What to Expect from an Employee Benefits Security Administration (EBSA) Investigation Susan Gilmore Fultz Associate Regional Director Cincinnati Regional

What to Expect from anEmployee Benefits Security

Administration (EBSA) Investigation

Susan Gilmore Fultz

Associate Regional Director

Cincinnati Regional Office

May 25, 2010

EBSA Organizational EBSA Organizational ChartChart

Office of the Chief Accountant

Deputy Assistant Secretary for Policy

Office of Exemption Determinations Office of Enforcement Office of Policy and

Research

Office of Health Plan Standards and

Compliance Assistance

Office of Regulations and Interpretations

Deputy Assistant Secretary for Program Operations

Office of Technology and Information Services

Office of Participant Assistance

Office of Program Planning Evaluation and

Management

Regional Offices

Chicago

Kansas City

Dallas

Los Angeles

San Francisco

Assistant Secretary

Boston

New York

Philadelphia

Atlanta

Cincinnati

EBSA Field OfficesEBSA Field Offices

Regional OfficesDistrict Offices

EBSA - EBSA - StructureStructure

Field Offices

– 10 Regional Offices

– Provide Compliance Assistance

– Conduct Investigations

EBSA’s Mission StatementEBSA’s Mission Statement

The Employee Benefits Security Administration protects the integrity of pensions, health plans, and other employee benefits for more than 150 million people. Our Agency mission is to:

• Assist workers in getting the information they need to exercise their benefit rights

• Assist plan officials to understand the requirements of the relevant statutes in order to meet their legal responsibilities

• Develop policies and regulations that encourage the growth of employment-based benefits

• Deter and correct violations of the relevant statutes through strong administrative, civil and criminal enforcement efforts to ensure workers receive promised benefits

EBSA EBSA EnforcementEnforcement Strategy Strategy

• Strategic Enforcement Plan (STEP)– Describes basic enforcement strategy– Last published in 2000

• Program Operating Plan (POP Guidance)– Changes annually

• Each Regional Office creates its own POP

NationalNational ProjectsProjects (FY 2010)(FY 2010)

• Rapid ERISA Action Team (REACT)

• Employee Stock Ownership Plans (ESOPs)

• Consultant/Advisor Project (CAP)

• Health Care Fraud / Multiple Employer Welfare Arrangements (MEWAs)

• Contributory Plan Criminal Project

SourcesSources of Casesof Cases

• Participant complaints

• Form 5500 Reviews

• Referrals from other agencies

• Media

• Other

Types of InvestigationsTypes of Investigations

• Civil– Plan– Service Provider

• Criminal– Plan– Service Provider– Employer– Individual

Issues/Areas of Review in Civil Issues/Areas of Review in Civil CasesCases

• Review of Plan Assets– Prudence, Prohibited Transactions, Self

Dealing

• Reporting and Disclosure

• Bonding

• General Plan Operations

• In accordance with Plan Document

• Remittance of Employee Contributions

Civil Plan InvestigationsCivil Plan Investigations

• Start with phone call from Investigator / Auditor

• Followed by confirmation letter

• Date & time of visit

• Plan(s) to be reviewed

• Records / documents needed• Varies depending on issue

Onsite Investigative WorkOnsite Investigative Work

• Interviews with key personnel and plan fiduciaries

• Basic operations / services• Contributions• Benefit payments• Expenses• Investments

Onsite Investigative WorkOnsite Investigative Work

• Identification of • Service providers• Record-keeper(s)

• Record Review

Basic DocumentsBasic Documents• Plan Document/ Trust Agreement• Form 5500 filings (past 3 years)• SPD• SAR for last year• Fidelity Bond• Fiduciary Insurance Policy• Trustee Statements (past 3 years) (asset

records)• Service Provider Contracts• Meeting Minutes• Benefit Statements• Asset records• Payroll/contribution records

Investigative EmphasisInvestigative Emphasis

Reporting Requirements• Annual Report (Form 5500)


Disclosure Requirements– Summary Plan Descriptions (SPDs)– Summary of Material Modifications (SMM)– Summary Annual Reports (SARs)– “Blackout” Notices– COBRA Notices / HIPAA Certificates & more– Provide documents on request– Participant Benefit Statements

• Field Assistance Bulletin 2006-03• Field Assistance Bulletin 2007-03


Bonding– 10% of Funds Handled – not less than $1,000

nor more than $500,000 ($1,000,000 for plans with employer securities)

– No deductible– Plan should be named as insured– Discovery Period of no less than one year

after termination or cancellation of bond is required


Fiduciary must

– Act “solely in interest” of Ps & Bs

– Discharge his / her / its duties prudently(care, skill, prudence and diligence)

– Diversify plan investments

– Follow terms of governing documents(to the extent consistent with ERISA)


Fiduciary must NOT

– act in his / her / its own self interest

– act on behalf of a party with adverse interests

– accept “gratuity” from those doing business

w/ the Plan (kickback)


Fiduciaries must NOT cause the Plan to engage in a “prohibited transaction”

• Sale / exchange with party in interest (PII)

• Loan / extension of credit with PII

• Goods, services & facilities with PII

• Transfer to, use by or for the benefit of a PII

Employee ContributionsEmployee Contributions

• Handling of employee contributions

• Basic Rule –As soon as they can be

“reasonably segregated”

from Employer’s general assets

Safe Harbor Reg. – Proposed 2/08 – became final 1/14/2010 - for plans with fewer than 100 participants


• “As soon as” varies from plan to plan

• will ask questions about handling

• will review practice / experience


• Outside Limits (Not a safe harbor)

• Pension – 15 Business Days after end of month of withholding / receipt

<< SIMPLE IRA Plans – 30 days after end of month >>

• Welfare – 90 days after withholding / receipt

Concluding the InvestigationConcluding the Investigation

• Depends on any problems identified

• If no problems are noted, closing letter

• If problems are noted,

corrective actions are necessary

Needing CorrectionNeeding Correction

• Usually, EBSA will send “Notice Letter”• Identifies problems• Offers chance to discuss correction

• EBSA encourages Voluntary Compliance

• Proper Correction >> “Closing Letter”• Identifies problems & corrective actions

• No Correction >> referral to the Solicitor’s Office

Needing CorrectionNeeding Correction

Depending upon the circumstances, EBSA may seek

• Correction of prohibited transactions• Restoration of losses• Penalties• Removal of fiduciaries• Removal of service providers• Appointment of independent fiduciary• Implementation of new internal controls• Supplemental distributions to Ps & Bs• Final accounting

IRS ReferralsIRS Referrals

• IRS Coordination Agreement and Statute requires:

– referral of prohibited transactions to IRS• IRC § 4975 excise tax

(tax qualified pension plans)

– referral of potential issues affecting tax qualified status

Criminal ReferralsCriminal Referrals

• Under some circumstances,

criminal referrals may be made

• Theft / embezzlement• Kickbacks / bribes• False statements to investigators• Willful failures to file / false filings• Health care fraud

• Allows “Plan Officials” to correct certain violations before DOL investigates and if done properly, receive a “No-Action” letter from the Department.

What is the VFC ProgramWhat is the VFC Program??

DOL NO ACTION DOL

“You fixed it”

Compliance AssistanceCompliance Assistance

• Office of Regulations & Interpretations• Advisory Opinion Letters, Regulations,

Technical Rulings• (202) 693 - 8500

• Office of Exemptions & Determinations• Exemptions from Prohibited Transaction Rules

– Class & Individual basis

• (202) 693 - 8540


• Office of Chief Accountant• Reporting & Disclosure issues• (202) 693 - 8360

• Office of Health Plan Standards

& Compliance Assistance• HIPAA & other group health laws• (202) 693 - 8335


• EBSA website: www.dol.gov/EBSA• EFAST website: www.efast.dol.gov

• Publications: 1-866-444-3272

• Technical Assistance (Toll-free number):1-866-444-3272

• EFAST Hotline (Toll-free number):1-866-463-3278 (Go EFAST)


• Cincinnati Regional Office

(859)578-4680

or

• 1-866-444-3272 (toll-free – will route to Cincinnati)

Helpful EBSA PublicationsHelpful EBSA Publications

• Meeting Your Fiduciary Responsibilities

• Understanding Retirement Plan Fees and Expenses

• Selecting an Auditor for Your Employee Benefit Plan

• Reporting and Disclosure Guide

QuestionsQuestions

Electronic FilingElectronic Filing

BackgroundBackground

Form 5500 Annual Return/Report Series used by 4 federal agencies.

Information collection to enforce ERISA provisions and IRS code.

EFAST has processed the Form 5500 Series filings since 2000.

EFAST 2EFAST 2

EFAST / EFAST2 TimeframeEFAST / EFAST2 Timeframe

• Development of EFAST2 was completed by January 1, 2010.

• After January 1, 2010 the system is expected to electronic process all Form 5500 returns/reports (plan year 2009, 2010, prior plan years, and amended returns/reports).

• EFAST will continue to process timely filed Plan Year 2008 returns/reports until October 15, 2010.

• Early Plan Year 2009 returns/reports due before EFAST2 is completed have been granted an extension but may be submitted on paper through EFAST using 2008 forms and instructions.

How does EFAST2 work?How does EFAST2 work?

• Signers/transmitters register for e-filing credentials (UserID/ETIN, PIN)

• Filers/preparers/stakeholders prepare returns/reports electronically– Use certified software or IFILE– Prepared files can be shared out-of-band– Attachments electronic

• Signers enter UserID & PIN• Filers/transmitters click submit

Form 5500Form 5500

2009 Forms Revisions 2009 Forms Revisions OverviewOverview

Facilitate move to fully electronic filing system.

Streamline and simplify small plan filing.

Better disclosure on plan fees & expenses.

Adopt Pension Protection Act (PPA) reporting changes.

New Form 5500-SFNew Form 5500-SF Two Page “Short Form” 5500 for Small plans (under 100

participants). Can use if:

Exempt from annual audit requirement;

100% invested in secure investments that have a readily determinable fair value;

Hold no employer securities; and

Not multiemployer plan.

No Schedules required except DB plans required to file actuarial schedule.

NOTE: IRS giving many 5500-EZ filers choice of e-filing 5500-SF with EFAST or paper 5500-EZ with IRS.

Form 5500 ChangesForm 5500 Changes IRS-only Schedules (E, SSA) removed to enable

mandatory e-filing.

Enhanced disclosures on plan fees & expenses (expanded Schedule C reporting).

Put 403(b) plans on par with 401(k) plans.

Better info on DB pension funding and multiemployer plans (including PPA changes) – new actuarial schedules (Schedules SB and MB replace Schedule B)

Focused compliance questions added.

Questions & instructions clarified/improved.

QuestionsQuestions