Employee Benefits Security Administration:

Enforcement Improvements Made but Additional Actions Could Further Enhance Pension Plan Oversight

GAO-07-22: Published: Jan 18, 2007. Publicly Released: Feb 20, 2007.

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The Department of Labor's (DOL) Employee Benefits Security Administration (EBSA) enforces the Employee Retirement Income Security Act of 1974 (ERISA), which sets certain minimum standards for private sector pension plans. On the basis of GAO's prior work, the Senate Committee on Health, Education, Labor and Pensions asked GAO to review EBSA's enforcement program. Specifically, this report assesses (1) the extent to which EBSA has improved its compliance activities since 2002; (2) how EBSA's enforcement practices compare to those of other agencies; and (3) what obstacles, if any, affect ERISA enforcement. To do this, we reviewed EBSA's enforcement strategy and operations, and interviewed officials at EBSA, the Internal Revenue Service (IRS) and the Securities and Exchange Commission (SEC), among others.

In March 2002, we identified weaknesses in EBSA's enforcement program, despite the agency's actions to strengthen it. Since that time, EBSA has, among other things, promoted coordination among regional investigators and increased participation in its voluntary correction programs, as we recommended. EBSA also has recruited investigators with advanced skills in accounting, finance, banking, and law that officials believe are necessary due to ERISA's technicalities. Yet some weaknesses identified in 2002 remain. Specifically, EBSA still has not adequately assessed the nature and extent of ERISA noncompliance, even though it has taken steps to do so. Without these data, EBSA is not positioned to focus its resources on key areas of noncompliance nor have adequate measurable performance goals to evaluate its impact on improving industry compliance. We also found that while some regional offices did routinely attempt to confer with their respective regional office of the SEC--the agency that oversees many of the same pension service providers under the securities laws--for case leads or to consider trends in potential pension violations, others did not. Lastly, EBSA's overall attrition rates remain high, with many investigators leaving for employment outside the federal government, yet EBSA has taken limited steps to evaluate the effect such attrition has on its operations. EBSA does not conduct routine compliance examinations and broad, ongoing risk assessments to focus its enforcement efforts like other agencies. Rather, investigators rely on various sources for case leads, such as participant complaints, agency referrals, and computer targeting. While such sources are important, this approach generally limits EBSA to leads discerned by participants and other government agencies or those disclosed by plan sponsors, and not those more complex or hidden. Further, EBSA also has not established a comprehensive risk assessment function. Instead of broad risk assessments, EBSA's annual risk evaluations are generally limited to a risk analysis of frontline investigators' case loads. In contrast, in addition to such activities, IRS and SEC incorporate routine compliance programs in an attempt to detect violations and identify emerging trends that may warrant enforcement action. Also, the SEC and Pension Benefit Guaranty Corporation have dedicated staff to regularly analyze information from various sources, such as investigations and academic research. Certain statutory obstacles also limit EBSA's oversight of private sector pension plans. First, restrictive legal requirements have limited EBSA's ability to assess penalties against fiduciaries and can impede the restoration of plan assets. DOL officials said that the 502(l) penalty under ERISA discourages quick settlement and can reduce the amount of funds returned to pension plans. Second, EBSA investigators' access to timely information necessary for identifying potential violations is limited by ERISA's filing requirements. Even though EBSA is taking steps to address processing delays, in 2006, investigators were relying on information up to 3 years old to target new case leads in some cases.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Congress has taken no action on this recommendation.

    Matter: To strengthen DOL's ability to protect pension plan assets, Congress may wish to consider amending section 502(1) of ERISA to give DOL greater discretion to waive the civil penalty assessed against a fiduciary or other person who breaches or violates EIRSA in instances where doing do would facilitate the restoration of plan assets.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On July 29, 2008, the Department of Labor/Employee Benefits Security Administration (EBSA) and the Securities and Exchange Commission entered into a Memorandum of Understanding (MOU) setting forth a framework for consultation and exchange of information. The MOU is designed to facilitate the ongoing consultation and communication between EBSA and the SEC concerning matters of mutual interest, including examination findings and trends and enforcement cases. To ensure continued communications between the SEC and EBSA staffs in the agencies' field offices, the DOL and SEC are required to designate persons to serve as points of contact for each regulator in each of the SEC and DOL regional offices and respective headquarters office. EBSA provided that SEC with its contact list on August 12, 2008.

    Recommendation: To improve overall compliance and oversight, the Secretary of Labor should direct the Assistant Secretary of Labor, EBSA, to direct the Office of Enforcement to establish, where appropriate, formal Securities and Exchange Commission coordination groups in the regional offices, similar to those already in place in some EBSA regions.

    Agency Affected: Department of Labor

  2. Status: Closed - Implemented

    Comments: In response to our recommendation, the Office of Enforcement completed a formal review of 64 randomly selected investigations that were opened based the Form 5500, either by review or a targeting report. EBSA was unable to definitely conclude that an earlier statutory filing deadline would have a significant impact on the outcome of investigations EBSA opens based on Form 5500 reviews. However, they noted that while an earlier filing date may have a positive impact on an investigation's outcome, their analysis found that the current statutory filing date does not result in placing plans at significant risks.

    Recommendation: To improve overall compliance and oversight, the Secretary of Labor should direct the Assistant Secretary of Labor, EBSA, to conduct a formal review to determine the effect that ERISA's statutory filing deadlines have on investigators' access to timely information and the likely impact if these deadlines were shortened.

    Agency Affected: Department of Labor

  3. Status: Closed - Implemented

    Comments: The Employee Benefits Security Administration (EBSA) stated that they continually evaluate their enforcement practices in overseeing the private pension industry. To address risk assessment trends, EBSA established a National Enforcement Library (NEL) to serve as a "knowledge management" tool for the agency and will provide information on current trends and emerging developments in employee benefit plan investment and management. EBSA officials said they had completed the draft outline of NEL, and were reviewing potential content in order to develop a more comprehensive outline. Although the extent to which staff will be dedicated to analyze trends in the private pension industry is unclear, staff were dedicated to develop this risk assessment library.

    Recommendation: To improve overall compliance and oversight, the Secretary of Labor should direct the Assistant Secretary of Labor, EBSA, to evaluate the extent to which EBSA could supplement its current enforcement practices with strategies used by similar enforcement agencies, such as routine compliance examinations and dedicating staff for risk assessment.

    Agency Affected: Department of Labor

  4. Status: Closed - Implemented

    Comments: Employee Benefits Security Administration (EBSA) officials said that they continue to monitor its attrition to determine whether there are discernible trends. To assist them in understanding why employees stay or leave the agency, they said that they analyzed the most recent Federal Human Capital Survey (FHCS) conducted by the U.S. Office of Personnel Management (OPM). They reported that OPM identified fifteen questions that are indicators of whether employees decide to stay or leave an agency. On eleven of the fifteen questions, EBSA scored higher than both the Department of Labor (Labor) as a whole and the federal government. On the four questions where EBSA scored less than either Labor or government-wide results, there was only a 1-3 percentage point difference. EBSA officials said that they continue to review and analyze data collected on exit surveys that employees are asked to complete when they leave the agency. The agency will also explore alternatives to determine why employees leave or might leave the agency. If the reasons for employees leaving or planning to leave can be determined, EBSA will explore options that are proven to improve employee retention. For FY11, Labor required EBSA to develop an agency operating plan that outlined the agency's strategic goals and ways the agency intends to address their evolving workloads.

    Recommendation: To improve overall compliance and oversight, the Secretary of Labor should direct the Assistant Secretary of Labor, EBSA, to direct the Office of Program Planning, Evaluation, and Management to evaluate the factors affecting staff attrition and take appropriate steps, as necessary. Such an effort might include a market-based study to assess comparable private sector compensation within specific geographic locations and include recommendations for modifying pay structures, if appropriate.

    Agency Affected: Department of Labor

 

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