As part of the Government Performance and Results Act of 1993, the Employee Benefit Security Administration (EBSA) has put in place a Strategic Enforcement Plan. As part of this plan, the EBSA is focusing on two primary areas. The first emphasis targets professional fiduciaries and service providers who are responsible for a large amount of assets or number of plans. The second initiative focuses on protecting the contributions of the participants. As a result of this project, in 2013, the DOL collected $1.7 billion dollars in civil enforcement cases and there were 320 criminal investigations leading to 88 indictments!
There are five enforcement priorities:
- Contributory Plans Criminal Project - This program is specific to protecting the employees who participate. It targets people who are committing fraud against the participants and beneficiaries. These people could be owners, employees or third-party administrators and investment advisors.
- Consultant Advisor Program (CAP) - CAP focuses on the receipt of improper or undisclosed compensation by employee benefit plan consultants and other investment advisors, as well as fraud and kickbacks involving advisors to the plans. This program complements the fee disclosure rules recently put in place.
- Health Benefit Security Project - This is a broad-ranging project focusing on many areas, including the Affordable Care Act, Multiple Employer Welfare Arrangements and fraud by medical providers and ensuring that insurance companies are providing promised benefits.
- Rapid ERISA Action Team (REACT) - REACT targets participants exposed to the greatest risk of loss, such as participants of plans where the sponsor has filed for bankruptcy. If participants’ money is not segregated in a timely manner, those dollars can be subject to creditors. REACT wants to ensure that all legal actions have been taken to preserve pension plan dollars.
- Employee Stock Ownership Plans - ESOPs are a very unique type of plan and can have specific violations. Some of the most common issues relate to the valuation, failure to provide specific benefits to participants and the loans associated with the ESOP.
The issues that the ESBA is focusing on and investigating are identified in many ways, including complaints, Form 5500 reviews, referrals from other agencies or even the media. One thing for sure is that they are not random. By being aware of these top areas of focus, you can help protect your plan’s assets as well as yourself.
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