1. U.S. Department of Labor Dallas Regional Office
What to Expect from an Employee Benefits Security Administration (EBSA) Investigation
U.S. Department of Labor Dallas Regional Office

2. National Office Regional Offices EBSA - Structure
Establishes policy and agency protocols
Oversight of reporting and disclosure requirements
Drafts regulations and interpretive guidance
Conducts economic research to determine impact of policy and regulations on regulated community
Conducts outreach such as the Health Benefits Education Campaign and fiduciary responsibility seminars
National Office
Conduct investigations of ERISA plans
Provide compliance assistance through Benefits Advisors
Conduct outreach to plan sponsors and other stakeholders
Regional Offices

3. EBSA’s Mission Statement
The Employee Benefits Security Administration protects the security of the retirement, health and other workplace related benefits of American workers and their families. Our Agency accomplishes this by:
developing effective regulations
assisting and educating workers, plan sponsors, fiduciaries and service providers
vigorously enforcing the law

4. What Is ERISA? Employee Retirement Income Security Act
ERISA is a federal law that sets standards for private-sector, employment-based pension and welfare benefit plans
Employee Benefits Security Administration (EBSA) enforces Title I of ERISA

5. What Are ERISA Plans?
ERISA covers two major types of “employee benefit plans”
Pension benefit plans
E.g., traditional defined benefit pension plans, and defined contribution pension plans such as 401(k) plans, profit sharing plans, ESOPs
Welfare benefit plans
E.g., group health plans, life insurance, disability plans, severance plans

6. What Are ERISA Plans? (continued)
Not all benefits paid to employees are ERISA covered plans
Certain payroll-based vacation and sick pay programs are not ERISA plans
State-mandated disability, workers compensation, and unemployment benefits are generally not ERISA plans
Some “executive compensation” plans are covered by ERISA but exempt from certain ERISA rules

7. Employee Retirement Income Security Act (ERISA)
Generally, ERISA allows the plan sponsor to decide whether to offer a plan and allows flexibility in the plan’s benefit design.
Applies to employee benefit plans sponsored by private sector employers and/or unions
NOT government plans
NOT church plans
Other exclusions may apply

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
General Plan Operations
In accordance with Plan Document
Reporting and Disclosure
Bonding
Remittance of Employee Contributions
Review of Plan Assets
Prudence, Prohibited Transactions, Self Dealing

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

13. What is an ERISA “Fiduciary”?
A person is a fiduciary with respect to a plan to the extent that the person:
exercises authority or control over management or disposition of plan assets;
renders “investment advice” for a fee or other compensation with regard to plan assets;
has discretionary authority or discretionary responsibility in administration of the plan or exercises discretionary authority or control regarding management of the plan.

14. Basic Fiduciary Duties
Acting solely in the interests of the participants and their beneficiaries
Being prudent
Paying only reasonable and necessary expenses of the plan
Following the terms of the plan (as long as the terms of the plan do not conflict with the requirements of ERISA)

15. Basic Documents Plan Document/ Trust Agreement
Form 5500 filings (past 3 years)
SPD (90 days, every five years)
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

16. Basic Documents (Health Plans)
Plan document / SPD / Certificate of Coverage
Summary of Benefits and Coverage (SBC)
Service provider contracts
Premium or contribution schedules
Documents related to plan finances
Documents related to claims
Participant notices required by ERISA
Other documents related to ERISA compliance

17. Reporting and Disclosure
Disclosure Requirements (automatically and upon request)
Summary Plan Descriptions (SPDs)
Summary of Material Modifications (SMM)
Summary Annual Reports (SARs)
“Blackout” Notices
COBRA Notices / Part 7 Notices
Participant Benefit Statements

18. Disclosures Upon Request
Upon receipt of written request, the plan administration must provide within 30 days:
Form 5500/Form 5500-SF
Current SPD
Other instruments under which the plan is established or operated (e.g., plan trust agreement)
Miscellaneous disclosures

19. Fidelity Bond
Bond must be for at least 10% of the amount of funds or other property a person handles
Review bond coverage when you change personnel or service providers who handle plan funds – otherwise, bond amount must be fixed at least once a year
Make sure that the plan or plans are named insureds on the bond, and that the bond is obtained from an approved surety
Discovery Period of no less than one year after termination or cancellation of bond is required
- See FAB

20. Employee Contributions
Participant contributions become “plan assets” when reasonably segregable from employer’s general assets – failure may result in violation of trust requirements and prohibited transactions.

21. Employee Contributions
Handling of employee contributions
Basic Rule –
As soon as they can be
“reasonably segregated”
from employer’s general assets
“As soon as” varies from plan to plan
Safe Harbor Regulation (1/14/2010) – for plans with fewer than 100 participants

22. Concluding the Investigation
Issues Identified
Corrective Actions
Closing Letter

23. 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

24. 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

25. 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

26. 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

27. 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
Designed to be a voluntary program
No need to consult with EBSA
Apply after correction
DOL
“You fixed it”
DOL
NO ACTION

28. VFC Program - Advantages
Compliance with ERISA
Guidance regarding correction
Restoration of losses
Increased benefits for some Ps & Bs
Enhanced benefit security
More accurate valuations & reporting

29. VFC Program - Advantages
“No Action” letter (upon completion)
Avoid DOL investigations
Avoid ERISA §502(l) penalty
20% penalty on settlement agreements
Avoid potential litigation
In some cases, avoid IRC §4975 excise tax

30. VFC Program - Applicants
Fiduciaries
Plan sponsors
Parties in Interest
Others in a position to correct
May utilize “Representative”
Must include copy of signed authorization

31. VFC Program - Transactions

32. VFC Program - Eligibility
Neither plan nor applicant “Under Investigation”
No evidence of criminal violations
EBSA has not referred the transaction to the IRS; EBSA notified plan official of referral

33. VFC Program - Correction
All losses must be restored to plan, all Prohibited Transactions corrected
Principal
Interest
Supplemental distributions must be made (when appropriate)
No correction costs paid by plan
5500s amended when appropriate

34. VFC Program - Application
Model Application Form
Not required, but recommended
Helps ensure a complete and accurate application
Includes Required Documents
Penalty of Perjury statement
Checklist

35. IF IN DOUBT, CALL

36. 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)

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

38. Compliance Assistance
EBSA website:
Technical Assistance:
Toll-free number (866)
Dallas Regional Office (972)
Publications: (866)