PLANSPONSOR.com November–December 2017 63
that investigators should generally treat as insubstantial—versus
as in violation of 406(b)( 3)—a fiduciary’s or his relative’s receipt
of “gifts, gratuities, meals, entertainment” and noncash consideration, including certain reimbursed expenses for educational
conferences, where the aggregate value of such items provided
by a single source, including employees, affiliates and related
parties, is less than $250 per year.
Notably, the manual contains a special policy for educa-
tional conferences. Specifically, investigators are instructed
to not treat as a violation the “reimbursement to a plan of
expenses associated with a plan representative’s attendance at
an educational conference,” as long as, prior to his attendance,
the fiduciary reasonably determines and documents in writing
that “(a) the plan’s payment of educational expenses in the first
instance was prudent, (b) the expenses were consistent with a
written plan policy or provision designed to prevent abuse, (c)
the conference had a reasonable relationship to the duties of the
attending plan representative, and (d) the expenses for atten-
dance were reasonable in light of the benefits afforded to the
plan by such attendance and unlikely to compromise the plan
representative’s ability to carry out his or her duties faithfully
in accordance with ERISA.”
While the Enforcement Manual does provide some guard-
rails to fiduciaries, it should not be mistaken for formal guid-
ance that is binding on the DOL. The manual provides only
general principles for enforcement as opposed to safe harbor
areas of nonenforcement.
The takeaway for fiduciaries is that they should remain diligent when receiving anything of value from a service provider.
For example, whereas accepting a dinner from a plan service
provider in the ordinary course of doing business may not be a
problem, doing so during a request for proposals (RFP) process
may not be appropriate.
To better prepare for such issues, consider having easy-to-consult policies that provide guidelines for accepting things of
value, and also ensure that such policies are followed in practice.
Of course, aside from providing practical assistance, these policies
may also be useful as defense in a DOL audit or investigation.
With the holiday season here, it may be a good time for plan fiduciaries to refresh themselves on the rules for receiving things of value from parties that service
their plan. The receipt of meals, gifts and entertainment by plan
fiduciaries has long been a focus of enforcement activity by the
Department of Labor (DOL), and fiduciaries should understand
the rules covering the receipt of such items on the front end to
avoid running into trouble later.
The offering of occasional business dinner invitations,
outings, educational seminars and gifts to plan fiduciaries has
been common practice in the retirement industry. Routine outings
are often vital for developing strong relationships and building
trust with service providers, particularly when the relationship
is intended to continue, long term. Unlike unions and persons
subject to the Labor-Management Reporting and Disclosure Act,
most employee benefit plans are not required to report the receipt
of things of value to the DOL. However, should they receive such
things, fiduciaries must comply with the fiduciary standards
and prohibited transaction rules under the Employee Retirement
Income Security Act (ERISA).
Particularly with respect to meals, gifts and entertainment, fiduciaries must be careful to not violate ERISA Section
406(b)( 3)’s anti-kickback rule, which prohibits a fiduciary from
receiving “any consideration for his own personal account from
any party dealing with such plan in connection with a transaction involving the assets of the plan.” For a long time, it was
unclear where to draw the line between the custom practices
described above and a 406(b)( 3) violation. In the absence of
any official guidance, the DOL’s enforcement approach was
seemingly ad hoc and inconsistent; fiduciaries reported widely
different enforcement interactions depending on which of the
agency’s regional offices was involved.
The DOL Enforcement Manual
Almost a decade ago, after pressure from the industry, the DOL
updated its Enforcement Manual to articulate general principles
for asserting violations when fiduciaries accept meals, gifts or
entertainment from parties that in some way serve their plan.
The updates provided some helpful guidelines to fiduciaries.
The manual first instructs investigators to determine
whether “a reasonable written policy or plan provision”
concerning this issue exists and is adhered to. It then provides
Stephen Saxon is a partner with Groom Law Group,
Chartered, in Washington, D.C. George Sepsakos, an
associate with Groom, contributed to this article.
A Fiduciary’s Guide
To the Holidays
Receipt of valued items must comply with ERISA