EBSA Seems to be Cracking Down on Service Provider Gifts

In its announcement, IFEBP said some recent audits and unofficial public statements by EBSA officials indicated a strict application of the ERISA Section 406(b)(3) provision prohibiting a fiduciary from receiving any consideration for his or her own personal account from any party dealing with a plan in connection with a transaction involving plan assets. In what IFEBP speculates is a zero tolerance policy on provider gifts, any gift or entertainment by a current or prospective service provider for a multiemployer plan for which the recipient serves as a trustee, was deemed by EBSA to be prohibited.

According to IFEBP, the EBSA offices seem to be extending the prohibition to any item of value regardless of whether the amount is likely sufficient to persuade a fiduciary in a transaction involving plan assets. While many commentators on the subject of service provider entertainment have suggested service providers for a plan can pay expenses for trustees which could be properly paid by the multiemployer plan, such as a meal in conjunction with a Trustees’ meeting, IFEBP said in some cases EBSA examiners have demanded trustees repay the amount of any meal or entertainment provided by a service provider plus 20% of that amount as a civil penalty.

One thing that has aided EBSA in identifying items of value provided to a trustee is the information furnished on the LM-30 and LM-10 forms, the announcement said. While the instances IFEBP has seen appear to be focused on multiemployer plans, the rationale cited by EBSA offices in prohibiting the provider gifts could extend to any fiduciary of a plan covered by ERISA.