A new report from the Government Accountability Office (GAO) sheds new light on enforcement activities of the DOL’s Employee Benefits Security Administration.
The 56-page report, Enforcement Efforts to Protect Participants’ Rights in Employer-Sponsored Retirement and Health Benefit Plans, provides what amounts to a tutorial about EBSA’s enforcement activities, including:
- how the agency manages its enforcement process;
- strategies to improve investigative processes and ensure enforcement quality; and
- the immediate and long-term challenges of COVID-19 for EBSA and private sector retirement and health plans.
As part of its nearly 18-month investigation, GAO analyzed EBSA data and documents, and interviewed officials from EBSA’s national office and three regional offices, as well as stakeholders knowledgeable about benefits compliance requirements.
It found that the 10 most frequent violation categories account for almost 97% of all violations. In the retirement space, the most common ERISA violation categories found in closed EBSA investigations for FY 2020 included:
- Fiduciary imprudence (869 cases)
- Exclusive purpose (793 cases)
- Fiduciary self-dealing (543 cases)
- Prohibited transactions with a party in interest (457 cases)
- Failure to follow plan documents (344 cases)
- Improper benefit to employer (235 cases)
- Duty of disclosure: plan descriptions and summary plan descriptions (183 cases)
- Bonding (159 cases)
- Reporting violation: annual reports (84 cases)
- Failure to establish trust (55 cases)
Overall, EBSA investigators identified 4,273 violations in the 1,411 investigations closed in FY 2020. This included 3,776 retirement plan violations from 1,056 closed investigations and 377 health plan violations from 288 closed investigations.
Additional findings for FY 2020 show that nearly 84% of investigations were civil and more than 16% were criminal, resulting in more than $3 billion in payments to participants and plans.
GAO notes that the last time it conducted a similar review was in 2007. In just the past decade, however, benefit plan assets have risen from over $5 trillion to $10.7 trillion, with EBSA’s oversight authority extending to nearly 722,000 retirement plans and approximately 2.5 million health plans as of FY 2020.
Cases Decrease, Recoveries Increase
According to the report, one of the bigger changes in EBSA’s enforcement process came in 2013, when the agency began to prioritize cases with the potential to affect many people and recover significant assets. Not surprisingly, as EBSA pursued more complex and technical investigations, the number of cases closed decreased, while monetary recoveries increased. In fact, total monetary recoveries for participants more than doubled from FY 2011 through FY 2020.
GAO also found that nearly 80% of total recoveries from all sources came from major cases in 2020. In that same period, the total number of investigations that were closed dropped by more than 62%.
According to EBSA, with the exception of those for employee stock ownership plans, investigations of plans identified through EBSA’s targeting methods were more likely to identify a violation than sampling study investigations.
To ensure investigation quality, EBSA says that it provides training, documents procedures, and reviews open and closed cases to evaluate whether investigation procedures have been followed, the report notes.
Pandemic’s Impact
Regarding current challenges for EBSA enforcement, GAO notes that in some cases, EBSA officials raised the same issues as industry stakeholders in relation to the COVID-19 pandemic, such as the challenge of adapting to a remote work environment, delayed communications and lack of guidance.
EBSA officials also described some unique challenges, including delays in their investigations, modifications to investigative processes and closed courts. For example, EBSA officials reported that court closures temporarily slowed criminal cases, but as virtual hearings increased, litigation resumed.
Not surprisingly, potential long-term challenges include difficulties locating the many participants who may have left a job due to the pandemic and may be unaware they left behind retirement funds, according to the stakeholders and EBSA officials who were interviewed. Limited travel, businesses failures and fraud are other potential long-term challenges cited by EBSA officials, according to the report.
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