Presentation on theme: "What to Expect from an Employee Benefits Security Administration (EBSA) Investigation Susan Gilmore Fultz Associate Regional Director Cincinnati Regional."— Presentation transcript:
What to Expect from an Employee Benefits Security Administration (EBSA) Investigation Susan Gilmore Fultz Associate Regional Director Cincinnati Regional Office May 25, 2010
EBSA Organizational Chart 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 Offices Regional Offices District Offices
EBSAs 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 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
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
Sources of Cases Participant complaints Form 5500 Reviews Referrals from other agencies Media Other
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
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
Onsite Investigative Work Interviews with key personnel and plan fiduciaries Basic operations / services Contributions Benefit payments Expenses Investments
Onsite Investigative Work Identification of Service providers Record-keeper(s) Record Review
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
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
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
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)
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)
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
Employee Contributions Handling of employee contributions Basic Rule – As soon as they can be reasonably segregated from Employers general assets Safe Harbor Reg. – Proposed 2/08 – became final 1/14/ for plans with fewer than 100 participants
Employee Contributions As soon as varies from plan to plan will ask questions about handling will review practice / experience
Employee Contributions Outside Limits (Not a safe harbor) Pension – 15 Business Days after end of month of withholding / receipt > Welfare – 90 days after withholding / receipt
Concluding the Investigation Depends on any problems identified If no problems are noted, closing letter If problems are noted, corrective actions are necessary
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 Solicitors Office
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
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
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
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 Program ? DOL NO ACTION DOL You fixed it
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)
Compliance Assistance Office of Chief Accountant Reporting & Disclosure issues (202) Office of Health Plan Standards & Compliance Assistance HIPAA & other group health laws (202)
Compliance Assistance Cincinnati Regional Office (859) or (toll-free – will route to Cincinnati)
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
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.
EFAST / EFAST2 Timeframe Development of EFAST2 was completed by January 1, 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, 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? 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
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.
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.
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.