Comments on the EBSA 2019 Fiscal Year Enforcement Fact Sheet

Each year about this time, the Employee Benefits Security Administration (EBSA) of the U.S. Department of Labor issues a Fact Sheet that shows us its work for the most recently ended fiscal year. This year’s fact sheet describes the most recent fiscal year ended on September 30, 2019. In sum, the Fact Sheet demonstrates that EBSA efforts are impactful and merit plan sponsor and service provider attention.

• As in past years, this year’s iteration reminds us of EBSA’s regulatory burden.

It has enforcement jurisdiction over an incredible 694,000 retirement plans2.2 million health plans and a similar number of other welfare benefit plans such as those providing life and disability insurance

The responsibility assigned to EBSA thus represents for it an immense task, especially when you know EBSA has only a few hundred employees (not all of whom are directly involved in enforcement). You know its responsibility entails the protection of 143 million plan participants.

• There's a vast number of health plans.

It’s interesting to me that health plans are three times more numerous than retirement plans (In ERISA parlance “retirement plans” include qualified defined benefit, profit sharing, and 401(k) plans and nonqualified arrangements such as 403(b) plans.). Why is there such a large gap? I have no explanation that thoroughly explains it. Regardless I do suspect EBSA will be paying more attention to these plans, if only because of their enormous economic impact, particularly in the aspect of fiduciary responsibility. Indeed, private litigation in this area is already on the upswing. Its area where plan sponsors would be wise to pay attention and to be proactive.

• The reported total monetary recoveries increased by almost a billion dollars.

They went from $1.6B in 2018 to 2.57B in 2019. Enforcement actions brought in $2.02B; the Voluntary Fiduciary Correction Program (VFCP) accounted for $14.6M; the Abandoned Plan Program raised $33.3M, and Monetary Recoveries from Informal Complaint Resolution resulted in $510M in recoveries.

• The agency’s Terminated Vested Participant Benefits Program appears to have been quite successful.

Of the $2.02B in enforcement action recoveries, the Fact Sheet attributes $1.476B to that program.

• More civil investigations were closed successfully in 2019 than in the prior year.

While the number of closed civil investigations in 2019 is down from 2018 (1,146 versus 1,329), the percentage closed successfully rose to 67% from 64%.

• Civil Litigation Represents a small percentage of total civil investigations.

The Fact Sheet notes, when EBSA cannot settle a case, it goes to litigation. EBSA reports that it referred 89 cases to its Solicitor’s Office for litigation. In other words, DOL litigates a little bit fewer than 8% of all investigations because they were not able to be settled.

• Some people got criminally indicted.

In the fiscal year 2019, there 76 persons indicted for crimes related to employee benefit plans. These folks included plan officials, corporate officers, and service providers. EBSA closed 275 criminal cases during the course of the year.

• EBSA is very proud of its compliance assistance programs.

These are the Voluntary Fiduciary Correction Program (VFCP) and the Delinquent Filer Voluntary Correction Program (DFVCP). EBSA received 1600 applications under VFCP and 20,088 annual returns under DFVCP. The last number is a tip of the iceberg number as it doesn’t indicate how many other annual returns are delinquent for which plan sponsors did not seek penalty relief.

• The Abandoned Plan Program is achieving results.

Under the program, so-called Qualified Termination Administrators can terminate and distribute assets from plans their sponsors abandoned. EBSA received applications 1,199 applications and closed 741 of them. QTAs distributed about $33.2M in assets were distributed directly to participants.

• Informal Complaint Resolution is a powerful tool.

EBSA helped employees recover from plans more than $510M, up from $443.2M in recoveries in 2018. EBSA Benefit Advisors closed more than 166,00 inquiries from participants through an informal resolution of complaints. Some of these inquiries had led to enforcement actions against employers, in particular when complaints indicated repeated violations by plan sponsors. EBSA opened more than 500 investigations as a result of inquiries.

• Website Visits.

The EBSA website had more than 3.91M visitors last year. I am one of them.

For information about FPG services or for any questions, you're always welcome to contact info@fiduciaryplangovernance.com.

*****

Chuck Humphrey is the principal of Law Offices of Charles G. Humphrey and a former IRS and Labor Department attorney. He is the author of the Fiduciary Responsibility eSource available by subscription from ERISApedia.com.

You can reach him at chumphrey@cghbenefitslaw or (716) 465-7505.