:: EBSA “Targeting Criteria” Enhancements Lead to Large Enforcement Gains
The Employee Benefits Security Administration (EBSA) reports total monetary recoveries for FY 2006 of more than $1.4 billion. Included in this figure is $829 million in assets restored to plans and benefits recovered for individual workers, “an increase of more than 200% over FY 2001″.
The agency breaks its 2006 recoveries into three categories:
- Prohibited Transactions Corrected and Plan Assets Protected ($569.1 M)
- Plan Assets Restored and Participant Benefits Recovered ($829.4 M) and
- The Voluntary Fiduciary Correction Program ($24.2 M)
The VFC program results are up 476% over the FY 2001 – 2006 period.
Results Attributed to Statistical Targeting
Noting that it closed 3,411 civil investigations, with 2,534 (74.29%) resulting in monetary results for plans or other corrective action, the EBSA credits this success to improved statistical targeting. “Because of improved targeting”, the agency reports “the proportion of investigations closed ‘with results’ has increased by 30% since FY 2001.”
What Are The Targeting Criteria?
Targeting is the process whereby the EBSA selects those plans and service providers which, in its view, have “the highest potential for abuse, consistent with agency goals, objectives and priorities.”
The EBSA develops targeting criteria using:
- Computer generated compilations of selected employee benefit plans or service providers derived from reports filed with EBSA
- Information derived from detailed review and analysis of annual reports, supporting financial statements, schedules, exemption application files, ERISA section 502 complaints, and other internal EBSA sources
- Information concerning employee benefit plans or service providers derived from other governmental agencies such as the IRS, the SEC, and state insurance agencies
- Information concerning employee benefit plans or service providers derived from non-governmental sources such as newspapers, industry journals and magazines, or leads from knowledgeable parties
- Information received as a result of complaints from participants, fiduciaries, informants, or other sources in the community and
- Compilations of selected employee benefit plans or service providers derived by using combinations of the sources listed in (1) through (5) above.
For example, a regional office may request a printout from the National Office of all exemption applications granted, denied or withdrawn for plans having at least fifty (50) participants located within the jurisdiction of that office. Further, the agency uses inquiry letters in some cases for more limited review.
Insight Into Development of Litigation Positions
In cases where voluntary compliance efforts have failed “or which involve issues for which voluntary compliance is not appropriate”, the agency forwards a recommendation to the Solicitor of Labor in selecting cases for litigation. The criteria involve:
- the ability to obtain meaningful relief through litigation
- cost of litigation
- viability of other enforcement options and
- agency enforcement priorities.
In FY 2006, of 251 cases were referred for litigation, suit was filed in 170 civil cases.
Criminal Enforcement Results
The EBSA has enforcement authority to investigate and refer cases subject to the criminal provisions under ERISA and criminal provisions under Title 18 of the United States Code that relate to employee benefit plans. (See, e.g., overview here) The agency conducts criminal investigations in consultation with the U.S. Attorneys office “and, in many instances, jointly with other federal and state law enforcement agencies.”
The EBSA reports that, in FY 2006, it closed 221 criminal investigations. The report states:
EBSA’s criminal investigations, as well as its participation in criminal investigations with other law enforcement agencies, led to the indictment of 106 individuals – including plan officials, corporate officers, and service providers – for offenses related to employee benefit plans. Since FY 2001, the agency has also increased the number of criminal investigations closed with either a guilty plea or with a criminal conviction by more than 50%.
Note: The EBSA has a daunting task given the multitude of plans subject to its jurisdiction. This authority extends to more than 700,000 retirement plans, approximately 2.5 million health plans, and similar numbers of other welfare benefit plans, such as those providing life or disability insurance.
The 2006 report indicates an agency goal of maximizing its resources through improved selection criteria and joint task operations with other agencies. The fiscal results indicate one benchmark of progress in achievement of agency goals.
Nonetheless, it should be noted that “low tech” avenues still have their place. Participant and beneficiary complaints and inquiries form “a major source of enforcement leads.” The agency reports that “[w]hen EBSA becomes aware of repeated complaints with respect to a particular plan, employer, or service provider, or when there is information indicating a suspected fiduciary breach, the matter is referred for investigation.” (In FY 2006 718 investigations began this way.)
For Self-Audit: In most cases plan administrators benefit from reviewing plan operations from the standpoint of EBSA enforcement criteria coupled with a due diligence review. For suggestions on a workshop to that effect, see the Due Diligence Checklist. More specific application of this information will be supplied periodically on this site and through the HPL newsletter.
