ISSUE: U.S. Department of Labor Audits

The Longshore and Harbor Workers’ Compensation Act is administered by the Division of Longshore and Harbor Workers’ Compensation, Office of Workers’ Compensation Programs, in the U.S. Department of Labor (DOL).

Key elements of the administration of the Act include collection of the annual Special Fund industry assessment and the maintenance of security deposits for DOL authorized insurance carriers and self-insured employers.  (For information concerning the Special Fund please see the discussion posted on October 27, 2010.)

The amount of each authorized insurance carrier’s and self-insurer’s annual Special Fund assessment is based in part on the Form LS-513, Report of Payments, that the carriers and self-insurers file each year showing the total of direct indemnity payments that each made on all of their cases during the preceding calendar year.

The amount of each authorized insurance carrier’s and self-insurer’s security deposit is based in large part on the Form LS-274, Report of Outstanding Liabilities, that each files annually listing total incurred liability, paid and reserved, for all open cases.

These reports have serious financial implications for the carriers and self-insurers that file them.  And the DOL must try to make sure that the Forms LS-513 are accurate in order to make sure that everyone pays their fair share of the assessment and that the Forms LS-274 are as reasonable as possible in order to protect the future benefits of injured workers and to protect the Special Fund from the possibility of future insolvency claims. 

Does the DOL have a system in place to try to insure that these Reports are as accurate and complete as reasonably possible?

It does.  DOL contracts with an outside public accounting firm to conduct reviews of Form LS-513 and Form LS-274.  This firm is very experienced at these audits.  The auditors know what they’re doing.  The audits protect the integrity of the Special Fund assessment and they protect the adequacy of security deposits.

Before I forget, the American Longshore Mutual Association (ALMA) has just been audited by DOL.  The results of the audit of ALMA’s LS-513, Report of Payments, for calendar year 2011 have been released.  In the words of the auditor, “Of the potential exceptions for the year 2011 filing, I tested 322 open cases and 600 closed cases.  I found no exceptions in our testing and therefore noted no adjustments to the 2011 LS-513 form filed by American Longshore Mutual Association.”

Brandon Miller, Chief, Branch of Insurance and Financial Management at DOL (my old job) stated that this result is “very impressive given the size and scope of your claims population compared to other employers and carriers.”

And that’s a very fair “assessment” of the audit result. ALMA is one of the biggest writers of Longshore coverage worldwide.  The reporting systems administered by The American Equity Underwriters (AEU) on behalf of ALMA are operating perfectly.  The DOL has been reassured that ALMA is reporting properly and paying its fair share of the Special Fund assessment.

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