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Presenting a live 90-minute webinar with interactive Q&A

DOL Investigations of Employee Benefit Plans:

Navigating Enforcement Actions,

Audits and Settlements

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

TUESDAY, JUNE 6, 2017

Ivelisse Berio LeBeau, Member, Sugarman & Susskind, PA, Miami

José M. Jara, Partner, FisherBroyles, LLP, New York

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DOL Investigations of Employee

Benefit Plans: Navigating

Enforcement Actions, Audits and

Settlements

Tuesday, June 6, 2017

Ivelisse Berio LeBeau, Esq. José M. Jara, Esq. Sugarman & Susskind, PA FisherBroyles, LLP

Miami, FL New York, NY

Background: DOL and EBSA

U.S. Department of Labor has many sub-

agencies, including:

Employee Benefits Security

Administration (EBSA)

◦ Charged with investigating ERISA violations

◦ Subpoena Power

Office of the Solicitor of Labor (SOL)

◦ “in house” DOL counsel

◦ Independent litigation authority

6

EBSA

National Office

◦ Different divisions with different missions

Regional Offices

◦ Regional Directors

◦ Pension Benefit Advisors

“customer service”; handle calls

◦ Investigators

Usually attorneys or accountants

◦ Supervisors

Usually former investigators

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EBSA: Civil and Criminal

EBSA has broad investigative authority

Most EBSA investigations are civil, but

EBSA also has authority to conduct

criminal investigations

◦ Same investigators

◦ Some different rules for criminal cases

◦ Criminal cases go to the U.S. Attorney’s Office

instead of DOL Solicitor’s

Enforcement Manual on website

8

EBSA Enforcement Statistics

For FY2016 EBSA reports:

◦ $777.5 million recovered for direct payment to plans, participants, beneficiaries

$352 million Enforcement Actions

$394.2 million Informal Complaint Resolutions

◦ Over 2,000 civil cases closed; 67.7% with results

◦ 144 cases referred for litigation; 62 federal lawsuits filed

◦ 333 criminal cases closed; 96 indictments

Presentation describes EBSA regional office investigations that led to these results

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Why me? (or who does EBSA

investigate?) EBSA investigators likely will not tell you

why your plan is being reviewed

Reasons for initiating reviews:

◦ Employee/Participant Complaints

Other Complaints

◦ Targeted:

National Office Enforcement Projects

Regional Office Enforcement Projects

Information Reported on Form 5500s

◦ Random?

◦ Referrals from other agencies 10

EBSA Enforcement Projects

Available on EBSA website (but have to look for it!)

National Enforcement Projects on: ◦ Major Case Enforcement Priority

◦ Employee Contributions Enforcement Priority

◦ Contributory Plans Criminal Project

◦ Plan Investments Conflicts

◦ Health Benefits Security Project (Part 7)

◦ ESOPs

◦ Bankruptcy (REACT)

◦ Abandoned Plans

◦ Voluntary Fiduciary Correction

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Investigation Subjects

All Types of Employee Benefit Plans:

◦ Retirement, Health, Apprenticeship, Legal

Plan Sponsors

Plan Trustees

Named Fiduciaries

Functional Fiduciaries

Plan Administrators

Service Providers

◦ Consultants Custodians

◦ Investment Advisors Directed Trustees

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What are they looking for?

Focus on investigating potential breaches

of ERISA fiduciary duty

Violations of:

ERISA §404 Fiduciary Duties

ERISA §406 Prohibited Transactions

ERISA §405 Co-Fiduciary Duties

ERISA Part 7 Health Plan Requirements

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What are they looking for?

Common Scenarios:

◦ Delinquent Employee Contributions

◦ Excessive Service Provider Fees

◦ Imprudent Investments

◦ Plan Sponsor Bankruptcies

◦ Part 7 violations in Health Plans

◦ Abandoned Pension Plans

◦ Hard to Value Assets

14

EBSA Investigative Process

EBSA Enforcement Manual on website

Initial Contact

◦ Usually a letter/could be a phone call

Request for Documents

◦ Standard and non-standard requests

◦ If don’t cooperate expect a subpoena

◦ Accommodation subpoenas

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Documents

Does request ask for copies to be sent to EBSA office or for on-site review?

◦ Pros and Cons to both

◦ Copying Costs/Electronic Media

Standard Requests:

◦ Governing Plan Documents

Plan Document/Amendments

Trust Document/Amendments

SPD/SMMs

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Documents

Standard Requests

◦ Required Reporting

5500s

Annual Funding Notices

SBCs

Participant Statements

SARs

◦ Audits

◦ Fidelity Bond/Fiduciary Liability Policy

◦ Service Provider Contracts

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Documents

Standard Requests: ◦ Plan Contribution records Employee contributions

CBAs

◦ Meeting Minutes

◦ Participant Loan records

◦ Income/Expenses/Journals

◦ Appraisals

◦ Part 7/ACA related

◦ COBRA/HIPAA/other notices

◦ Correspondence/E-mails

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Documents

Standard Requests:

◦ Bank Accounts/Statements

◦ Investment Accounts/Statements

◦ Real Property Records

◦ Securities/Bonds

◦ Claims Adjudication Records

Non-standard requests

◦ Requests that refer to anything specific, such as a specific investment/type of investment; a specific claim or type of claim; specific plan details

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On-site Review

Most investigations will include an on-site

review

◦ “desk audit” exception

What to Expect:

◦ Usually at primary place of business

◦ Can last days or weeks

◦ Investigator will likely review documents

◦ Investigator may conduct interviews

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Interviews

Typically interviews held on-site,

sometimes at EBSA office

◦ Voluntary

◦ Not recorded

◦ Not under oath

◦ No time limit

Attorney Present?

◦ Who’s the Client?

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Interviews

Common interview subjects:

◦ Plan Administrator

If in-house or entity, could interview several people

who perform different functions

◦ Trustees

If board usually designee or officers; could interview

all

◦ Fiduciaries

◦ Plan Sponsor

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Interviews

Standard Procedures/Disclosures

Circumstances matter:

◦ Tone of interviewer

◦ Attitude of interviewee

◦ Point of investigation

◦ Nature of Review

Practice Tips

Administrative Depositions

23

Follow Up (and why does it take so

long?) There will be follow up questions

There will likely be follow up requests for

documents

There could very likely be long periods of

time between requests, contacts

What’s happening at EBSA?

◦ Reports- Investigator, Supervisor, National

◦ Reviews-Supervisor, Regional, National

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After the investigation is complete

Most investigations lead to a letter from

EBSA reporting the results

Possibilities:

◦ No findings/Closing letter

◦ Findings but no action/Closing letter

◦ Voluntary Compliance Request

◦ Referral to Solicitor’s Office for litigation

25

Voluntary Compliance

EBSA encourages voluntary compliance

Offered in almost all matters

Work with the investigator and correct issues identified in the review

◦ Change procedures

◦ Adopt policies

◦ Enforce policies

◦ Restore assets

◦ Repay monies

◦ Correct prohibited transactions

26

Voluntary Compliance

Submit response to VC Letter

◦ Address all issues raised

◦ Include any defenses to claims

◦ Describe voluntary compliance actions

◦ Include exhibits

◦ Include additional information as

relevant to address issues raised

27

Voluntary Compliance

If money is paid to address issues—

◦ Recoveries generally go to an employee

benefit plan

◦ Recoveries could go to a person

◦ Recoveries do not go to the DOL or Treasury

If address issues to EBSA’s satisfaction,

EBSA will issue a No Action letter

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502(l)

ERISA §502(l) requires that the DOL

assess a 20% penalty on amounts

recovered by settlement agreement or

court order

Are voluntary compliance actions taken in

response to a VC letter from EBSA a

settlement agreement?

EBSA discretion to reduce penalty

29

Referral to Solicitor’s Office

If voluntary compliance efforts fail, or

EBSA does not seek voluntary

compliance, EBSA refers matter to

Solicitor’s Office for litigation

Office of the Solicitor

◦ National Office/Pension Benefits Security

Division (PBSD)

◦ Regional Offices

◦ Represent DOL in federal court cases

◦ Has independent litigation authority 30

Solicitor’s Office (SOL)

SOL attorney will receive all investigation

materials, interview reports, and

documents, along with EBSA report

describing investigation and findings

SOL attorney will conduct independent

review of facts and claims

SOL attorney will likely reach out to

subjects of investigation

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Solicitor’s Office (SOL)

SOL response may include:

◦ Request for tolling agreement

◦ Request for documents

◦ Request for meeting to discuss issues

◦ Filing case in federal court

Cases frequently settle with SOL

◦ Both before and after filing in federal court

32

Solicitor’s Office (SOL)

Complaint/Consent Judgment

◦ If enter into negotiations before SOL files in

federal court

◦ SOL will file complaint with allegations

◦ Simultaneously file negotiated consent

judgment

◦ Several non-negotiable items:

No denials of liability

DOL will issue press release

DOL will assess 502(l) penalty

33

Solicitor’s Office (SOL)

If negotiations with SOL fail, or if no tolling agreement reached, or if facts show exigent circumstances, SOL will file complaint in federal court

Will proceed as any other federal litigation

Any settlement of case after filing will require settlement agreement with same parameters/limitations as Consent Judgment

34

Related concerns

Internal Revenue Service

◦ DOL only acts on its own behalf

◦ Issues in DOL matter could raise excise tax concerns, i.e.

Section 4975 if any prohibited transactions

Section 4980D if any health plan violations

◦ Tax qualification issues are referred to IRS

Participant Complaints

◦ DOL action does not bind Plan participants

◦ Participants can’t get same recovery twice

35

Voluntary Fiduciary Correction

Program (VFCP)

The VFCP is NOT available if a plan is

already under review

If Plan is already being reviewed and

attempt VFCP it will be denied

If have self-identified fiduciary violations,

and not under review, consider entering

the VFCP and addressing the issues raised

before EBSA opens an investigation!

36

Questions?

Ivelisse Berio LeBeau, Esq. José M. Jara, Esq.

Sugarman & Susskind, PA FisherBroyles, LLP 100 Miracle Mile, Suite 300 445 Park Avenue, 9TH Fl.

Coral Gables, FL 33134 New York, NY 10022

Ivelisse@sugarmansusskind.com jose.jara@fisherbroyles.com

305-529-2801 (646) 457-1517

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Ivelisse Berio LeBeau, Esq. Ms. Berio LeBeau has been working in the employee benefits law field for more than 20 years. Ivelisse counsels the boards of trustees of jointly administered multiemployer pension and welfare benefit funds; represents fiduciaries in litigation and in connection with government agency investigations; represents employees in employment law matters, including participants in ERISA benefit plans; and provides general ERISA compliance advice to plan sponsors. At present her practice has focused on the requirements and implications of the Affordable Care Act; the responsibilities of service providers to benefit plans; and representing plans and their trustees in investigations conducted by the U.S. Department of Labor.

From 1994 to 2007 Ivelisse served as a Trial Attorney in the Solicitor’s Office of the U.S. Department of Labor. At the DOL she represented the Employee Benefits Security Administration (“EBSA”) in lawsuits brought under ERISA alleging that fiduciaries to employee pension and welfare benefit plans breached fiduciary duties imposed by ERISA or were engaged in transactions prohibited under ERISA, including actions against fiduciaries who had made imprudent investment decisions and against service providers who generated and retained undisclosed indirect compensation. Ivelisse also worked closely with EBSA investigators providing legal support and assistance during EBSA investigations.

In September of 2015 Ms. Berio LeBeau was inducted as a Fellow of the American College of Employee Benefits Counsel, an invitation-only organization of nationally recognized employee benefits lawyers who have made significant contributions to the advancement of the employee benefits field.

Ms. Berio LeBeau is Editor in Chief of the upcoming 4th edition of Employee Benefits Law to be published by Bloomberg BNA Books later in 2017; she was previously co-editor of the 3rd edition of Employee Benefits Law and Editor in Chief of the 2014 and 2015 Supplements to the 3rd edition. This legal treatise is based on contributions by members of the Employee Benefits Committee of the American Bar Association’s Labor and Employment Law Section. Ivelisse is also a frequent speaker on employee benefits law topics at conferences and seminars sponsored by organizations including the American Bar Association, the International Foundation of Employee Benefit Plans, the Florida Bar Labor and Employment Section, and local bar and trade organizations.

38

Jose M. Jara, Esq.

Mr. Jara has over 20 years of ERISA and employee benefits experience,

ranging from governmental compliance, fiduciary liability insurance, to

the application of ERISA’s fiduciary standards and prohibited

transaction provisions. Mr. Jara has extensive experience resolving

issues for corporate plan sponsors and multiemployer plans before

the U.S. Department of Labor, where he was formerly a senior

pension law specialist and investigator.

39