PLANSPONSOR - December 2017/January 2018 - 47

SAXON ANGLE
DOL Investigations
N
otwithstanding a change to a seemingly more " businessfriendly "
administration, fiduciaries of plans covered by
the Employee Retirement Income Security Act (ERISA)
continue to receive letters and subpoenas from the Department
of Labor (DOL) giving notice that the plan or a plan service provider
will be investigated. This can be a troubling moment for plan
sponsors and other plan fiduciaries who believe they have done
everything prudently and in a manner consistent with their duties
and responsibilities under ERISA. But they also know-or will
shortly be made aware-that the statute provides myriad opportunities
for foot faults, any of which may lead to a violation.
Knowing how the DOL investigation process works, what
to expect if you are investigated and the types of claims that the
agency might assert can help smooth out the investigative process.
The DOL's Employee Benefit Security Administration (EBSA)
Office of Enforcement is the agency within the DOL responsible
for enforcing ERISA. EBSA works out of 10 regional offices across
the country. The DOL has broad power to investigate ERISA violations,
including the power to subpoena books and records and
compel witnesses to testify under oath. ERISA empowers the DOL
to assess civil penalties or bring civil litigation against a fiduciary
who breaches his duties under the act or who violates any of its
fiduciary responsibility provisions.
A typical investigation begins with a letter or subpoena from
the EBSA regional office conducting the investigation. It's important
to remember that receiving a notice of investigation does not
mean the fiduciary has done anything wrong. While many investigations
begin with a participant complaint, many also occur in
conjunction with a regional or national initiative that is wholly
unrelated to any particular plan or plan service provider.
The request for documents will demand, e.g., the operational
documents for the plan, disclosures, plan receipts and trust statements.
Identifying and collecting documents requested by the
investigator can take significant time.
At the start of any investigation, it's important to establish a
point of contact for the investigator. Typically, the contact person
will be an attorney who serves as the conduit of all information
exchanged with the DOL and coordinates the process. It's
a mistake to allow the investigator a free rein to contact anyone
within the company at any time.
DOL investigations also involve voluntary interviews with
persons the investigator believes to have relevant information.
Knowing the process can lessen sponsors' concerns
Before beginning an interview, the investigator is obligated to
inform interviewees that if he discovers information involving
violations of laws outside of ERISA, the DOL will refer the matter
to the relevant agency-e.g., the Internal Revenue Service (IRS),
Securities and Exchange Commission (SEC) or Department of
Justice (DOJ). The initial formality of the interview process can
come as a surprise to some interviewees, as can the scope and
range of the questions asked.
Once the investigator has gathered and analyzed the necessary
information, the DOL regional office must decide whether to
take any further action. To the extent it determines that violations
of ERISA may have occurred, it may issue a voluntary compliance
(VC) letter. The VC letter will: 1) include a description of facts identified
during the investigation and the DOL's position concerning
violations that may have occurred based on its understanding of
the facts; 2) invite discussion regarding correction of the identified
potential violations; and 3) advise that, without correction, the
matter may be referred to the department's Office of the Solicitor
for possible legal action. Unfortunately, the DOL frequently issues
a VC letter without giving the plan sponsor an opportunity to
provide additional facts or legal arguments that may persuade the
agency no violation has occurred.
If counsel had not been retained prior to receipt of a VC letter,
it should be once a letter is received to properly assess the merits
of the allegations. Working with counsel to determine the most
advantageous solution is of the utmost importance at this stage of
the investigation.
The closing of an investigation, like the opening, takes place
with a letter. The letter will normally inform the plan fiduciaries
of the violations previously cited and the corrective action taken,
if any. If a prohibited transaction has occurred, the DOL may also
choose to refer cases to the IRS for the possible imposition of
excise tax.
Thinking about the investigative process, and the likely areas
of focus during an investigation, can also help a plan sponsor
identify any legal or operational compliance issues where additional
effort might be warranted. After all, the time to identify
and remedy problems is before the DOL comes calling.
Stephen Saxon is a partner with Groom Law Group,
Chartered, in Washington, D.C. George Sepsakos, an
associate with Groom, contributed to this article.
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