PLANSPONSOR - June/July 2021 - 40

INSIDE ANGLE
Enforced by EBSA
A GAO report outlines DOL investigation practices
A
recently issued report from the Government
Accountability Office (GAO) gives an introspective
look at the enforcement practices of the Department
of Labor (DOL) Employee Benefits Security Administration
(EBSA). For the regulated community, the GAO report provides
a rare opportunity to see EBSA's perspective
and understand the agency's objectives and
strategy when conducting plan investigations
and other enforcement actions.
Of importance for all plan sponsors,
the report describes how EBSA selects
an investigation. EBSA investigators are unlikely to disclose the
reason for the case opening. However, it can often be discerned
through a review of the agency's initial letter to the plan sponsor
notifying it of the investigation, or from the types of questions
raised in the agency's document request.
The GAO report also gives a glimpse into
... the report
plans to investigate. The agency generates
" leads " for potential enforcement through
various sources, including referrals from its
benefit advisers-non-investigators responsible
for handling participant inquiries and
complaints-as well as compliance concerns
identified in Form 5500 filings. The report
notes that " investigators also track sources, such as bankruptcy
filings, media reports, private litigation and information from
industry data compilers to identify potential violations for investigation. "
In addition, EBSA may generate leads based on referrals
from other federal agencies such as the IRS or Securities
and Exchange Commission (SEC), as well as local authorities.
As not every lead can be pursued, EBSA seeks to " prioritize
indicates that
EBSA does
not open
investigations
randomly.
the metrics EBSA uses to measure the success
of its enforcement program. In 2013, it began
assessing investigator performance based on
recovery amounts vs. number of cases closed.
This means investigators are judged upon
the money recovered, including that paid to
plans, participants and beneficiaries.
Thus, investigators are incentivized to
cite fiduciaries for Employee Retirement
Income Security Act (ERISA) violations in
connection with managing the plan and to
compel fiduciaries to pay amounts to plans,
participants and beneficiaries. This incentive structure is manifested
through the recovery amounts generated over the period:
These doubled from $1.5 billion in 2012 to over $3 billion in
fiscal year 2020 while EBSA's staff headcount declined during
that same period.
The GAO report also shows that EBSA " primarily enforces
potential investigations that originate from participant inquiries,
address national and regional projects, and those that may result
in large monetary recoveries or affect large numbers of participants. "
The DOL's prioritizing monetary recoveries does not mean
that small plans are immune from EBSA enforcement. Instead,
the GAO report notes that " investigations of smaller plans are
primarily a means to assess the conduct of fiduciaries and service
providers to many plans. " In other words, the investigations of
small plans may be focused on bigger fish, such as the plan's
recordkeeper, investment manager or other service providers.
Consistent with our experience, the report indicates that
EBSA does not open investigations randomly. Instead, " EBSA staff
decide whether to pursue an investigation based on the merits of
the issue for investigation, including the egregiousness of the
allegation, whether correction has already been made, whether
there are viable parties to pursue for corrective action, " among
others. Thus, EBSA will generally have a reason behind opening
40 PLANSPONSOR.COM June - July 2021 Art by Joseph Ciardiello
ERISA through civil investigations of retirement and health
plans and by encouraging plans to voluntarily remedy any violations
identified by EBSA staff. ... " Typical corrections include
restoring assets to the plan, paying participants amounts due to
them and implementing administrative changes.
The report reflects our observations that EBSA seeks to
compel fiduciaries to voluntarily correct issues identified by its
investigators. While it may refer certain matters to the DOL's
Office of the Solicitor, which acts as EBSA's lawyers, the vast
majority of cases are closed without it turning to litigation.
For those of us defending EBSA investigations daily, the
report validates much of our own experience dealing with the
agency over the last decade. Sponsors should expect it to continue
a fairly aggressive enforcement program for the foreseeable future.
Steve Saxon is a partner with Groom Law Group, Chartered,
and George Sepsakos is a principal with Groom. Offices for
Groom are in Washington, D.C.
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