I didn’t know you have kids. Seriously, aren’t you single? I need to see some documentation.
Ok, that is a bit overboard. However, if you want to get serious about saving money on benefits, a dependent audit may be a bumpy but lucrative road. This blog is the third in a series of five techniques to lowering your benefits cost without changing your plan design or carrier. Prior posts in this series include Know Your Claims and Duplication of Coverage.
Secret Three: Dependent Eligibility Audit
The intention of a dependent eligibility audit is to ferret out those who are ineligible for benefits. Examples of ineligibles may include non-resident step children, college grads who may feel like dependents but technically are not, or the classic unemployed ex-husbands who will not get off the couch, but like an old hound, you feel sorry for them. Joking aside, these people add up quickly. Finding one ineligible participant in your plan can save up to $6,000 per year. Finding a slew of them will have a noticeable impact and go straight to the bottom line.
Communication is Key
Caution! People get a pit in their stomach when they hear the word audit. Second, they do not like sharing personal information. Therefore, the way you deliver the message about the audit is key. In other words, you do not want to blast out an email today saying “proof of your dependent status is due by the close of business Friday.”
Sell the benefits of an audit to the participant. The participants’ costs are going up and their benefits are getting cut, too. Explain, as an employer and plan sponsor, you have a fiduciary responsibility to make sure all dependents are eligible, and to misrepresent is fraud. Therefore, it is necessary to make sure the plans are in compliance.
Steps to Successful Audit
- Positive Communication
- Communicate at least a month before you start your audit to set expectations
- Create a plan and review with your employment attorney
- Communicate “the plan” (don’t call it an audit)
- The definition of eligibility requirements
- Methods to prove eligibility
- Halo period where the participant may change status without penalty or embarrassment
- Final deadline (here is where you may decide to define the nature of fraud)
Please share any stories you have about your experience with employee dependent audits. If you happen to try one and you do not find any ineligibles, I may respond, “Look closer, the employees committing fraud may have left the building out of embarrassment.”
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