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Susan Gilmore Fultz Associate Regional Director

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Presentation on theme: "Susan Gilmore Fultz Associate Regional Director"— Presentation transcript:

1 What to Expect from an Employee Benefits Security Administration (EBSA) Investigation
Susan Gilmore Fultz Associate Regional Director Cincinnati Regional Office May 25, 2010

2 EBSA Organizational Chart
Assistant Secretary Deputy Assistant Secretary for Program Operations Deputy Assistant Secretary for Policy Office of Exemption Determinations Office of Policy and Research Office of Enforcement Office of Health Plan Standards and Compliance Assistance Office of Regulations and Interpretations Office of the Chief Accountant Office of Program Planning Evaluation and Management Office of Technology and Information Services Office of Participant Assistance Regional Offices Boston New York Philadelphia Atlanta Cincinnati Chicago Kansas City Dallas Los Angeles San Francisco

3 EBSA Field Offices Regional Offices District Offices

4 EBSA - Structure Field Offices 10 Regional Offices
Provide Compliance Assistance Conduct Investigations

5 EBSA’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

6 EBSA Enforcement 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

7 National Projects (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

8 Sources of Cases Participant complaints Form 5500 Reviews
Referrals from other agencies Media Other

9 Types of Investigations
Civil Plan Service Provider Criminal Employer Individual

10 Issues/Areas of Review in Civil Cases
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

11 Civil 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

12 Onsite Investigative Work
Interviews with key personnel and plan fiduciaries Basic operations / services Contributions Benefit payments Expenses Investments

13 Onsite Investigative Work
Identification of Service providers Record-keeper(s) Record Review

14 Basic 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

15 Investigative Emphasis
Reporting Requirements Annual Report (Form 5500)

16 Investigative Emphasis
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 Field Assistance Bulletin

17 Investigative Emphasis
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

18 Investigative Emphasis
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)

19 Investigative Emphasis
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)

20 Investigative Emphasis
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

21 Employee 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/ for plans with fewer than 100 participants

22 Employee Contributions
“As soon as” varies from plan to plan will ask questions about handling will review practice / experience

23 Employee Contributions
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

24 Concluding the Investigation
Depends on any problems identified If no problems are noted, closing letter If problems are noted, corrective actions are necessary

25 Needing 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

26 Needing 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

27 IRS 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

28 Criminal 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

29 DOL What is the VFC Program?
Allows “Plan Officials” to correct certain violations before DOL investigates and if done properly, receive a “No-Action” letter from the Department. Plan Official DOL “You fixed it” DOL NO ACTION

30 Compliance Assistance
Office of Regulations & Interpretations Advisory Opinion Letters, Regulations, Technical Rulings (202) Office of Exemptions & Determinations Exemptions from Prohibited Transaction Rules Class & Individual basis (202)

31 Compliance Assistance
Office of Chief Accountant Reporting & Disclosure issues (202) Office of Health Plan Standards & Compliance Assistance HIPAA & other group health laws (202)

32 Compliance Assistance
EBSA website: EFAST website: Publications: Technical Assistance (Toll-free number): EFAST Hotline (Toll-free number): (Go EFAST)

33 Compliance Assistance
Cincinnati Regional Office (859) or (toll-free – will route to Cincinnati)

34 Helpful EBSA Publications
Meeting Your Fiduciary Responsibilities Understanding Retirement Plan Fees and Expenses Selecting an Auditor for Your Employee Benefit Plan Reporting and Disclosure Guide

35 Questions

36 Electronic Filing

37 Background 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. EBSA, the IRS, and PBGC are partner agencies in administration and oversight of the current EFAST system to process Form 5500 Series filings required by the ERISA. These filings are critical to the agencies’ ERISA enforcement missions and provide data to the public and other Government agencies on over one million employee benefit plans each year. The EFAST system has processed Form 5500 Series filings, received almost exclusively on paper, since 2000.

38 EFAST 2

39 EFAST / 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.

40 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

41 Form 5500

42 2009 Forms Revisions Overview
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.

43 New 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. Like current filers who are exempt from audit requirement, must meet all of the conditions of the small plan audit waiver regulation at 29 CFR , including enhanced SAR requirements for DC plans, enhanced disclosure requirements for DB plans that post-PPA not required to provide SAR. Note: must be exempt for annual audit requirement under 29 CFR by virtue of type of assets held, NOT by virtue of enhanced bonding. CANNOT hold employer securities, real estate, limited partnerships, other hard to value assets

44 Form 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. IRS removed Schedule P in 2005 and Schedule T in 2006 in anticipation of move to electronic filing; three questions on Schedule E were moved to the Schedule R Fee disclosure update focuses on enhanced indirect compensation disclosure on Schedule C. Because of burden issues, does not apply for reporting purposes for small plans, but small plans do now break out direct service provider expenses from other administrative expenses. Code section 403(b) plans that are covered by Title I of ERISA no longer do limited reporting. Large plans must submit IQPA report. “80-120” rule still applies. Major PPA-related funding changes is shift from Schedule B to two actuarial Schedules – Schedule SB (single employer and multiple employer) and Schedule MB (multiemployer and certain money purchase plans). Also new questions on the Schedule R. These changes are effective for 2008. New compliance questions include blackout notice compliance questions and question on whether plan has paid all benefits when due.

45 Questions

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