A new report from the Government Accountability Office (GAO) sheds new light on the enforcement activities of the DOL’s Employee Benefits Security Administration.
The 56-page report, Enforcement efforts to protect the rights of members of employer-sponsored pension and health benefit plans, provides what amounts to a tutorial on EBSA enforcement activities, including:
- how the agency manages its execution process;
- strategies to improve investigative processes and ensure the quality of execution; and
- the immediate and long-term challenges of COVID-19 for EBSAs and private sector pension and health plans.
As part of its nearly 18-month investigation, GAO analyzed data and documents from EBSA and interviewed officials from EBSA’s country office and three regional offices, as well as knowledgeable stakeholders. on service compliance requirements.
He found that the 10 most common offense categories accounted for almost 97% of all offenses. In the retirement field, the most common ERISA violation categories found in EBSA investigations closed for fiscal 2020 included:
- Fiduciary imprudence (869 cases)
- Exclusive use (793 cases)
- Fiduciary transactions for own account (543 cases)
- Transactions prohibited with an interested party (457 cases)
- Non-compliance with plan documents (344 cases)
- Unfair advantage for the employer (235 cases)
- Disclosure requirement: plan descriptions and summary plan descriptions (183 cases)
- Collage (159 cases)
- Report 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 FY2020. This included 3,776 pension plan violations out of 1,056 closed investigations and 377 plan violations. health out of 288 closed investigations.
Additional results for fiscal 2020 show that nearly 84% of investigations were civil and over 16% were criminal, resulting in payments of over $ 3 billion to members and plans.
The GAO notes that the last time it conducted a similar review was in 2007. Over the past decade, however, pension plan assets have grown from over $ 5 trillion to $ 10 trillion. $ 7 billion, with EBSA’s supervisory authority extending to nearly 722,000 pension plans and approximately 2.5 million health plans as of fiscal 2020.
Cases decrease, recoveries increase
One of the most significant changes in the EBSA execution process, according to the report, came in 2013, when the agency began prioritizing cases that could affect many people and recover important assets. . As expected, as EBSA conducted more complex and technical investigations, the number of closed cases declined, while monetary recoveries increased. In fact, the total monetary recoveries for participants more than doubled between fiscal 2011 and fiscal 2020.
The GAO also found that nearly 80% of total recoveries from all sources were from major cases in 2020. During the same period, the total number of closed investigations fell by more than 62%.
According to EBSA, with the exception of those regarding employee stock ownership plans, investigations into plans identified through EBSA’s targeting methods were more likely to identify a violation than sample investigations.
To ensure the quality of investigations, EBSA says it offers training, documents procedures and reviews open and closed cases to assess whether investigative procedures were followed, the report notes.
Impact of the pandemic
Regarding the current challenges for the application of the EBSA, the GAO notes that in some cases, officials of the EBSA have raised the same issues as industry stakeholders regarding the COVID-19 pandemic, such as the challenge of adjusting to a remote working environment, delayed communications and lack of guidance. .
EBSA officials also described some unique challenges, including delays in their investigations, changes to investigative processes and closed courts. For example, EBSA officials have reported that court closures have temporarily slowed criminal cases, but virtual hearings have increased, litigation has resumed.
Unsurprisingly, potential long-term challenges include difficulty locating the many participants who may have quit their jobs due to the pandemic and may be unaware that they left retirement funds, according to stakeholders and officials. of EBSA interviewed. Limited travel, business failures and fraud are other potential long-term challenges cited by EBSA officials, according to the report.