “That’s the starting point. The IRS is the enforcement arm of this. They like to open up additional looks every year at your employer. Your CFO will not be happy when they open up looks at you every year. And your CEO is not going to be happy with HR when they open up investigations each year.”

Auditors also review plan documents, summary plan descriptions (SPDs), summaries of benefits and coverage (SBCs), required health and welfare plan notices, and ACA information returns. Documentation gaps draw immediate scrutiny.

Q&A: What to Expect from a DOL Audit

What Are the Most Common Employer Compliance Pitfalls?

Employer compliance with group health plan and benefits regulations spans a dense web of overlapping obligations — and the margin for error is narrow. Here are areas where errors happen most frequently:

• Outdated plan documents and SPDs: Plan documents and SPDs must be updated every five or 10 years depending on the type of amendment. Many employers let these lapse. Auditors will request them immediately. Having outdated or missing documents signals broader compliance weakness.
• Incomplete SBC distribution: SBCs must be distributed to all eligible employees and COBRA beneficiaries. The distribution itself must be documented contemporaneously. Verbal assurances are not sufficient. If you cannot prove distribution occurred, auditors will treat it as if it never did. “Please don’t forget COBRA,” Kushner said. “I have horror stories about COBRA.”
• Inaccurate full-time equivalent tracking: Determining ALE status requires a structured methodology: a six- to 12-month measurement period, followed by an administrative period, followed by a stability period. Employers that skip this framework risk misclassifying employees and triggering ACA Employer Shared Responsibility penalties under Code Section 4980H. Both the Section 4980H(a) and 4980H(b) penalties are nondeductible excise taxes — they cannot be written off.
• Missed form 5500 filing: Employers with health and welfare plans covering 100 or more participants must file Form 5500 annually. Using a wrap document to consolidate multiple benefits into a single filing is a widely accepted and efficient approach, but only if it is properly executed.
• Unpaid or late PCORI fees: Self-funded health plans and health reimbursement arrangements (HRAs) owe Patient-Centered Outcomes Research Institute (PCORI) fees. The updated June 2026 rate is $3.84 per covered individual (per IRS Form 720). Payment is due by July 31 each year via IRS Form 720. Missing this deadline draws IRS attention.
• Nondiscrimination testing gaps: Self-funded medical plans and cafeteria plans must undergo annual nondiscrimination testing. Group life insurance designs must also be nondiscriminatory, relying on flat amounts or multiples of compensation rather than structures that disproportionately benefit highly compensated employees.
• Late or missing ACA information returns: The 1094 and 1095 series must be filed electronically. Errors or late filings can generate IRS Letter 226-J, which proposes Employer Shared Responsibility Payment assessments. Responding to a 226-J requires documented evidence of coverage. Without records, the burden of proof is nearly impossible to meet.

Toolkit: Complying with the Affordable Care Act

Build Your Compliance Foundation Now

A DOL audit is not necessarily a sign that something went wrong — it may simply be a random selection or a regulatory sweep. What it will reveal, however, is whether your documentation is in order.

Start by auditing your own plan documents, notice distribution records, full-time-employee tracking methodology, and ACA filing history. Identify gaps before an auditor does. HR professionals who get ahead of these requirements are far better positioned to respond calmly and confidently when the DOL comes knocking.

Toolkit: Essential Health Care Cost Management Strategies

Audits can be triggered by employee complaints, targeted enforcement initiatives, or random selection. The DOL has increased audit activity across health and welfare plans in recent years, particularly around ACA and mental health parity compliance.