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Here is another thread:

So too much ROTH was deposited to his account? If so remove the excess, use it to reduce the next company 401(k) deposit and you are done at least from the plan stand point. You will need to correct the payroll so their year-end W-2 is correct. As for how you retrieve the over payment from the employee, I'll leave that to other folks to address.

In my experience, an independent qualified public accountant might close the work-papers file and release the IQPA's report on the plan's financial statements after the IQPA has received a comfort letter from a recognized practitioner who confirms that she has been engaged to see through the correction of the errors and is confident that the corrections will be sufficient to preserve tax-qualified status and restore ERISA breaches.

Conversely, one might wonder what idiot came up with the idea of auditing something that you don't need to. Congress and the IRS have given plan administrators explicit permission to rely upon participant self-certification of hardships, unless they have actual knowledge to the contrary. So why would the plan administrator go looking for trouble when they had no duty to do so, nor liability for not doing so? There can be no good that comes from this, only problems.

Consider working out the steps that will be taken to correct the issue including what needs to be corrected, how will it be corrected and who will calculate the correction. With a work plan in place, have a discussion with the current auditor about to add getting the audit or audits done. They may suggest some paths forward such as they will expand the 2024 audit engagement to include 2023. They also can discuss whether they will issue a report with a disclaimer (which almost certainly will trigger a call from the DOL). Having a plan, or having an active engagement to make corrections and restate the audit will go a long way to getting some time to clean things up. This will not be cheap, but the goal is to make a good faith effort to do what is right.

Great point, Peter. I think you're right that those ADA rules can be read to apply only to the employee. Under that interpretation, the main consideration would turn to the HIPAA/ACA nondiscrimination rules. Assuming this is a "participatory" wellness arrangement (i.e., does not require the individual to satisfy a standard related to a health factor), the only HIPAA/ACA nondiscrim requirement is that the program be available to "similarly situated individuals" regardless of health status. We don't have the 30% limit or reasonable alternative standard rules that apply to health-contingent (activity-only and outcome-based) programs to worry about. Those regs say that "relationship to the participant" (e.g., spouse, child) can be a separate category of similarly situated individuals from the employee or other types of dependents. So in this case, they could argue that the spouse category is a separate group of similarly situated individuals with a permissible condition to enroll in the health plan based on the participatory wellness program requirement that they complete the annual physical. All of that is probably aggressive and would need to be viewed as a potential litigation risk, but I can at least see now how the theoretical pieces would fit together after considering Peter's response. Here's what I would look to if trying to justify that approach-- 29 CFR §2590.702: (d) Similarly situated individuals. The requirements of this section apply only within a group of individuals who are treated as similarly situated individuals. A plan or issuer may treat participants as a group of similarly situated individuals separate from beneficiaries. In addition, participants may be treated as two or more distinct groups of similarly situated individuals and beneficiaries may be treated as two or more distinct groups of similarly situated individuals in accordance with the rules of this paragraph (d). Moreover, if individuals have a choice of two or more benefit packages, individuals choosing one benefit package may be treated as one or more groups of similarly situated individuals distinct from individuals choosing another benefit package. ... (2) Beneficiaries. (i) Subject to paragraph (d)(3) of this section, a plan or issuer may treat beneficiaries as two or more distinct groups of similarly situated individuals if the distinction between or among the groups of beneficiaries is based on any of the following factors: (A) A bona fide employment-based classification of the participant through whom the beneficiary is receiving coverage; (B) Relationship to the participant (for example, as a spouse or as a dependent child); (C) Marital status; (D) With respect to children of a participant, age or student status; or (E) Any other factor if the factor is not a health factor. (ii) Paragraph (d)(2)(i) of this section does not prevent more favorable treatment of individuals with adverse health factors in accordance with paragraph (g) of this section. ... (f) Nondiscriminatory wellness programs — in general. A wellness program is a program of health promotion or disease prevention. Paragraphs (b)(2)(ii) and (c)(3) of this section provide exceptions to the general prohibitions against discrimination based on a health factor for plan provisions that vary benefits (including cost-sharing mechanisms) or the premium or contribution for similarly situated individuals in connection with a wellness program that satisfies the requirements of this paragraph (f). (1) Definitions. The definitions in this paragraph (f)(1) govern in applying the provisions of this paragraph (f). ... (ii) Participatory wellness programs. If none of the conditions for obtaining a reward under a wellness program is based on an individual satisfying a standard that is related to a health factor (or if a wellness program does not provide a reward), the wellness program is a participatory wellness program. Examples of participatory wellness programs are: (A) A program that reimburses employees for all or part of the cost for membership in a fitness center. (B) A diagnostic testing program that provides a reward for participation in that program and does not base any part of the reward on outcomes. (C) A program that encourages preventive care through the waiver of the copayment or deductible requirement under a group health plan for the costs of, for example, prenatal care or well-baby visits. (Note that, with respect to non-grandfathered plans, §2590.715-2713 of this part requires benefits for certain preventive health services without the imposition of cost sharing.) (D) A program that reimburses employees for the costs of participating, or that otherwise provides a reward for participating, in a smoking cessation program without regard to whether the employee quits smoking. (E) A program that provides a reward to employees for attending a monthly, no-cost health education seminar. (F) A program that provides a reward to employees who complete a health risk assessment regarding current health status, without any further action (educational or otherwise) required by the employee with regard to the health issues identified as part of the assessment. (See also §2590.702-1 for rules prohibiting collection of genetic information.) ... (2) Requirement for participatory wellness programs. A participatory wellness program, as described in paragraph (f)(1)(ii) of this section, does not violate the provisions of this section only if participation in the program is made available to all similarly situated individuals, regardless of health status.

Brian Gilmore, thank you for giving so generously to our learning. Even if one accepts the executive agency’s rule as a reasoned interpretation of Congress’s statute: 29 C.F.R. § 1630.14 has 30 uses of the word employee, but no use of spouse, dependent, beneficiary, or participant. If one reads only the text of this rule, there might be some ambiguities about whether an employee-benefit plan’s condition regarding a medical examination of an employee’s spouse is, in particular circumstances, “a subterfuge for violating the [equal-employment provisions of the Americans with Disabilities Act] or other laws prohibiting employment discrimination[.]” 29 C.F.R. § 1630.14(d)(1) https://www.ecfr.gov/current/title-29/part-1630/section-1630.14#p-1630.14(d)(1). Further, ERISA, the Public Health Service Act, the Internal Revenue Code, the Affordable Care Act, and other Federal and (not superseded) State laws might affect the plan sponsor’s choices. These and other laws might matter in how an employer and plan sponsor thinks about questions of the kind Bcompliance2003 describes. It’s complex enough that one would want information and advice from a team of employment, employee-benefits, and other lawyers.

In my experience, rigorously and carefully following ERISA 503 claims procedures, including explaining every reason for a denial, often results in a further flow of information.