Dependent Verification Audits: Building Fairer and More Sustainable Benefits Programs

Offering benefits to employees can be a considerable expense for the business. Although these expenses are often justified due to the added employee engagement and long-term loyalty they can lead to, it’s still important to ensure they’re administered accurately and responsibly.

Dependent verification audits are an essential part of this process. They help to ensure that benefits programs remain fair and sustainable for businesses long-term, while confirming that employees are only enrolling eligible dependents into coverage.

From a business’s perspective, conducting dependent verification audits is a critical component of keeping premium costs down and assuming fiduciary responsibility as plan sponsors. 

How Dependent Verification Audits Help Both Employers and Employees

When businesses ensure that their benefit plans cover only genuinely eligible dependents, this helps both the employer and employees in several key ways.

For Employers

• Cost savings - Dependent verification auditing processes are an important way for businesses to control their benefits spending. It ensures that dependents who are no longer eligible or who were added to plans by mistake aren’t being covered incorrectly by the business. Correcting these issues can help to free up funds and make benefits packages more sustainable.

• Compliance - Regulations like ERISA lay out clear minimum standards for benefits plans, including how they’re administered and coverage requirements for dependents. Dependent verification audits help businesses make sure they’re always in compliance with these requirements and avoid costly penalties.

• Data Accuracy - Conducting a dependent verification audit can also ensure that businesses are maintaining accurate enrollment records over time. This is especially important as businesses scale, add new staff members, or employees make multiple changes to their dependent coverage over the years.  

For Employees

• Fairness - Employees want to know that their benefits and coverage rules are equal to those of their peers. Dependent verification auditing processes are a great way to show employees that there is a due diligence process in place to ensure this. This helps to remove any feelings that benefits administration processes are being managed correctly, whether they’re handled in-house or outsourced to benefits administration teams.

• Long-term Sustainability - For many employees, benefits packages can be a significant deciding factor in whether or not they choose to onboard with a company. Without effective dependent verification audits, the sustainability of these benefits could be questioned. If benefits premiums had to increase due to ineligible claims continuously coming through, it could impact whether or not an employee chooses to stay with the company.

• Transparency - Dependent verification auditing processes, when handled correctly, can be a great way to add more transparency and trust within the organization. They’re a good opportunity to be more proactive in discussions with employees and help them build more confidence in the integrity of the organization’s benefits programs.

Overcoming Employee Concerns

It’s only natural for some employees to raise their eyebrows when hearing that the business wants to verify their dependent information. There may be some concerns about trust or even the security of their data privacy.

However, there are some effective ways to help reduce these initial concerns. This includes:

Clearly Communicate the Audit's Purpose and Process

The first thing you want to do as a business is be completely open and honest about the reasons for dependent verification audits. Explain to them why these audits are necessary, including the legal requirements of the business and the benefits they’ll provide to everyone.

It’s also important to be clear when outlining how these processes work and what will be required from each employee. The more information you provide to employees on the outside, the fewer questions or worries they’re likely to have.

Leverage Multiple Communication Channels

As part of your communication strategy, consider all the available channels to help inform your employees about the process. You might want to leverage email, the company’s intranet site, one-on-one meetings, or a dedicated Q&A session explicitly designed for this process.

Creating more communication methods surrounding your dependent verification auditing process helps to ensure all your employees get the information they need, while also being able to ask relevant questions.

Use Easy-to-Understand Explanations of Audit Terms

Since some employees may have a harder time than others understanding the requirements of dependent verification audits, you should focus on using easy-to-understand language during the process. Try to avoid complex industry jargon and summarize what’s required of each employee in simple terms.

Highlight the Importance of Strict Confidentiality

One of the main concerns that employees may have during dependent verification audits is the amount of personal data they may be required to submit. While some employees may be indifferent to these requests, others may be worried about where and how the information is used.

Make sure you’re transparent about the security measures you have in place for any information that’s provided, as well as following any legal requirements for collecting, storing, and using employee data.

Provide Employees with Opportunities to Provide Feedback

Another important thing to consider is how your employees feel about the dependent verification audit process. Take the time to ask for their feedback during the process so that you can make improvements moving forward. 

This can be a great way to create a pain-free verification process for everyone that allows you to handle your important legal requirements without adding too much friction for teams.

Best Practices for a Smooth Verification Process

1. Set clear goals and timelines for the audit to help maximize efficiency.

2. Make sure employees are given adequate notice for verification processes so they can plan accordingly.

3. Provide access to helpful resources during the process to avoid confusion.

4. Plan for the dependent verification audit well in advance to help ensure accuracy during the process.

5. Providing clear explanations of results and the appeals process

6. Use a third-party administrator for dependent verification audits to help ensure fairness and consistency.

Create More Sustainable Benefits Offerings for Everyone

Dependent verification audits are essential for businesses to ensure they comply with legal reporting requirements while helping to save on premium dollars.

By following the suggested strategies, you can implement this essential process into your organization, eliminating employees' concerns while creating more sustainable offerings for everyone.

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Frank Mengert continues to find success by spotting opportunities where others see nothing. As the founder and CEO of ebm, a leading provider of employee benefits solutions. Frank has built the business by bridging the gap between insurance and technology driven solutions for brokers, consultants, carriers, and employers nationwide.