DOL audit letter received - when to notify insurance carrier

[Gudgergirl]

I am legal counsel to a 401(k) plan and have a client who received a letter from DOL informing them that their 401(k) Plan is being investigated. This client is very conscientious and does everything right. Anyway, the client asked me if they should notify their insurance carrier. At this point all that has happened is the receipt of the letter. We haven't supplied the documents, met with the agent yet or had any follow up questions. I think notifying the insurance carrier is premature at this point but was curious as to what others think/ have done.

By the way, I have read the insurance policy and it seems to say that the insured must notify the insurer when the insured becomes aware of facts that could give rise to a claim. At this point, we aren't aware of any such facts. Assuming anything the agent uncovers is even covered by the policy, it seems to me the time to notify the insurer is when we have a better idea as to what the agent is focused on or if we uncover something in reviewing the paperwork before sending it to the agent.

Any thoughts are much appreciated.

[ETA Consulting LLC]

I agree with you. The 'audit' or 'investigation' is simular to an inspection; which doesn't imply that anything is wrong.

Good Luck!

[goldtpa]

Your insurance policy requires you to notify the insurance company of anything that could give rise to a claim. If you don't notify them and there is a claim, they will not pay it. The word is "could". An audit could lead to a claim. Thus the insurance company would try to deny you coverage based on the fact that you did not notify them of a potential issue.

[PensionPro]

The DOL investigation increases the likelihood of a claim so the safe option is to notify the insurance company. What is the downside? Btw, it is worth exploring what if anything triggered the investigation.

[Bird]

I submit that the audit is not something that gives rise to a claim; that would be some event that is uncovered by the audit. As long as the client has no knowledge of such an event, I don't see the need to notify the insurance carrier. I'm not sure there's a downside, but there's a difference between being conservative and blanketing everyone with unnecessary information "just to be safe."

[mbozek]

I am legal counsel to a 401(k) plan and have a client who received a letter from DOL informing them that their 401(k) Plan is being investigated. This client is very conscientious and does everything right. Anyway, the client asked me if they should notify their insurance carrier. At this point all that has happened is the receipt of the letter. We haven't supplied the documents, met with the agent yet or had any follow up questions. I think notifying the insurance carrier is premature at this point but was curious as to what others think/ have done.

By the way, I have read the insurance policy and it seems to say that the insured must notify the insurer when the insured becomes aware of facts that could give rise to a claim. At this point, we aren't aware of any such facts. Assuming anything the agent uncovers is even covered by the policy, it seems to me the time to notify the insurer is when we have a better idea as to what the agent is focused on or if we uncover something in reviewing the paperwork before sending it to the agent.

Any thoughts are much appreciated.

Not all claims are covered by insurance or reportable. If you dont know the reason for the audit why not wait until you are sure that the matter is one covered by your insurance policy.

My concern is that the insurance co would use your filing of a notice of a possible claim as a reason to raise the premium even if the cliam was not coverd under the policy.

What if this is a random audit?

[Effen]

What is the harm in notifying the insurance company? Seems like this is a case of better safe than sorry. If there is a claim, why give them any room to argue. Pick up the phone and notify the carrier the plan is having a DOL audit. It will probably be a 2 minute phone call that protects your client.