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ML BeneBits

EXAMINING A RANGE OF EMPLOYEE BENEFITS
AND EXECUTIVE COMPENSATION ISSUES

The Employee Benefits Security Administration (EBSA) at the US Department of Labor (DOL) compiles statistics every year to measure its activities as the agency responsible for investigating and enforcing the fiduciary duties under ERISA. Statistics for the agency’s 2018 fiscal year enforcement activities affirm that EBSA’s enforcement program remains extremely active, with a particular focus on terminated vested participant investigations.

In particular, the statistics indicate that in fiscal year 2018, EBSA recovered $1.6 billion, including $1.1 billion from enforcement actions. In obtaining these results, EBSA closed 1,329 civil investigations, with 64.7% of cases resulting in monetary recoveries or other corrective action. EBSA referred 111 cases for civil litigation, and 56 civil cases were filed. In the criminal area, EBSA closed 268 cases (87 with convictions or guilty pleas) and obtained indictments against 142 individuals.

There are a few notable points about EBSA’s reporting on its enforcement activities.

  • First, in what has been a trend in recent years, EBSA’s enforcement activities remain extremely active. The official EBSA statistics indicate an increase in enforcement activities:
    • From fiscal year 2016 to 2017, total recoveries rose 72%, from $777.5 million in 2016 to $1.1 billion in 2017. This includes enforcement action recoveries, which nearly doubled from $352.0 million in 2016 to $682.3 million in 2017.
    • From fiscal year 2017 to 2018, total recoveries rose again, this time by 45%, from $1.1 billion in 2017 to $1.6 billion in 2018. This includes enforcement action recoveries, which again increased (by 61%) from $682.3 million in 2017 to $1.1 billion in 2018.

As with last year’s statistics, these numbers suggests that the current administration is not having a cooling effect of EBSA enforcement actions. Instead, EBSA enforcement has remained brisk, or—if these statistics are a reflection of such activities—has even increased.

  • Second, another trend that continues from fiscal year 2017 is that the most significant portion of these recoveries come from one EBSA enforcement initiative: the Terminated Vested Participant Project (TVPP). As previously reported, this enforcement initiative is focused on whether retirement plan administrators are adequately (1) searching for missing participants, (2) notifying deferred vested participants that a retirement benefit is payable, and (3) encouraging participants (especially unresponsive participants) to commence benefits on time (namely by the plan’s normal retirement age or required beginning date).

In its 2018 statistics, EBSA specifically notes that its “enforcement program helped terminated vested participants in defined benefit plans collect benefits of over $807.7 million” (which is a sizable increase over the fiscal year 2017 TVPP reported recoveries of $326.7 million).

The takeaway is that not only is EBSA enforcement not slowing down, but the agency’s TVPP initiative is particularly active and growing. This is consistent with Morgan Lewis’s experiences: Over the last year, we have seen more of these investigations being opened, and from a greater number of EBSA regional offices. We have also observed these investigations evolving in scope, such as into the new topic of uncashed check procedures and even into examinations of defined contribution plans.

In light of EBSA’s very active enforcement program, plan administrators may want to consider—even before the DOL initiates an investigation—a fulsome review of plan fiduciary compliance, including on the issues of lost and missing participants in their plans. Such reviews could also include a targeted undertaking to identify—and resolve—missing and unresponsive participants and participant record gaps.

If you have any questions about the DOL’s enforcement activities, please reach out to the author or your Morgan Lewis contact.