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