Compliance November 30, 2021

Report Offers Insight on How DOL Gets Leads for Benefit Plan Enforcements

The Employee Benefits Security Administration recovered $2.4 billion for plans, participants and beneficiaries in FY 2021.

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Through its enforcement of the Employee Retirement Income Security Act (ERISA), the Department of Labor (DOL)’s Employee Benefits Security Administration (EBSA) recovered more than $2.4 billion for employee benefit plans, participants and beneficiaries in fiscal year (FY) 2021.

In addition to reporting enforcement results, an EBSA fact sheet offers information about how the agency gets leads for its enforcement actions. The data shows of that $2.4 billion total, $1.9 billion was recovered from enforcement actions, $34 million came from the agency’s Voluntary Fiduciary Correction Program (VFCP), $50.8 million was from its Abandoned Plan Program and $499.5 million was recovered from the resolution of informal complaints.

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EBSA’s oversight authority extends to nearly 734,000 retirement plans, 2 million health plans and 662,000 other welfare benefit plans, such as plans providing life or disability insurance. It has responsibility for investigating potential criminal conduct, including violations of the criminal provisions of ERISA and those in the United States Criminal Code that concern employee benefit plans or general financial crimes.

In FY 2021, there were 188 criminal investigations opened, 208 were closed and 118 of those opened involved health benefit plans. These investigations led to 72 indictments—39 of which were related to health benefits plans and 16 of which stemmed from EBSA’s Contributory Plans Criminal Project (CPCP). The CPCP is EBSA’s initiative to protect plans, and participants in plans, that are funded (in whole or in part) through employee contributions that are withheld from wages.

The agency notes in its report that the VFCP and Delinquent Filer Voluntary Compliance Program (DFVCP) encourage the correction of ERISA violations by providing significant incentives for fiduciaries and others to self-correct. The VFCP allows plan officials who have identified specific ERISA violations to take corrective action without becoming the subject of an enforcement action. In FY 2021, ESBA received 1,201 applications for the VFCP. Additionally, the DFVCP, which encourages plan administrators to bring their plans into compliance with ERISA’s filing requirements, received 22,553 reports.

While EBSA often pursues voluntary compliance to correct violations and restore losses to employee benefit plans, in cases where voluntary compliance efforts have failed, or are inappropriate, the agency forwards a recommendation to the solicitor of labor to initiate litigation. Both the EBSA and the solicitor of labor determine which cases are appropriate for litigation, after considering the ability to obtain meaningful relief through litigation, the cost and the viability of other enforcement options. In FY 2021, 70 cases were referred for litigation. Even after referral to the solicitor of labor for litigation, the department can often resolve claims for monetary relief without filing suit.

The Abandoned Plan Program facilitates the termination and distribution of benefits from individual account pension plans abandoned by their sponsoring employers. During FY 2021, EBSA received 1,770 applications from qualified termination administrators and closed 923 applications with terminations approved.

Other leads for enforcement come from employee complaints. When employees experience a problem with a benefit plan, they can contact EBSA benefit advisers for assistance. Through this informal complaint resolution process, benefits advisers closed more than 175,000 inquiries. These inquiries can sometimes lead to enforcement actions if the agency receives repeated complaints on a particular plan, employer or service provider, or when there is information indicating an ERISA violation. There were 251 investigations opened from inquiry referrals.

Ask the Experts November 30, 2021

Satisfying Electronic Disclosure Requirements for SPDs to New Hires

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.

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“In the past, we have been providing a hard copy summary plan description (SPD) to all our new employees in their new hire packet as part of our onboarding process; however, we are looking to reduce the amount of paper we send to employees. We are thinking of including a notice in the new hire packet, that provides a link to a website where the SPD can be electronically accessed by participants. Would this be compliant with the Department of Labor’s (DOL) regulations regarding electronic disclosure with respect to new hires?”

Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

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As you know, the administrator of a benefit plan covered by the Employee Retirement Income Security Act (ERISA) must provide certain disclosures and documents to participants and other specified individuals at stated times or when certain events occur.  When providing these documents, the administrator must “use measures reasonably calculated to ensure actual receipt of the material by plan participants.”  In 2002, the DOL provided two safe harbors that would permit an administrator to electronically furnish documents and still be deemed to satisfy ERISA’s disclosure requirements. The DOL’s 2020 final rule on electronic disclosures created a new electronic delivery safe harbor that provides significantly more flexibility in this area. 

The DOL appears to anticipate the scenario you describe in its discussion of providing a paper initial notice of internet availability to plan participants as follows:

“This initial notice must explain that covered documents will be provided electronically to an electronic address, identify the specific electronic address to be used for the individual, include any instructions to access the documents, include a notice that materials may not be available for more than a year or, if later, after the posted document has been superseded by a subsequent version of the document, and an explanation of the rights to request a paper version of any document and the right to opt out of electronic delivery globally. This paper notice is required both before a plan fiduciary begins to rely on the safe harbor (after its effective date), and when employees are newly hired over time.”

Note the slight, yet significant, difference, however, in what the DOL is describing compared to what you are describing. Whereas your notice provides a link to access the SPD, what this language is stating is that you need to first provide a notice, on paper, that the participant will be emailed/texted at a specific specified email address/smartphone number with the information necessary to access the website where the SPD will be posted. After that you would then email/text the notice (described as a “notice of internet availability” in the final rule) that is similar to what you proposed be included in your new hire packet.

Thus, your process, as outlined, would not be compliant with the language in the final rule. However, as noted, this is a safe harbor, which means that it is not the only method of satisfying the ERISA’s disclosure requirements electronically, though an administrator who complies with any of the DOL’s electronic disclosure safe harbors will be deemed to have satisfied those disclosure requirements. Thus, before you abandon your proposed process, you may wish to contact ERISA counsel well-versed in such matters to determine whether your proposed method might satisfy ERISA disclosure requirements or could be tweaked to be compliant.

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

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