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entitled 'Employee Benefits Security Administration: Enforcement 
Improvements Made but Additional Actions Could Further Enhance Pension 
Plan Oversight' which was released on February 20, 2007. 

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Report to the Ranking Minority Member, Committee on Health, Education, 
Labor and Pensions, U.S. Senate: 

United States Government Accountability Office: 

GAO: 

January 2007: 

Employee Benefits Security Administration: 

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

GAO-07-22: 

GAO Highlights: 

Highlights of GAO-07-22, a report to the Ranking Minority Member, 
Committee on Health, Education, Labor and Pensions, U.S. Senate 

Why GAO Did This Study: 

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. 

What GAO Found: 

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. 

What GAO Recommends: 

GAO recommends that EBSA evaluate its enforcement strategy in light of 
other agencies’ strategies, determine how ERISA’s filing deadlines 
affect its investigators, increase coordination with SEC, and determine 
how attrition affects its operations. EBSA disagreed with our 
recommendation to evaluate their strategy in light of other agencies’ 
strategies, but agreed with the remaining recommendations. Congress 
should consider amending 502(l) of ERISA to give DOL greater discretion 
to waive the civil penalty, when appropriate. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-22]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Barbara D. Bovbjerg at 
(202) 512-7215 or bovbjergb@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

EBSA Has Made Improvements to Its Enforcement Program, but Challenges 
Remain: 

Unlike Other Agencies, EBSA Does Not Conduct Routine Compliance 
Examinations or Comprehensive Risk Assessments: 

Statutory Obstacles May Limit EBSA's Ability to Oversee Pension Plans 
Effectively: 

Conclusions: 

Matter for Congressional Consideration: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comparison of Selected Federal Agencies' Authorities, 
Enforcement Practices, Results, and Resources: 

Appendix III: Comments from Employee Benefits Security Administration: 

Appendix IV: Comments from Securities and Exchange Commission: 

Appendix V: GAO Contacts and Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Ratio of Investigators, Examiners, or Agents to Regulated 
Employee Benefit Plans and Securities Entities: 

Table 2: Number of Pension Plans EBSA Reviewed in Fiscal Year 2005: 

Table 3: EBSA Actions Taken in Response to GAO Recommendations from 
2002 Review: 

Table 4: Overall Attrition Rates (Percentages) for EBSA Investigators, 
Other EBSA Employees, DOL, and Other Federal Agencies, Fiscal Years 
2001-2005: 

Figures: 

Figure 1: Participants in Defined Benefit and Defined Contribution 
Plans, 1980-2002: 

Figure 2: Overview of EBSA's Investigative Process: 

Abbreviations: 

CPDF: Central Personnel Data File: 
DFVC: Delinquent Filer Voluntary Compliance: 
DOL: Department of Labor: 
EBSA: Employee Benefits Security Administration: 
EDS: ERISA Data System: 
EFAST: ERISA Filing Acceptance System: 
ERISA: Employee Retirement Income Security Act: 
FTE: full-time equivalent: 
IRS: Internal Revenue Service: 
OCIE: Office of Compliance Inspections and Examinations: 
OIG: Office of Inspector General: 
OPM: Office of Personnel Management: 
ORA: Office of Risk Assessment: 
PBGC: Pension Benefit Guaranty Corporation: 
SCEP: Student Career Experience Program: 
SEC: Securities and Exchange Commission: 
STEP: Student Temporary Employment Program: 
VFCP: Voluntary Fiduciary Correction Program: 

United States Government Accountability Office: 
Washington, DC 20548: 

January 18, 2007: 

The Honorable Michael B. Enzi: 
Ranking Minority Member: 
Committee on Health, Education, Labor and Pensions: 
United States Senate: 

Pensions are a vital source of retirement income for millions of 
Americans. According to the Department of Labor (DOL), America's 
private sector pension and retirement savings system includes 
approximately 730,000 plans with assets totaling roughly $4.9 trillion 
and covering over 100 million participants. The Department of Labor's 
Employee Benefits Security Administration (EBSA) is the primary agency 
responsible for protecting private pension plan participants and 
beneficiaries from the abuse or theft of their pension assets by 
enforcing the Employee Retirement Income Security Act of 1974 (ERISA), 
as amended, which sets certain standards for pension plans sponsored by 
private sector employers. Because private sector pensions are second 
only to Social Security in providing individuals' retirement income, 
effective oversight of the private pension industry's management of 
these assets is critical to ensure the economic security of workers, 
retirees, and their families. 

In 2002, we reported on EBSA's enforcement program and concluded that 
certain changes could improve the program's management.[Footnote 1] 
Subsequently, we testified before the committee that although EBSA had 
made progress in improving its enforcement program, significant 
challenges remained.[Footnote 2] In light of prior GAO work, you asked 
us to review the actions that EBSA has taken to strengthen its 
enforcement program. Specifically, this report assesses (1) the extent 
to which EBSA has improved its ability in recent years to enforce and 
promote compliance with ERISA, (2) how EBSA's enforcement practices 
compare to those of other federal agencies with similar 
responsibilities, and (3) what obstacles, if any, affect EBSA's 
enforcement of ERISA. 

To complete our work, we collected and documented information on EBSA's 
enforcement strategy, operations, and human capital management 
practices. We reviewed EBSA's efforts to address recommendations from 
our prior work, focusing on the agency's management of its enforcement 
program. We interviewed officials from the Department of Labor's Office 
of the Solicitor and Office of Inspector General as well as EBSA's 
Office of Participant Assistance, Office of Enforcement, and the Office 
of the Chief Accountant. In addition, we visited 6 of EBSA's 10 
regional offices in Atlanta, Boston, Chicago, Kansas City, 
Philadelphia, and San Francisco, and 2 of its 5 district offices in 
Seattle and Washington, D.C., where we interviewed field office 
management, regional solicitors, investigators, and other staff. We 
selected these offices to represent a diverse selection of geographic 
locations and types of investigations conducted in those offices. To 
assess the reliability of EBSA's enforcement results data, we spoke 
with agency officials about the data quality control procedures and 
reviewed relevant documentation. We determined the data were 
sufficiently reliable for the purposes of this report. We also 
interviewed officials and obtained information from the Internal 
Revenue Service (IRS) and the Securities and Exchange Commission (SEC) 
on the enforcement practices they use to regulate the pension and 
securities industries to determine whether these strategies or 
practices could be applicable to EBSA's enforcement program. We also 
collected information on the authorities and practices of the Pension 
Benefit Guaranty Corporation (PBGC), the agency responsible for 
insuring defined benefit pension plans. Finally, we met with 
representatives from professional organizations that represent plan 
participants and entities that conduct audits of pension plans that 
EBSA regulates. 

We conducted our work between October 2005 and August 2006 in 
accordance with generally accepted government auditing standards. 
Appendix I discusses our scope and methodology in further detail. 

Results in Brief: 

In 2002, we reported that while EBSA had taken actions to strengthen 
its enforcement program, weaknesses existed in EBSA's management of its 
enforcement strategy and overall human capital management policies, 
among other things, which limited its enforcement program's 
effectiveness. Since that review, EBSA has made several improvements to 
enforce and promote compliance, in part by increasing coordination 
among its regional investigators, instituting better quality controls, 
and increasing the return of plan assets to participants through 
improved participation of plan sponsors in its voluntary correction 
programs. In addition, EBSA has recruited investigators with advanced 
skills in accounting, finance, banking, and law that EBSA officials 
believe are required because of the technical aspects of ERISA and the 
changing nature of benefit plans. Nevertheless, some weaknesses we 
identified in 2002 remain. Specifically, EBSA has not developed 
complete data to adequately assess the nature and extent of 
noncompliance that would allow the agency to better focus its resources 
on areas of vulnerability, such as pension plan mismanagement. Without 
these data, EBSA also relies on performance measures that field 
investigators said encourage them to focus on the most obvious cases-- 
those that are easily corrected--rather than on complex and emerging 
violations where the outcome is less certain. In addition, we 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. Last, while EBSA has developed strategies regarding its 
workforce needs, the agency's overall attrition rates remain high, and 
it has taken limited steps to evaluate the effect such attrition has on 
its operations. 

Unlike other federal enforcement agencies with similar 
responsibilities, EBSA does not conduct routine compliance examinations 
or broad risk assessments to inform its enforcement efforts. Regarding 
routine compliance examinations, EBSA officials said that such 
examinations would divert investigators from conducting investigations 
of alleged violations. Instead, EBSA investigators rely on several 
sources, such as outside complaints and informal targeting of pension 
plans, to focus their enforcement efforts. While these sources are 
important, such methods are generally reactive and may reveal only 
those violations that are sufficiently obvious for a plan participant 
to detect or those disclosed by plan sponsors in their pension plan 
documents, and not those violations that are possibly more complex or 
hidden. In contrast, IRS and SEC have dedicated compliance examination 
programs designed to regularly inspect a company's operations and 
financial records for violations and emerging trends that may warrant 
further review by enforcement staff. EBSA also has not established a 
comprehensive risk assessment function to target enforcement. Instead 
of broad risk assessments, EBSA's annual risk evaluations are generally 
limited to a risk analysis of frontline investigators' case loads. 
Unlike EBSA, SEC and PBGC have dedicated staff to routinely analyze 
data from a variety of sources in order to assess risk within the 
securities and pension industries in an attempt to better focus agency 
resources on areas of greatest risk. 

Certain statutory obstacles may limit EBSA's oversight of private 
sector pensions. First, the restrictive legal requirements of the 
502(l) penalty under ERISA--a civil penalty assessed against a 
fiduciary for certain breaches of ERISA--have limited EBSA's ability to 
assess penalties and restore plan assets. According to EBSA officials, 
the penalty discourages parties from quickly settling claims of 
violations, thereby impeding the restoration of plan assets. Further, 
EBSA officials stated that, in some instances, the penalty reduces the 
amount of funds returned to pension plans when a plan sponsor is 
unwilling or cannot fully restore assets and also pay the penalty. 
Second, while EBSA has taken steps to require the electronic submission 
and processing of pension plan data, EBSA investigators' access to 
timely plan data for targeting new case leads is still limited by ERISA 
filing requirements and processing delays that are caused primarily by 
the existing paper-based system. As a result, in some cases, 
investigators were relying on data up to 3 years old to target 
potential violators. 

We are making several recommendations to the Department of Labor that 
are intended to strengthen EBSA's enforcement program. We are also 
asking that Congress consider amending ERISA to give the Department of 
Labor greater discretion to waive the civil penalty assessed against 
fiduciaries or other persons who violate ERISA in instances where doing 
so will facilitate the restoration of plan assets. In response to our 
draft report, EBSA disagreed with our recommendation to evaluate the 
extent to which it could supplement its current enforcement practices 
with strategies used by similar enforcement agencies, such as 
conducting routine compliance examinations or dedicating staff for risk 
assessment. EBSA noted that because we did not evaluate the 
effectiveness of strategies used by the agencies highlighted in our 
report, they were concerned that a recommendation to copy one of the 
models would be premature given the diversion of investigative 
resources it would require. However, we do not suggest that EBSA copy 
the IRS, PBGC, or SEC models; rather, we suggest that EBSA consider 
incorporating enforcement strategies that are standard practice at 
these agencies as well as many other federal financial regulators. We 
recognize and would expect that EBSA's implementation of these standard 
practices could vary from that of other regulatory models, given the 
nature of its responsibilities. EBSA agreed with our recommendations to 
conduct a formal review of the effect that ERISA's filing deadlines 
have on its investigative staff; establish formal SEC coordination 
groups in its regional offices, where appropriate; and evaluate the 
factors affecting staff attrition and take appropriate steps as 
necessary. EBSA and SEC comments are reproduced in appendixes III and 
IV, respectively. 

Background: 

In 1974, Congress passed ERISA to protect the rights and interests of 
participants and beneficiaries of private sector employee benefit 
plans. It outlines the responsibilities of employers and administrators 
who sponsor and manage these plans. ERISA also defines fiduciaries as 
persons who (1) exercise discretionary authority or control over the 
management of a private sector employee benefit plan or the plan's 
assets, (2) render investment advice for a fee or other compensation 
with respect to plan assets, or (3) have any discretionary authority or 
responsibility to administer the plan. Under ERISA, fiduciaries are 
required to act prudently and exclusively in the interest of plan 
participants and beneficiaries. 

ERISA also describes the types of pension plans that private sector 
employers may sponsor, which include defined benefit and defined 
contribution plans.[Footnote 3] In 1980, defined benefit plans covered 
approximately 38 million participants, while some 20 million 
individuals participated in defined contribution plans. By 2002, the 
numbers had changed, with roughly 42 million participants covered by 
defined benefit plans and approximately 65 million participants in 
defined contribution plans. Figure 1 shows the shift in participation 
from defined benefit to defined contribution plans since 1980. 

Figure 1: Participants in Defined Benefit and Defined Contribution 
Plans, 1980-2002: 

[See PDF for image] 

Source: Private Pension Plan Bulletin: Abstract of 1999, 2000, 2001, 
and 2002 Form 5500 Annual Reports, Department of Labor. 

[End of figure] 

According to experts, the fact that more workers are now covered by 
defined contribution plans rather than defined benefit plans is 
significant because the risk associated with providing retirement 
income is shifting toward workers and away from employers. Under 
defined benefit plans, the employer is typically responsible for 
funding the plan to cover promised benefits--accounting for any 
shortfalls due to market fluctuations, poor investment decisions, or 
changing interest rates. In contrast, under a defined contribution 
plan, participants are generally responsible for ensuring that they 
have sufficiently saved for retirement and generally make their own 
investment decisions. As a result, much of the risk has moved from the 
employer to the plan participants. Today, with about one-fifth of 
Americans' retirement wealth invested in mutual funds, pension and 
retirement savings plans have become more dependent on the investment 
services industry. These plans now include new investment vehicles and 
financial instruments that are more complex and require specialized 
knowledge and expertise for prudent decision making. 

EBSA Shares the Responsibility for Enforcing ERISA with Other Agencies: 

EBSA shares responsibility for enforcing ERISA with the IRS and PBGC. 
EBSA enforces Title I of ERISA, which specifies, among other standards, 
certain fiduciary and reporting and disclosure requirements, and seeks 
to ensure that fiduciaries operate their plans in the best interest of 
plan participants. EBSA conducts investigations of plan fiduciaries and 
service providers and seeks appropriate remedies to correct violations 
of the law, and pursues litigation when they determine necessary, as 
shown in figure 2. 

Figure 2: Overview of EBSA's Investigative Process: 

[See PDF for image] 

Source: GAO analysis of EBSA's process. 

[End of figure] 

IRS enforces Title II of ERISA, which provides, among other standards, 
tax benefits for plan sponsors and participants, including participant 
eligibility, vesting, and funding requirements.[Footnote 4] IRS audits 
plans to ensure compliance and can levy tax penalties or revoke tax 
benefits, as appropriate. In contrast, PBGC, under Title IV of ERISA, 
insures benefits for defined benefit pension plans when companies 
default on promised pension benefits. To do so, PBGC collects premiums 
from plan sponsors and administers payment of pension benefits in the 
event that these plans terminate without sufficient assets to pay all 
benefits accrued under the plan to date. Finally, while SEC does not 
draw authority from ERISA, it is responsible under securities laws for 
regulating and examining entities registered with SEC, such as 
investment advisers, managers, and investment companies that often 
provide services to plans. Additional information on selected agencies' 
authorities and enforcement practices is contained in appendix II. 

According to 2002 data, EBSA's oversight authority covers approximately 
3.2 million private sector pension and health benefit plans with assets 
over $5 trillion and covering more than 150 million 
participants.[Footnote 5] Of the 3.2 million plans, EBSA reported that 
approximately 730,000 are pension plans with assets totaling roughly 
$4.9 trillion and covering over 100 million participants. EBSA's 385 
frontline investigators are primarily responsible for overseeing these 
employee benefit plans. In contrast, IRS and SEC have oversight 
responsibility for a smaller number of entities. Specifically, IRS's 
389 agents conduct oversight for some 1.3 million pension, profit- 
sharing, and stock bonus plans,[Footnote 6] and the SEC's 1,953 
investigators and examiners oversee 17,337 registrants, such as 
investment advisers and investment companies. Table 1 shows the ratio 
of investigators, examiners, or agents to the number of plans and 
entities that EBSA, IRS, and SEC regulate. 

Table 1: Ratio of Investigators, Examiners, or Agents to Regulated 
Employee Benefit Plans and Securities Entities: 

Agency: EBSA; 
Investigators, examiners, or agents: 385; 
Employee benefit plans/securities entities: 3.2 million[A] pension (0.7 
million ) and health benefit plans (2.5 million); 
Ratio of personnel to regulated plans or entities: 1 : 8,000[A]. 

Agency: IRS; 
Investigators, examiners, or agents: 389; 
Employee benefit plans/securities entities: 1.3 million pension plans: 
5500 filers (0.7 million), 5500 EZ filers (0.2 million), and non-5500 
filers (0.4 million)--Form 5500s include basic plan information; 
Ratio of personnel to regulated plans or entities: 1 : 3,000. 

Agency: SEC; 
Investigators, examiners, or agents: 1,953; includes 851 examiners and 
1,102 investigators; 
Employee benefit plans/securities entities: 17,337[B] includes 
investment advisers (9,022), investment companies (1,002), broker 
dealers (6,900), transfer agents (400), self-regulatory organizations 
(11), and clearing agencies (2); 
Ratio of personnel to regulated plans or entities: 1 : 9. 

Source: EBSA, IRS, and SEC. 

[A] Because of data limitations, not all other welfare plans under 
EBSA's oversight are included. 

[B] SEC is also responsible for enforcing certain provisions of the 
federal securities laws, such as provisions pertaining to fraud, that 
apply to entities and individuals that are not subject to broad 
regulation under the laws. For fiscal year 2005, cases primarily 
classified as involving regulated entities accounted for 32.5 percent 
of SEC's total actions. 

[End of table] 

EBSA's field offices conduct investigations to detect and correct 
violations of Title I of ERISA and related criminal laws. In fiscal 
year 2005, EBSA had roughly 7,800 ongoing investigations, of which 
approximately 3,400 were newly opened as a result of various source 
leads, such as participant complaints, computer targeting, and other 
agency referrals. EBSA closed about 4,000 investigations during that 
year. 

EBSA's Participant Assistance staff supplements EBSA's enforcement 
activities by helping plan participants obtain retirement and health 
benefits that have been improperly denied.[Footnote 7] In fiscal year 
2005, this office conducted roughly 2,000 outreach events to educate 
participants, beneficiaries, plan sponsors, and members of Congress 
about pension plan rights and obligations, among other topics. In 
addition, during the same time, the office reported that its benefits 
advisers closed about 160,000 inquiries and complaints, some of which 
resulted in monetary recoveries.[Footnote 8] In those instances where a 
complaint was not informally resolved, EBSA officials said that it was 
referred to the enforcement staff in the field offices for possible 
investigation. As a result of such referrals, EBSA data showed that its 
investigators closed almost 1,200 investigations in fiscal year 2005 
with monetary results of $130.24 million. 

Additionally, EBSA's Office of the Chief Accountant is concerned with 
employee benefit plans' annual reporting and audit requirements and 
enforces those provisions through civil penalties under ERISA.[Footnote 
9] Through their combined efforts, EBSA data indicate that the agency 
reviewed over 36,000 private sector pension plans in fiscal year 2005. 
Table 2 shows the number of plans investigated or contacted by each 
office. 

Table 2: Number of Pension Plans EBSA Reviewed in Fiscal Year 2005: 

EBSA: Enforcement; 
Total number of plans reviewed: 7,752. 

EBSA: Participant Assistance; 
Total number of plans reviewed: 19,522. 

EBSA: Office of the Chief Accountant; 
Total number of plans reviewed: 9,208. 

EBSA: Total; 
Total number of plans reviewed: 36,482. 

Source: EBSA: 

Note: According to EBSA, this information includes all plans subjected 
to some type of review by EBSA--not all plans were given a full review-
-which included investigations and inquiries into plan activities. For 
example, EBSA estimated that about 19,500 plans were reviewed, in part, 
based on responses to about 160,000 participant inquiries. Multiple 
complaints could be filed for a single plan. Also, according to EBSA, a 
number of these reviews targeted service providers, a fact that may 
have a further impact on additional plans serviced by these providers. 

[End of table] 

DOL's Office of the Solicitor supports EBSA regional offices by 
litigating civil cases and providing legal support. In fiscal year 
2005, the office litigated 178 of the 258 civil cases referred to it by 
EBSA. In addition, EBSA conducts criminal investigations in 
consultation with the U.S. Attorneys' offices and in many cases, 
conducts joint enforcement actions with other federal, state, and local 
law enforcement agencies. EBSA conducted about 200 criminal 
investigations in fiscal year 2005. As a result, over 100 plan 
officials, corporate officers, and pension plan service providers were 
indicted. 

EBSA Has Made Improvements to Its Enforcement Program, but Challenges 
Remain: 

In 2002, we identified several weaknesses in EBSA's management of its 
enforcement program, including the lack of a centrally coordinated 
quality review process, better coordination needed among its 
investigators, the lack of data to assess the nature and extent of 
noncompliance, and limited attention to its human capital management, 
despite the agency's actions to strengthen the program in prior years. 
Since our 2002 review, EBSA has improved its enforcement program. 
However, several challenges remain. The agency has promoted 
coordination among regional investigators, implemented quality 
controls, and developed strategies to address its workforce needs. To 
promote compliance, EBSA has increased its educational outreach to plan 
participants, sponsors, and service providers, and increased 
participation in its voluntary correction programs. However, the agency 
has not fully addressed concerns from our prior reviews. Specifically, 
EBSA still has not (1) developed complete data on the nature and extent 
of plans' noncompliance, (2) established a formal coordination protocol 
with SEC within its regional offices, and (3) formally evaluated the 
factors affecting staff attrition. 

EBSA Has Made Some Progress in Improving Its Enforcement Program: 

In recent years, EBSA has addressed many of the concerns we raised in 
our 2002 review. As shown in table 3, such improvements include 
promoting coordination among regional investigators, implementing 
quality controls, and developing strategies to meet its workforce 
needs. 

Table 3: EBSA Actions Taken in Response to GAO Recommendations from 
2002 Review: 

GAO observation: Certain requirements, such as notifying plan 
participants of potential violations and levying excise taxes on 
prohibited transactions, may hinder participation in the Voluntary 
Fiduciary Correction Program (VFCP); 
GAO recommendation to EBSA: Analyze barriers to participation in the 
VFCP and explore ways to reduce them; 
Examples of EBSA actions to address recommendation: EBSA has simplified 
and expanded the original VFCP regulation published in 2002, which 
describes how to apply for voluntary correction, the 19 categories of 
transactions covered, acceptable methods for correcting violations, and 
examples of potential violations and corrective actions. Applications 
received for voluntary corrections increased from 55 in fiscal year 
2002 to 985 in fiscal year 2005. 

GAO observation: EBSA had not adequately estimated the nature of 
employee benefit plans' noncompliance with ERISA provisions; 
GAO recommendation to EBSA: Develop a cost-effective strategy for 
assessing the level and type of ERISA noncompliance among employee 
benefit plans; 
Examples of EBSA actions to address recommendation: In fiscal year 
2001, EBSA conducted a national compliance study of group health plans' 
compliance with the new health care laws in ERISA. In 2003, EBSA 
conducted a compliance study focusing on large multi-employer health 
plans. Currently, the agency is conducting a baseline study to 
determine the level of compliance with ERISA requirements on timely 
transmission of employee contributions to pension plans. 

GAO observation: EBSA gave limited attention to human capital 
management despite anticipated workforce and enforcement workload 
changes. For example, the agency had not considered succession planning 
and workforce retention, which could undermine the continuity and 
effectiveness of its enforcement program; 
GAO recommendation to EBSA: Conduct a comprehensive review of the 
agency's future human capital needs, including the size of its 
workforce, the skills and abilities needed, succession planning 
challenges, and staff deployment issues; 
Examples of EBSA actions to address recommendation: EBSA conducted an 
employee workforce analysis and an employee training needs assessment. 
In 2003, DOL issued its Human Capital Strategic Management Plan, which 
provided DOL's strategies for addressing current and projected skills 
shortages, anticipated future staffing needs, and competency 
requirements to ensure that employees possess or acquire the critical 
skills needed to accomplish program mission and functions. 

GAO observation: EBSA lacked a centrally coordinated quality review 
process to ensure that its investigations are conducted in accordance 
with its investigative procedures; 
GAO recommendation to EBSA: Develop a closed case quality review 
process that ensures the independence of reviewers and sufficiently 
focuses on substantive technical case issues; 
Examples of EBSA actions to address recommendation: In fiscal year 
2003, an EBSA team composed of Office of Enforcement and field managers 
developed a closed case quality review program. The program focuses on 
substantive technical issues, and findings are reported centrally to 
the national office. Although regional office officials administering 
the program reviewed their own office's cases for quality, the program 
includes procedures to ensure the independence of the case reviewer. 

GAO observation: EBSA had not routinely analyzed the full range of 
cases investigated to determine which sources were the most effective 
in terms of detecting and correcting violations; 
GAO recommendation to EBSA: Conduct regular reviews of the sources of 
cases that lead to investigations; 
Examples of EBSA actions to address recommendation: EBSA conducted 
analysis on cases closed in fiscal years 2001, 2002, 2003, and 2004. 
The agency agreed to perform reviews of the sources of cases that lead 
to investigations on an annual basis as long as resources permit. 

GAO observation: EBSA did not coordinate the sharing of best practices 
information among its regions regarding case selection and 
investigative techniques; 
GAO recommendation to EBSA: Coordinate the sharing of best practices 
information among regions relating to the optimum and most productive 
techniques for selecting and conducting investigations; 
Examples of EBSA actions to address recommendation: EBSA established a 
Best Practices Sharing Team composed of enforcement staff and regional 
representatives. The agency also developed an intranet site to allow 
its investigators to share best practices, such as investigative plans, 
subpoenas, letters, and investigative guides. 

Source: GAO analysis. 

[End of table] 

As part of its workforce efforts, EBSA has recruited investigators with 
advanced skills in accounting, finance, banking, and law that EBSA 
believes are required because of the technical aspects of ERISA and the 
changing nature of benefit plans. As of September 2005, EBSA employees 
were among some of the highest educated within DOL, and EBSA staff data 
indicated that investigators have wide-ranging skills and backgrounds 
similar to those investigators at IRS and SEC. For example, EBSA 
reported that 46 percent of its investigators hold law degrees, with 
some of these staff also holding additional degrees or certificates in 
accounting or business administration as well as other subject areas. 
Also, EBSA reported that 27 percent of its investigators or auditors 
had undergraduate degrees in accounting, with several also having 
skills in forensic accounting or fraud examination. Several 
investigators and auditors had other advanced degrees, such as master's 
degrees in business administration, law, and public policy, as well as 
backgrounds in securities, taxation, banking, insurance, and employee 
benefits. Recognizing a need for fraud examination skills, EBSA now 
includes a course on forensic accounting in its basic training of newly 
hired investigators, and EBSA data showed that the agency also sent 
many of its investigators to the Federal Law Enforcement Training 
Center over the last several years to take courses in fraud examination 
as well as money laundering and health care fraud. 

Since 2002, EBSA has also used several initiatives to recruit its 
staff. EBSA recruiters attend a variety of job fairs, college campuses, 
and other events to identify and contact applicants with necessary 
skills. Further, to provide national office directors and regional 
directors additional tools to recruit for all occupations, authority 
has been delegated to approve certain human capital flexibilities, such 
as advances in pay and payment of travel expenses for employment 
interviews. 

In addition to attending recruitment events, EBSA uses three principal 
programs to recruit students from law schools, business schools, and 
other specialized disciplines. These programs are the: 

* Student Career Experience Program (SCEP): designed for students to 
work in positions related to their academic field of study while 
enrolled in school.[Footnote 10] Upon graduation, interns may convert 
to full-time career employees. Since 2002, EBSA has employed roughly 
100 SCEP participants. As of July 2006, EBSA reported that 28 students 
were participating in the program. 

* Student Temporary Employment Program (STEP): designed for the 
temporary employment of students ranging from a summer internship to a 
period generally not to exceed 1 year. According to officials, some 
STEP interns join the SCEP program after the summer internship ends. 
Since 2002, EBSA has employed 115 interns in the STEP program. As of 
July 2006, EBSA reported that it had 4 participants. 

* Federal Career Intern Program: a 2-year internship program that can 
result in conversion to career employment. EBSA just recently began 
using this program to recruit full-time employees who have recently 
obtained an undergraduate or graduate degree. According to EBSA, the 
program, which allows the agency to recruit students outside of the 
normal hiring process, is much faster and more streamlined, enabling 
EBSA to better target candidates. As of July 2006, EBSA reported that 
24 students were participating in EBSA's program and were not yet 
eligible for conversion. 

Furthermore, DOL offers an agencywide Masters of Business 
Administration Fellows Program, which is used to recruit business 
school graduates. This is a 2-year rotational program, at the end of 
which fellows may be converted to career employees. As of 2006, 76 
fellows had taken part in the program across all DOL agencies, 
including EBSA. 

In addition to addressing our prior concerns on the management of the 
enforcement program, EBSA has established formal criminal coordinator 
positions for each regional office and increased funds returned to 
participants through its assistance. With regard to its criminal 
coordinators, EBSA created a new position in each regional office, 
modeled after its national office coordinator position, to facilitate 
relationships with law enforcement agencies at the regional level. The 
position works with law enforcement agencies and prosecutors at all 
levels to improve the likelihood that criminal violations will be 
recognized and appropriately investigated. Regional office officials 
believe that the position expands their opportunities for criminal 
prosecutions. For example, one regional official said that if the U.S. 
Attorney's office did not believe it was cost-effective to prosecute an 
alleged violation, the regional coordinator would refer cases to the 
local district attorney's office for prosecution. Additionally, several 
regional office officials believed that the new position would help 
them better coordinate their criminal investigations, ultimately 
increasing criminal prosecutions. 

EBSA also continues to provide education to plan participants, 
sponsors, and service providers to promote compliance. EBSA's education 
program is designed to increase plan participants' knowledge of their 
rights and benefits under ERISA. For example, EBSA anticipates that 
through education, participants will become more likely to recognize 
potential problems and notify EBSA when issues arise. The agency also 
conducts outreach to plan sponsors and service providers, in part, 
about fiduciary responsibilities and obligations under ERISA. For 
example, EBSA's benefit advisers speak at conferences and seminars 
sponsored by trade and professional groups and participate in outreach 
and educational efforts in conjunction with other federal or state 
agencies. Some outreach activities include: 

* briefings to congressional offices, state insurance commissioners, 
and other federal, state, and community organizations; 

* fiduciary compliance assistance seminars for employers, plan 
sponsors, and practitioners; and: 

* on-site assistance to dislocated workers facing job loss as a result 
of plant closure or layoffs. 

EBSA has also increased funds returned to participants through its 
assistance. For example, for fiscal year 2002, the Office of 
Participant Assistance reported that it had recovered approximately $49 
million on behalf of participants. As of fiscal year 2005, the office 
reported that it had increased that amount to about $88 million. 

At the same time, EBSA has increased its enforcement results since 
2002. According to EBSA data, in fiscal year 2002, for every dollar 
invested in EBSA, the agency's investigators produced about $7.50 in 
financial benefits, or roughly $830 million in total monetary 
recoveries. As of fiscal year 2005, they were producing just over $12 
for every dollar--a total of $1.6 billion. EBSA officials said that the 
agency has achieved these results, in part, because of recent program 
improvements and with relatively small increases in staff. Full-time 
equivalent (FTE) authorized staff levels increased from 850 in fiscal 
year 2001 to 875 FTEs in fiscal year 2006. As of August 2006, 385 of 
the 875 FTEs were frontline field investigators. 

In addition, EBSA has increased compliance through its Voluntary 
Fiduciary Correction Program (VFCP) and its Delinquent Filer Voluntary 
Compliance (DFVC) Program. The VFCP allows plan officials to disclose 
and correct certain violations without penalty. The program is designed 
to protect the financial security of workers by encouraging employers 
and plan officials to voluntarily comply with ERISA and allows those 
potentially liable for some fiduciary violations under to ERISA to 
apply for relief from enforcement actions and certain penalties, 
provided they meet specified criteria and follow program procedures. 
Specifically, plan officials can correct 19 types of transactions, such 
as the remittance of delinquent participant contributions and 
participant loan repayments to pension plans. If the regional office 
determines that the applicant has met the program's terms, it will 
issue a "no action" letter to the applicant--avoiding a potential civil 
investigation and penalty assessment. As a result of the program, in 
fiscal year 2005, EBSA reported that $7.4 million was voluntarily 
restored to employee benefit plans. Furthermore, the DFVC program is 
designed to encourage plan administrators to comply with ERISA's filing 
requirements. According to EBSA data, the program has increased the 
number of unfiled annual reports received from about 3,000 in fiscal 
year 2002 to over 13,000 in fiscal year 2005. 

EBSA Still Does Not Estimate Overall Industry Compliance, Regularly 
Confer With SEC Staff on Industry Trends, and Address Retention of 
Investigators: 

Despite improvements in its enforcement efforts, EBSA has not 
completely addressed several weaknesses we previously identified. 
Specifically, EBSA has not systematically estimated the nature and 
extent of pension plans' noncompliance, a fact that limits the agency's 
ability to assess overall industry compliance with ERISA and measure 
the effectiveness of its enforcement program. In 2002, we recommended 
that EBSA take steps to develop a cost-effective strategy for assessing 
the level and type of noncompliance among employee benefit plans. In 
response, EBSA stated that it had established its ERISA Compliance 
Assessment Committee and had embarked on a statistical study to gauge 
health plans' noncompliance with the provisions of Part 7 of ERISA, 
dealing with group health plan requirements.[Footnote 11] Although EBSA 
has conducted and continues to generate some statistical studies to 
measure noncompliance in the pension and health care industries, its 
pension compliance data remain limited, focusing on information such as 
the timeliness and full remittance of employee contributions to defined 
contribution plans. However, as of June 2006, EBSA officials could not 
provide an estimated time frame for results of its timeliness and 
remittance study. Although EBSA has taken steps, the agency still did 
not know the nature and extent of noncompliance within the pension 
industry, and its ERISA Compliance Assessment Committee had not yet 
planned any additional pension compliance baseline studies. 

EBSA's limited noncompliance information may also prevent EBSA from 
effectively measuring the overall performance of its enforcement 
program. The Government Performance and Results Act of 1993 requires 
that executive agencies demonstrate effectiveness through measurable 
result-oriented goals. According to the Office of Management and 
Budget,[Footnote 12] DOL has selected output measures as proxies to 
compensate for the difficulty in measuring overall performance. Since 
our 2002 review, EBSA's enforcement program continues to use 
performance measures that generally focus on how well the agency is 
managing and using its resources--such as the number of specific 
investigations closed with results--rather than on its overall impact 
on the security of employee benefits. Some regional office officials we 
visited raised concerns that the current measures and expected 
increases to EBSA's performance goals in the coming years would likely 
result in an inability to review and conduct more complex cases, given 
each office's limited resources and the need to close cases with 
results. For example, one of EBSA's performance goals is to close 69 
percent of its civil investigations with results in 2006, with planned 
increases to that goal of 3 percent per year until 2008--to 75 percent. 
Some regional officials stated that meeting the revised performance 
goal encourages a focus on cases that are more obvious and easily 
corrected, such as those involving employee defined contribution plans, 
rather than on investigations of complex and emerging violations where 
the outcome is less certain and may take longer to attain. Without data 
to assess the extent and nature of noncompliance, as we recommended in 
2002, EBSA will continue not to have effective measures for assessing 
the overall effectiveness of its enforcement program. 

In a 2005 testimony, we also noted that EBSA needed to better 
coordinate with the SEC on issues related to the securities and pension 
industries.[Footnote 13] Although the two agencies periodically share 
information, we found that EBSA has not yet established a systematic 
procedure by which its investigators in all its regional offices can 
regularly confer with their respective SEC regional office. Under the 
securities laws, SEC is subject to confidentiality restrictions with 
respect to information it can disclose to EBSA pertaining to an ongoing 
investigation, even if the information pertains to possible violations 
of ERISA.[Footnote 14] For example, if SEC investigates a securities 
trading firm and has reason to believe that information discovered 
during the investigation might be of interest to EBSA investigators, 
SEC may alert EBSA to their findings. Likewise, EBSA investigators can 
alert SEC to information that is discovered during an ERISA 
investigation that might be of interest to SEC. However, unlike EBSA, 
SEC may not share documentation associated with its findings unless 
EBSA submits a written request for information which, if approved, 
allows access to any evidence that SEC has obtained during the course 
of its investigation. 

In an attempt to expedite the information-sharing process, certain EBSA 
regional offices, but not all, have established informal working groups 
of investigators that regularly meet with SEC investigators to exchange 
information. For example, one region has established an "SEC Group," 
which regularly meets with SEC investigators to develop case 
information and potential leads. In contrast, another region stated 
that it has very little contact with SEC and only learns about SEC 
investigations through the media. While not all EBSA regional and 
district offices may have the same need to interact with SEC because of 
the nature of the private sector companies within their jurisdiction, 
EBSA may not have knowledge of an SEC investigation involving the same 
entity in those offices where no working group exists unless such 
knowledge is disclosed to the public, therefore limiting its awareness 
of potential violations. 

Further, EBSA has not developed initiatives to ensure retention of its 
investigative staff, despite its improvements in human capital 
management. In 2002, we reported that EBSA had one of the highest 
attrition rates within DOL. Since our review, we found that EBSA's 
overall attrition rate remained high, and in recent years, attrition 
rates for EBSA's investigators appear to have risen. Table 4 shows the 
attrition rates of EBSA investigators including students that occupy 
investigator positions in the GS-1801 series, as compared to the 
attrition rates of similar groups. 

Table 4: Overall Attrition Rates (Percentages) for EBSA Investigators, 
Other EBSA Employees, DOL, and Other Federal Agencies, Fiscal Years 
2001-2005: 

Fiscal year: 2001; 
EBSA investigators[A]: 7.1; 
EBSA agencywide: 9.4; 
All other DOL employees: 9.1; 
All other federal investigators[A]: 5.2. 

Fiscal year: 2002; 
EBSA investigators[A]: 3.3; 
EBSA agencywide: 8.4; 
All other DOL employees: 8.7; 
All other federal investigators[A]: 4.3. 

Fiscal year: 2003; 
EBSA investigators[A]: 3.4; 
EBSA agencywide: 7.2; 
All other DOL employees: 6.7; 
All other federal investigators[A]: 6.3. 

Fiscal year: 2004; 
EBSA investigators[A]: 5.6; 
EBSA agencywide: 8.9; 
All other DOL employees: 6.1; 
All other federal investigators[A]: 5.4. 

Fiscal year: 2005; 
EBSA investigators[A]: 11.2; 
EBSA agencywide: 10.8; 
All other DOL employees: 8.8; 
All other federal investigators[A]: 5.2. 

Source: GAO analysis of OPM's Central Personnel Data File. 

[A] Investigators represent all designated GS-1801 investigative 
positions, including those employed under the student temporary 
employment program. EBSA investigators in training (students--GS-1899 
series) are not included in the attrition rate calculations--attrition 
for 1899 classification is: 62 percent ('01), 83 percent ('02), 63 
percent ('03), 54 percent ('04), and 45 percent ('05). EBSA also hires 
auditors--classified as a GS-511--which are a part of the investigative 
staff. 511 auditors are not included in the table. We determined the 
overall attrition rates for this classification as follows: 10.4 
percent ('01), 2.3 percent ('02), 8.6 percent ('03), 9.7 percent ('04), 
and 7.7 percent ('05). 

[End of table] 

Specifically, data suggest that EBSA's attrition rates for 
investigators have climbed since 2002, and as of 2005, EBSA 
investigators were leaving at twice the rate of other federal 
investigators. In fact, as of fiscal year 2005, EBSA had lost 102 
investigators since fiscal year 2002 for various reasons, such as 
resignations and retirement. For example, in fiscal year 2005, EBSA 
lost 52 investigators, of which 34 left for employment outside of the 
federal government.[Footnote 15] While this may be due in part to EBSA 
employing temporary students as entry-level investigators, between 
fiscal year 2002 and fiscal year 2005, 58 investigators had left EBSA 
for employment outside of the federal government. 

According to regional office officials in several offices we visited, 
particularly in major urban areas, they had difficulties retaining 
newly hired investigators because of insufficient compensation, and 
some believed that these staff used EBSA as a training ground for the 
private sector employee benefit plan industry where they could earn 
higher salaries. For example, in the San Francisco regional office, 
officials reported that the investigator attrition rate has averaged 
about 13 percent per year, and as of April 2006, officials reported 
that 50 percent of their staff had less than 3 years of experience. 
While other agencies may face similar attrition problems in such urban 
areas, EBSA has taken limited steps to evaluate the impact such 
attrition has on its operations. 

Officials from EBSA's Office of Program Planning, Evaluation and 
Management reported that the agency dropped earlier considerations for 
retention strategies, such as student loan repayment and retention 
bonuses, in view of data that suggest investigators are usually leaving 
for much higher salaries elsewhere. Although EBSA has employed exit 
surveys, the agency has limited processes to evaluate why its 
investigators are leaving the agency, nor has the agency evaluated the 
extent to which other retention initiatives may be useful. While EBSA 
may be able to recruit new investigators and to fill vacant positions, 
the continued turnover requires additional resources for training new 
staff. Further, the relative inexperience of new staff may have an 
adverse effect on EBSA's enforcement program's efforts. 

Unlike Other Agencies, EBSA Does Not Conduct Routine Compliance 
Examinations or Comprehensive Risk Assessments: 

Although EBSA regularly targets violations, it does not conduct routine 
compliance examinations or comprehensive risk assessments to direct its 
enforcement practices, as do other federal agencies that share similar 
responsibilities. Rather, the agency relies on various sources for case 
leads, such as outside complaints and informal targeting of plans, to 
focus its enforcement efforts. While these leads are important, in 
addition to undertaking such activities, agencies such as IRS and SEC 
have developed routine compliance programs to detect violations and 
identify emerging trends that may warrant further examination by 
enforcement staff. Moreover, SEC and PBGC have dedicated staff to 
perform broad risk assessments by analyzing information from multiple 
sources in order to anticipate, identify, and manage risks to investors 
and to the pension insurance system. 

EBSA Does Not Conduct Routine Compliance Examinations: 

EBSA does not conduct routine compliance examinations--evaluations of a 
company's books, records, and internal controls--limiting its ability 
to detect and deter violations. Rather than conduct such examinations, 
EBSA relies on several sources for case leads. For example, EBSA uses 
participant complaints and other agency referrals as sources of 
investigative leads and to detect potential violations. Moreover, EBSA 
identifies leads, in part, through informal targeting efforts by 
investigators, primarily using data reported by plan sponsors on their 
Form 5500 annual returns. While these sources are important, such 
methods are generally reactive and may reveal only those violations 
that are sufficiently obvious for a plan participant to detect or those 
disclosed by plan sponsors on their Form 5500s,[Footnote 16] and not 
those violations that are possibly more complex or hidden. 
Nevertheless, EBSA officials raised concerns that conducting such 
examinations would divert resources from EBSA's current enforcement 
practices. 

In contrast, IRS and SEC use such examinations in an effort to detect 
violations or identify weaknesses that could lead to violations. IRS's 
Office of Employee Plans administers a compliance examination program 
to detect violations of tax laws related to pension plans. According to 
agency officials, IRS dedicates eight staff members for selecting 
entities for examinations, and IRS uses a risk-based process for 
selecting and scoping such examinations. If a violation is detected 
during an examination, IRS can subsequently levy penalties and excise 
taxes on the violators.[Footnote 17] In fiscal year 2005, the Office of 
Employee Plans closed 8,230 examinations. Similarly, SEC's Office of 
Compliance Inspections and Examinations (OCIE) detects violations of 
securities laws through its examination program.[Footnote 18] OCIE 
examines advisers, investment companies, broker-dealers, and other 
registered entities to evaluate their compliance with the federal 
securities laws, to determine if they are operating in accordance with 
disclosures made to investors, and to assess the effectiveness of their 
compliance control systems. SEC conducted 2,056 examinations of 
investment advisers and investment companies in fiscal year 2005. 

IRS also uses examinations in an attempt to identify emerging areas of 
noncompliance and analyze compliance risk levels among specific types 
of pension plans. IRS plans to use this information in its risk-based 
examination selection process, similar to recommendations that we made 
to EBSA in 2002. As part of this effort, IRS, which has a similar 
resource level to EBSA, is in the process of conducting examinations to 
develop compliance baselines for 79 market segments it identified based 
on business sector and plan type. For example, IRS is developing 
separate baseline compliance levels for 401(k) plans, defined benefit 
plans, employee stock ownership plans,[Footnote 19] and profit-sharing 
plans in the construction industry. IRS officials expect the baselines 
to be completed by the end of fiscal year 2007. Likewise, SEC, which 
has fewer entities to oversee and more resources than EBSA, attempts to 
use its examination program to identify emerging trends. In addition to 
its other examination types, SEC conducts sweep examinations-- 
compliance examinations that focus on specific industry issues among a 
number of registrants--to remain informed of securities industry 
developments. For example, SEC initiated a sweep examination of several 
pension plan service providers to identify conflicts of interest 
between the providers and the plan sponsors.[Footnote 20] 

Furthermore, because of the number of EBSA investigators relative to 
employee benefit plans, EBSA's presence in the pension industry is 
limited, therefore decreasing the possibility that a plan may be 
investigated. A compliance examination program, in part, is designed to 
establish a presence by regularly reviewing entities' operations, 
thereby likely creating a deterrent to noncompliance. For example, IRS 
officials said that they believe that their program deters violations 
from occurring because they select many plans for review each year 
based on established risk criteria. Because fiduciaries are unsure when 
IRS's agents may review their activities, IRS officials believe that 
the agency has created an environment that encourages compliance. 
Likewise, EBSA officials believe that their voluntary compliance 
programs are also successful at deterring violations, because employers 
and fiduciaries want to disclose and correct violations instead of 
being investigated and prosecuted. However, given the ratio of employee 
benefit plans to investigators, EBSA's limited presence may create an 
incentive for fiduciaries or plan sponsors to take compliance lightly, 
even though EBSA attempts to deter violations through its correction 
programs and publicizing its enforcement results. 

EBSA Has Not Dedicated Staff to Formalized Risk Assessment: 

Although EBSA's enforcement strategy emphasizes targeting violations 
and protecting plan participants at risk, EBSA has no staff dedicated 
to conduct broad risk assessments of multiple sources of information, 
including, but not limited to, investigations, academic research, 
compliance studies, and other market data. While the agency attempts to 
identify areas of risk through its efforts in establishing its national 
priorities and projects, this effort ultimately relies on regional 
investigators to identify developing problems--generally in the course 
of their existing investigations. EBSA's Strategic Enforcement Plan 
directs EBSA to establish national investigative priorities to ensure 
that its enforcement program focuses on areas critical to the well- 
being of employee benefit plans. On the basis of these priorities, EBSA 
annually develops national and regional projects based on unique or 
problematic issues identified within a region's geographic jurisdiction 
in accordance with its strategic plan. Depending on the prevalence of a 
specific problem across regions, it can be elevated to a national 
project. For example, EBSA has recently implemented a national project 
focusing on pension consulting services, called the Consultant/Advisor 
Project, which is aimed at identifying plan service providers, 
particularly investment advisers, who may have a conflict of interest 
that could affect the objectivity of the advice they provide their 
pension plan clients. However, because EBSA relies primarily on 
identifying risk through its investigations and targeting, which offer 
no systematic, analytic process for anticipating new types of 
violations before they become pervasive, its risk assessment approach 
may be limited. 

Unlike EBSA, some federal agencies, such as SEC and PBGC, have 
dedicated staff to analyzing information from multiple sources to 
assess external risk within their regulated industries. Once risks are 
identified, the agencies develop and focus their enforcement strategies 
to mitigate and manage them. In 2004, SEC established the Office of 
Risk Assessment (ORA) to coordinate the SEC's risk management program. 
While relatively small, ORA serves as the agency's risk management 
resource and works with other SEC departments to identify and manage 
risks. According to ORA officials, the office's five staff identify and 
assess areas of concern through expert analysis, such as new and 
resurgent forms of fraud and illegal activities. For instance, ORA 
worked in conjunction with OCIE to develop a database to collect and 
catalog such issues within the securities industry in order to evaluate 
risk to investors. OCIE then uses this database to select cases for its 
examination program. Also, PBGC has dedicated one employee--supported 
by staff in various departments--for risk assessment within its 
Department of Insurance Supervision and Compliance. PBGC officials 
believe this has strengthened its operational capability to identify 
and monitor risks to its pension insurance program, including 
macroeconomic factors, industry-specific risks, and matters relating to 
specific plan sponsors. PBGC officials also stated that these efforts 
play a role in PBGC's financial reporting processes, including valuing 
its benefit liabilities and determining whether liabilities associated 
with distressed plans should be classified as liabilities in PBGC's 
financial statements, as required by generally accepted accounting 
principles. 

Statutory Obstacles May Limit EBSA's Ability to Oversee Pension Plans 
Effectively: 

Certain statutory obstacles may limit EBSA's effectiveness in 
overseeing private sector pension plans. First, the restrictive legal 
requirements of the 502(l) penalty under ERISA have limited EBSA's 
ability to assess penalties and restore plan assets. According to EBSA 
officials, the penalty discourages parties from quickly settling claims 
of violations, thereby impeding the restoration of plan assets. 
Further, EBSA officials stated that in some instances, the penalty can 
also reduce the amount of money restored to plan participants when a 
plan sponsor is unwilling to or cannot fully restore assets and pay the 
penalty. Second, investigators' access to timely plan data for 
targeting new case leads is limited by ERISA filing deadlines. As a 
result, the data can be several years old. In fact, in some cases, 
investigators were relying on data up to 3 years old to target 
potential violators. While EBSA is constrained by ERISA's filing 
requirements, the agency has taken steps to address processing delays 
in an effort to provide more timely data to investigators and to 
improve its targeting efforts. 

Restrictive Statutory Requirements Can Impede the Restoration of Plan 
Assets: 

Restrictive legal requirements have limited EBSA's ability to assess 
penalties against fiduciaries or other persons who knowingly 
participate in a fiduciary breach, and the penalty provision under 
Section 502(l) of ERISA has delayed and in certain instances prevented 
the restoration of funds to pension plans. Under ERISA, EBSA must 
assess penalties based on monetary damages, or more specifically, the 
restoration of plan assets.[Footnote 21] Section 502(l) of ERISA 
requires EBSA to assess a 20 percent penalty against a fiduciary who 
breaches a fiduciary duty under, or commits a violation of, Part 4 of 
Title I of ERISA or against any other person who knowingly participates 
in such a breach or violation, and the penalty is 20 percent of (1) the 
"applicable recovery amount," (2) the amount of any settlement agreed 
upon by the Secretary, or (3) the amount ordered by a court to be paid 
in a judicial proceeding instituted by the Secretary. However, the 
penalty can only be assessed against fiduciaries or knowing 
participants in a breach by court order or settlement agreement. 
Therefore, if there is no settlement agreement, or court order, or if 
someone other than the fiduciary or knowing participant returns plan 
assets, EBSA cannot assess the penalty. 

In those instances where EBSA does pursue formal settlement, officials 
stated that the penalty can discourage parties from quickly settling 
claims of violations, because violators almost always insist on 
resolving all of EBSA's claims in one settlement package, including 
both the amount to be paid to the plan and the amount paid in the form 
of a penalty. In many of these cases, violators have contested the 
penalty, in turn delaying settlement and impeding restoration of plan 
assets. 

In addition, officials stated that the penalty can, in some instances, 
reduce the amount of money restored to the plan participant when a plan 
sponsor is unwilling to or cannot fully restore assets and pay the 
penalty. Currently, EBSA has limited discretion to waive or reduce the 
20 percent penalty in situations where it reduces the funds returned to 
the plan.[Footnote 22] Because ERISA requires the penalty to be paid to 
the U.S. Department of the Treasury, if insufficient funds exist to 
restore plan assets and pay the penalty, plan assets may not be 
completely restored. For example, if a plan sponsor is found to have 
breached its fiduciary duty and the amount involved is $1,000,000 and 
the sponsor has only $900,000 left in its possession, the amount 
returned to the plan participants will be $720,000 (80 percent), and a 
penalty of $180,000 (20 percent) will be paid to the U.S. Treasury. 

Investigators' Access to Timely Data Limited by ERISA Filing Deadlines: 

Under ERISA, plan sponsors have up to 285 days to file their annual 
Form 5500 reports,[Footnote 23] limiting EBSA investigators' access to 
timely information necessary for targeting new case leads. In addition, 
as we reported in 2005, processing delays and the time necessary to 
correct errors can result in a further delay of up to 120 days after a 
plan's year end--increasing the potential delay to over 400 
days.[Footnote 24] As a result, in 2006, EBSA investigators were 
generally relying on information from 2003 and 2004 to target 
violations. Because of these delays, fiduciaries may have more time to 
misappropriate plan assets, causing harm to participants for long 
periods before violations are identified. 

Unlike IRS, which supplements its 5500 reviews with risk-based 
compliance examinations, EBSA relies primarily on the 5500 data 
maintained in its ERISA Data System (EDS) for performing its targeting 
efforts. According to officials, EDS provides EBSA investigators with 
about 30 pre-designed, standard programs as well as an ad hoc query 
capability to target pension plans that are perceived to have an 
increased likelihood of violations. For example, investigators stated 
that, historically, some construction contractors have established 
pensions for workers involved with a particular project and then 
abandoned the plan at the project's completion without fully funding 
the plan. In this scenario, investigators can use EDS ad hoc query 
capability to obtain data on such plans. However, because of untimely 
information, plans could already be abandoned before EBSA investigators 
identified these types of violations. 

While EBSA is constrained by ERISA's filing requirements, the agency 
has taken steps to address processing delays in an effort to obtain 
more timely information to improve its targeting efforts. In its fiscal 
year 2007 appropriation request, DOL requested funding for an updated 
electronic filing system--known as EFAST2--with the goal of expediting 
the Form 5500 filing process in two ways. First, EFAST2 is designed so 
that it will not accept Form 5500 data submissions unless they pass a 
series of edit checks. EBSA officials stated that the change should 
reduce errors and processing times. Second, EFAST2 should capture data 
from prior year filings in a manner that officials believe will be more 
conducive to analysis than the current ERISA Filing Acceptance System 
(EFAST). This new system is intended to replace the current process, 
where approximately 98 percent of Form 5500s are filed using paper 
forms, with the remainder filed electronically through EFAST. EBSA 
officials stated that the current paper filings take more than three 
times longer to process than electronic filings and have nearly twice 
as many errors. To address these issues, EBSA recently issued a 
regulation requiring the electronic filing of all Form 5500s for plan 
years beginning on or after January 1, 2008. EBSA officials believe 
that the new requirements and system features will provide EBSA with 
more timely data. 

Conclusions: 

EBSA is a relatively small agency facing the daunting challenge of 
safeguarding the retirement assets of millions of American workers, 
retirees, and their families. Since our 2002 review, EBSA has taken a 
number of steps to strengthen its enforcement program and leverage its 
resources in an effort to implement its enforcement strategy. The 
agency has directed the majority of its resources toward enforcement 
and has decentralized its investigative authority to the regions, 
allowing its investigators more flexibility to focus on issues 
pertinent to their region. Yet despite these improvements, EBSA's 
ability to protect plan participants against the misuse of pension plan 
assets is still limited, because its enforcement approach is not as 
comprehensive as those of other federal agencies, and generally focuses 
only on what it derives from its investigations. 

While it has employed some proactive measures, such as computerized 
targeting of pension plan documents, EBSA remains largely reactive in 
its enforcement approach, thus potentially missing opportunities to 
address problems before trends of noncompliance are well established. 
Currently, EBSA does not have the institutional capacity to 
comprehensively identify and evaluate evidence of potential risk to 
participants before emerging violations become pervasive. Although EBSA 
evaluates risk through the development of its annual national and 
regional projects, the agency does not conduct routine compliance 
examinations, which could add a key piece to the foundation on which to 
base its broad risk analyses. Further, the agency does not 
systematically draw on outside sources of information, such as academic 
studies and industry experts, nor does it formally assess risk on an 
ongoing basis, as similar agencies do. As a result, EBSA is restricted 
in its ability to detect new and emerging trends or weaknesses that may 
occur throughout the entire pension industry. However, even if EBSA 
were to conduct such examinations and collect additional information, 
it would not be in a position to identify overarching problems from 
these data, because it does not have a dedicated workforce for such 
efforts. 

We understand that dedicating staff for the purpose of identifying 
risks may require trade-offs among EBSA's competing priorities. Given 
that EBSA investigators are tasked with the responsibility for 
overseeing roughly 3.2 million private pension and health benefit 
plans, such trade-offs must be considered carefully, and may involve 
the inclusion of other offices within the agency. Nevertheless, a 
formal risk assessment function can be conducted with modest staff 
allocations, as demonstrated by the PBGC and SEC risk assessment 
functions. Furthermore, if EBSA officials believe that these trade-offs 
would adversely affect its enforcement operations, the agency has the 
option of seeking additional resources from Congress, if necessary. 
However, such a request should only occur after the agency has explored 
and achieved all available efficiencies within its existing resource 
allocations. Whatever approach is ultimately taken, it is critical that 
EBSA take steps to employ a more assertive enforcement approach, or a 
portion of the pension industry will, in essence, continue to lack 
effective oversight. 

While EBSA is considering such options, it is vital that the agency 
further explore opportunities to strengthen its existing enforcement 
program. Although EBSA and SEC periodically coordinate efforts on 
multiple issues, the agencies must explore opportunities to identify 
questionable activities through a more systematic coordination effort 
throughout their regional offices. While we recognize that not all EBSA 
regional and district offices may have the same need to interact with 
SEC, access to information that SEC has obtained about potential 
violations could save investigative resources for both agencies and may 
also expedite the prosecution of fiduciaries who are violating the law. 
EBSA must also explore all possibilities to retain skilled staff so 
that it does not have to spend its limited resources on training new 
staff, and minimize the loss of institutional experience. Additionally, 
even though EBSA has taken steps to address the Form 5500 processing 
delays, EBSA investigators' access to timely plan information necessary 
for targeting new case leads is still limited by ERISA's filing 
deadline. Moreover, opportunities to expedite settlements and restore 
funds to pension plans may be lost by the fact that EBSA has little 
authority, under current law, to waive a mandatory penalty when it 
prevents fully restoring assets to participants. At a time when the 
retirement of millions of Americans is imminent, it is more important 
than ever to take all possible measures to protect their pension 
assets. 

Matter for Congressional Consideration: 

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

Recommendations for Executive Action: 

To improve overall compliance and oversight, we recommend that the 
Secretary of Labor 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, and: 

* 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. 

Direct the Office of Enforcement to: 

* establish, where appropriate, formal SEC coordination groups in the 
regional offices, similar to those already in place in some EBSA 
regions. 

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 Comments and Our Evaluation: 

We obtained written comments on a draft of this report from the Acting 
Assistant Secretary for the Employee Benefits Security Administration, 
Department of Labor, and from the Director of Enforcement, for the 
Securities and Exchange Commission. EBSA and SEC's comments are 
reproduced in appendix III and appendix IV, respectively. EBSA and SEC, 
as well as IRS and PBGC, also provided technical comments, which were 
incorporated in the report where appropriate. 

EBSA agreed with three of the four recommendations we made to the 
Secretary of Labor to strengthen EBSA's enforcement program. EBSA 
disagreed with our recommendation to evaluate the extent to which the 
agency could supplement its current enforcement practices with other 
enforcement strategies, such as conducting routine compliance 
examinations and dedicating staff for risk assessment. While EBSA 
agreed that it should continue to evaluate its enforcement practices on 
an on-going basis, the agency stated that it would be premature to 
emulate the SEC and IRS models because GAO did not assess the 
effectiveness of these models. However, our report does not suggest 
that EBSA copy the IRS, PBGC, or SEC models; rather, we suggest that 
EBSA consider incorporating enforcement strategies that are standard 
practice at many federal financial regulators, such as the federal 
banking regulators that constitute the Federal Financial Institutions 
Examination Council as well as at IRS and SEC. Further, we have 
highlighted the potential benefit of these enforcement strategies in 
prior GAO work. We recognize and would expect that EBSA's 
implementation of these standard practices could vary from other 
regulatory models, given the nature of its responsibilities. We 
continue to believe that these practices could have merit for EBSA and 
therefore deserve further consideration. 

In addition, EBSA commented that our recommendation to evaluate the 
extent to which it could supplement its investigations with routine 
compliance examinations appeared to be premised on the assumption that 
"some number of completely random investigations would have a 
significant deterrent effect and could better enable [EBSA] to identify 
emerging areas of noncompliance." We do not believe that completely 
random investigations are appropriate, nor do we recommend that EBSA 
conduct them. Rather, EBSA should consider developing a compliance 
examination program that uses risk-based criteria to target larger or 
higher-risk pension plans with the goal of examining these plans more 
frequently. Based on these criteria, EBSA could select a sample of 
plans to review each year which may identify emerging areas of 
noncompliance with modest resource allocations. 

EBSA noted that it has conducted routine compliance examinations in the 
past as part of its investigative process, an action that it concluded 
resulted in a low number of cases with violations. We believe that 
examinations and investigations are two distinct enforcement practices. 
Specifically, compliance examinations should not only detect potential 
violations and deter noncompliance, but also identify mismanagement or 
questionable practices that may warrant additional scrutiny by 
investigators. Investigations are generally conducted in response to 
possible violations, which can be identified through compliance 
examinations and other sources. We believe that when used together, 
routine compliance examinations and investigations can provide a better 
enforcement capability than investigations alone. 

EBSA commented that the process it uses to identify risk has many of 
the same characteristics as the risk assessment process described in 
our report, and that EBSA investigators gather valuable information 
from employee benefit professionals. Our report recognizes that EBSA 
evaluates risk through its efforts in annually establishing its 
national priorities and projects by reviewing its investigations. 
However, we believe that EBSA's risk assessment efforts fall short of 
practices used by other agencies because the agency lacks staff 
dedicated to continuously monitoring the private sector pension 
industry and bases its current risk assessment approach primarily on 
its investigative findings. According to GAO's Standards for Internal 
Controls,[Footnote 25] agencies should establish an assessment of the 
risks the agency faces from both internal and external sources. For 
example, agencies should have mechanisms in place to anticipate, 
identify, and react to risks presented by changes, including economic, 
industry, and regulatory changes, that can affect the achievement of 
agency goals and objectives. Although EBSA has taken some steps to do 
this, certain patterns of risk may go undetected because EBSA does not 
have staff dedicated to evaluating risk across the entire industry, 
even though such an effort would not require extensive resources as our 
report highlights. If EBSA were to supplement its existing enforcement 
efforts with staff dedicated to continuously reviewing information from 
multiple sources, such as its investigators' interviews with employee 
benefits professionals, findings by other agencies, compliance studies, 
and academic research, the agency could better anticipate, identify, 
and react to risk as it emerges, rather than after established patterns 
of risk are detected during its annual planning process. We continue to 
believe that by relying primarily upon the identification of risks 
through its investigations and the existing targeting process, some 
emerging trends or abuse could go undetected. 

As we agreed with your office, unless you publicly announce its 
contents earlier, we plan no further distribution of this report until 
30 days after its issue date. At that time, we will send copies of this 
report to the Secretary of Labor, the Commissioner of the IRS, the 
Chairman of the SEC, and other interested parties. We will also make 
copies available to others on request. If you or your staff have any 
questions concerning this report, please call me at (202) 512-7215. Key 
contributors are listed in appendix V. 

Sincerely yours, 

Signed by: 

Barbara D. Bovbjerg: 
Director, Education, Workforce, and Income Security Issues: 

[End of section] 

Appendix I: Scope and Methodology: 

To determine the steps that the Employee Benefits Security 
Administration (EBSA) has taken in recent years to enforce and promote 
Employee Retirement Income Security Act of 1974 (ERISA) compliance, we 
collected and documented information on EBSA's enforcement strategy, 
operations, and human capital management practices. We reviewed EBSA's 
efforts to address recommendations from our prior work, focusing on the 
agency's management of its enforcement program. To document the 
management of EBSA's enforcement program, we collected and reviewed 
EBSA's policies, such as its Strategic Enforcement Plan, Enforcement 
Manual, and regional Program Operating Plans. In addition, we obtained 
EBSA's enforcement results for fiscal years 2001-2005. EBSA maintains 
these results in its Enforcement Management System. This system was 
designed to support not only strategic policy decisions, but also day- 
to-day management of investigator inventories and activities. To verify 
the reliability of EBSA's enforcement results data, we interviewed 
officials from EBSA's Office of Technology and Information Services and 
corroborated the data with system documentation and the systems that 
produced the data. We reviewed the data for obvious inconsistency 
errors and completeness. From this review, we determined that the EBSA- 
supplied data were sufficiently reliable for the purposes of this 
report and account for EBSA's enforcement results. We also used data 
from the 2002 and 2004 waves of the Health and Retirement Study to 
examine retirement income by source at the median because of the 
presence of extreme outliers. The rank order of Social Security and 
pensions and annuities is the same when evaluated at the mean or 
median. 

We also interviewed officials from the Department of Labor's (DOL) 
Office of the Solicitor, and Office of Inspector General, as well as 
EBSA's Office of Enforcement, Office of Participant Assistance, and 
Office of the Chief Accountant. In addition, we selected and visited 
EBSA's regional and district offices in Atlanta, Boston, Chicago, 
Kansas City, Philadelphia, San Francisco, Seattle, and Washington, 
D.C., where we interviewed EBSA field office management, regional 
solicitors, staff, and investigators. We selected these offices based 
on geographic location and the number and types of investigations 
conducted. Further, we met with representatives from professional 
organizations that represent entities regulated by EBSA and plan 
participants and conduct audits of pension plans. 

In addition, we collected and examined information on EBSA enforcement 
initiatives, the results of its prior internal reviews, and studies 
performed by the DOL Office of Inspector General (OIG). To determine 
the statutory restrictions that limit the sharing of information 
between EBSA and the Securities and Exchange Commission (SEC), we 
interviewed EBSA investigators, managers, and attorneys. We also 
interviewed officials at SEC and reviewed the applicable securities 
laws that govern the sharing of information related to SEC 
investigations. Finally, we reviewed past GAO work on SEC and consulted 
the teams within GAO that regularly review SEC operations. 

Moreover, to verify claims by regional offices that offices were 
experiencing high rates of attrition, we analyzed data from the Office 
of Personnel Management's Central Personnel Data File (CPDF). Using 
these data, we identified the newly hired investigators and followed 
them over time to see how many left EBSA. We identified all new hires 
for fiscal years 2000 through 2005 by using personal action codes for 
accessions and career conditional positions. Next, we determined 
whether these individuals had personnel activity indicating they had 
separated from EBSA. Separations (attritions) included resignations, 
retirements, terminations, and deaths. For more on the reliability of 
the CPDF, see GAO's report on the topic.[Footnote 26] 

To determine the overall attrition rates for EBSA investigators (not 
just new hires), we analyzed data from the CPDF for fiscal years 2000 
to 2005. For each fiscal year, we counted the number of employees with 
personnel actions indicating they had separated from EBSA. We did 
include investigators in training, who are classified as GS-1801 
investigators, because these individuals draw down on EBSA's overall 
full-time equivalents and play an important part of its hiring process. 
We divided the total number of separations for each fiscal year by the 
average of the number of permanent employees in the CPDF as of the last 
pay period of the fiscal year before the fiscal year of the separations 
and the number of permanent employees in the CPDF as of the last pay 
period of the fiscal year of separations. To place the attrition rates 
for EBSA investigators in context, we compared EBSA's attrition rates 
to those for employees in other occupations and agencies (EBSA 
employees, all other DOL, and all other employees in the executive 
branch of the federal government.) 

To identify how EBSA practices compare to those of other agencies, we 
interviewed officials from SEC, the Internal Revenue Service (IRS), and 
the Pension Benefit Guaranty Corporation. We selected these agencies 
given their responsibilities in regulating different segments of the 
private sector pension industry. To identify the types of authorities 
and practices that these agencies used, we collected and reviewed 
documentation from ERISA, the Securities Exchange Act of 1934, the 
Investment Advisors Act of 1940, and the Investment Company Act of 
1940, as well as prior GAO reports. However, we did not evaluate the 
effectiveness of these agencies' compliance examination, enforcement, 
or risk assessment programs. From this review, we conducted a 
comparative analysis to identify what types of authorities and 
practices other agencies might have that EBSA did not--a detailed 
comparison can be found in appendix II. 

Furthermore, we identified statutory obstacles within ERISA that limit 
EBSA's ability to enforce ERISA--the inefficient nature of Section 
502(l) of ERISA and the lack of timely information for investigators 
resulting from annual reporting deadlines. To identify these obstacles, 
we interviewed several former and current EBSA investigators, reviewed 
past GAO and DOL OIG reports on ERISA enforcement, and collected and 
reviewed various documents to corroborate the testimonial evidence 
obtained. Specifically, to determine EBSA's authority to waive a 
penalty that, in certain situations, reduces the amount of assets 
returned to plan participants, we interviewed EBSA investigators and 
other officials that assess and collect the penalty. We also reviewed 
the relevant section of ERISA, which requires the Secretary of Labor to 
assess the penalty under Section 502(l). We obtained and reviewed 
information regarding the number of times the penalty was assessed and 
the total amount collected as a result of the penalty. Finally, we 
obtained and reviewed court decisions that involved the assessment of 
the 502(l) penalty. Furthermore, to determine the timeliness of the 
information--provided on the Form 5500--that EBSA investigators use for 
targeting purposes, we interviewed EBSA investigators and management to 
identify the ways in which 5500 data are used to identify potential 
violations. We also reviewed a past GAO report that thoroughly reviewed 
the Form 5500 and the processes that contribute to the length of time 
between a plan's year end and the time when the information is 
available for use by investigators. Additionally, we obtained and 
reviewed system documentation on the ERISA Data System (EDS)--the 
system that EBSA uses to store and query the 5500 information. Finally, 
we interviewed EBSA personnel that are involved in developing EFAST2, a 
new electronic filing system that will purportedly enable all 5500s to 
be filed electronically for reporting years beginning on or after 
January 1, 2008. 

[End of section] 

Appendix II: Comparison of Selected Federal Agencies' Authorities, 
Enforcement Practices, Results, and Resources: 

The Employee Benefits Security Administration, the Internal Revenue 
Service, and the Securities and Exchange Commission are responsible for 
enforcing laws designed to protect pension plan participants and other 
securities investors. A comparison of the agencies' authorities, 
responsibilities, and enforcement practices shows that EBSA lacks 
certain authorities compared to those of other agencies and uses 
different practices. 

Authorities and Penalties: 

Title I of ERISA provides the Secretary of Labor, through EBSA, the 
authority to investigate and enforce the requirements and standards of 
Title I. Civil penalties of up to $1,100 per day may be assessed for 
certain violations of reporting and disclosure obligations and a 20 
percent penalty on an applicable recovery amount may be assessed 
related to a fiduciary breach. There are a number of fairly 
particularized penalties under ERISA that EBSA can impose. Unlike IRS 
and SEC, EBSA does not have the enforcement authority to disband, 
suspend, or take any effective action against a plan auditor for 
substandard audits of employee benefit plan, because plan auditors are 
not considered fiduciaries under ERISA. 

Title II of ERISA, which amended the Internal Revenue Code (the Code) 
to parallel many of the Title I rules, is administered by IRS. The 
principal responsibility under the Code for IRS is to determine that 
plans meet certain tax qualification requirements as specified in the 
Code. IRS has broad authority to revoke certain tax benefits to plan 
sponsors if they do not meet these requirements. IRS can also assess 
certain penalties for failure to file or furnish certain information 
required to be filed with the agency pertaining to plans. 

SEC, under federal securities laws, has broad authority to enforce and 
regulate the sale of securities and disclosure of information 
concerning these securities. SEC has authority, under its regulations, 
to maintain fair and orderly securities markets and requires specified 
disclosures of corporate financial statements. SEC, through civil 
penalties and fines, may enforce the securities laws to ensure 
compliance and may impose penalties ranging from $5,000 to $500,000 per 
violation, or in some cases the amount of pecuniary gain to the 
defendant as a result of the violation. Also, if SEC finds substandard 
audit work, it has the authority to bar, censure, or suspend auditors 
responsible for such work. 

Regulated industry; 
EBSA: Total employee benefit plans: 3.2 million; Pension plans: 
733,000; Health plans: 2.5 million; 
IRS: Total pension plans: 1.3 million plans; 724,000 (5500 filers); 
221,000 (5500 EZ filers); 353,000 (non-5500 filers); 
SEC: Total registered securities entities: 17,337; Investment advisers: 
9,022; Investment companies:1,002; Broker/dealers: 6,900; Transfer 
agents: 400; Self- regulatory organizations: 11; Clearing agencies: 2. 

Offices with enforcement related responsibilities; 
EBSA: Office of Enforcement (OE); Office of Participant Assistance 
(OPA); Office of the Chief Accountant (OCA); 
IRS: Office of Employee Plans (EP); 
* Examinations; 
* Rulings and Agreements (R&A); 
* Employee Plans Compliance Unit (EPCU); 
SEC: Division of Enforcement; Office of Compliance Inspections and 
Examinations (OCIE); Office of Risk Assessment (ORA). 

Practices; 
EBSA: Responding to participant complaints (OPA); Investigations (OE); 
Voluntary compliance programs (OE, OCA); Reporting and disclosure 
audits (OCA); 
IRS: Establish compliance baselines for risk assessment (Examinations); 
Centralized case selection process (Examinations); Compliance 
examinations (Examinations); "Soft contact" compliance programs (EPCU); 
Voluntary compliance programs (R&A); Determinations (R&A); 
SEC: Investigations (Enforcement); Compliance examination programs 
(OCIE); Formalized risk assessment (ORA). 

Strategic goals; 
EBSA: Enhance pension and health benefit security; 
IRS: Enhance enforcement of the tax law; 
SEC: Enforce compliance with federal securities laws. 

Performance measures; 
EBSA: Ratio of closed civil cases with corrected violations to closed 
civil cases; Ratio of criminal cases referred for prosecution to total 
criminal cases; Applications to voluntary compliance programs; Customer 
satisfaction index; 
IRS: Timeliness; Examination quality; Examination cases closed; EPCU 
compliance contacts; Customer satisfaction; 
SEC: Investment advisers and investment companies examined; Percentage 
of first enforcement cases filed within 2 years; Enforcement cases 
successfully resolved. 

Fiscal year 2005 results; 
EBSA: Plans investigated: 7,752[A]; Civil and criminal investigations 
closed: 3,978; Closed civil cases with corrected violations: 76%; 
Referred criminal cases: 45%; Plans reviewed for violations by OPA: 
19,522; Voluntary compliance applications received: 985; Plans reviewed 
for completeness by OCA: 9,208; Customer satisfaction index: 67%; 
IRS: Examinations closed: 8,230; EPCU compliance contacts: 145[B]; 
Determinations made: 39,864[B]; Voluntary compliance applications: 
1,707[B]; Customer satisfaction for determinations: 61%[B]; Customer 
satisfaction for examinations: 70%[B]; 
SEC: Investment advisers examined: 1,530; Investment companies 
examined: 527; Percentage of first enforcement cases filed within 2 
years: 65%; Enforcement cases successfully resolved: 99%. 

Fiscal year 2005 resources; 
EBSA: 2005 appropriation for ERISA enforcement activities: 
$131,000,000; Number of investigators: 385; Number of benefits 
advisors: 108; 
IRS: 2005 appropriation for Office of Employee Plans: $91,230,910; 
Number of agents for compliance examinations: 389; 
SEC: 2005 appropriation for Division of Enforcement: $316,000,000; 
Number of investigators: 1,102; 2005 appropriation for Office of 
Compliance Inspections and Examinations: $210,000,000; Number of 
examiners for investment advisers and investment companies: 489; Number 
of examiners for broker-sealers and self regulatory organizations: 362. 

Source: EBSA, IRS, and SEC. 

[A] This includes health and pension plans: 

[B] This is as of August 2005: 

[End of table] 

[End of section] 

Appendix III: Comments from Employee Benefits Security Administration: 

U.S. Department of Labor: 
Assistant Secretary for Employee Benefits Security Administration: 
Washington, D.C. 20210: 

December 19, 2006:  

Barbara D. Bovbjerg: 
Director, Education, Workforce, and Income Security Issues: 
United States Government Accountability Office: 
Washington, DC 20548: 

Dear Ms. Bovbjerg: 

We have reviewed the Government Accountability Office's (GAO) draft 
report entitled "Employee Benefits Security Administration: Enforcement 
Improvements Made but Additional Actions Could Further Enhance Pension 
Plan Oversight" (GAO-07-22). This letter provides our general comments 
concerning the draft report; we already have provided technical 
comments directly to your staff. 

Agency Actions Since the 2002 GAO Report: 

We appreciate GAO's recognition of the actions that we have taken since 
your last review in 2002 with respect to increasing coordination among 
our regional investigators[Footnote 27], obtaining increased 
participation in our voluntary correction programs, and recruiting 
investigators with advanced skills. As noted in your report, these 
steps have enabled EBSA to increase its enforcement results from $830 
million in fiscal year 2002 to $1.6 billion in fiscal year 2005. In 
fact, fiscal year 2003 through fiscal year 2006 enforcement results are 
the highest in the Agency's history, averaging 171% higher than the 
preceding four year period from fiscal year 1999 through fiscal year 
2002. 

While we recognize that overall management and oversight can always be 
improved, EBSA has worked diligently to develop an enforcement program 
that strives to maximize results obtained with available resources. As 
GAO recommended in 2002, our Agency carefully reviews and analyzes the 
sources of cases that lead to investigations. This has enabled us to 
more effectively select as investigative targets those plans or other 
entities that are likely to have engaged in violations of ERTSA. We 
also have shared "best practices" among the regions, enabling the 
regions to identify the most productive techniques for selecting and 
conducting investigations. We have conducted baseline studies on the 
level of compliance with ERISA Title I, Part 7, and with our regulation 
on the timely deposit of employee contributions to 401(k) plans. 
Changes in the Voluntary Fiduciary Correction Program (VFCP) have 
removed or lessened barriers to participation, and voluntary 
corrections have increased dramatically. Therefore, our investigative 
staff is able to focus on more complex issues and on those fiduciaries 
who are less willing to correct violations. 

Recommendation No. 1: 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. 

Given the size of the plan universe that the Agency oversees relative 
to its number of investigators, EBSA has focused its available 
resources on investigations that we believe will most likely result in 
the deterrence, detection and correction of ERISA fiduciary violations. 
Your recommendation that we evaluate the usefulness of conducting 
"routine compliance examinations" appears to be premised on the 
assumption that some number of completely random investigations would 
have a significant deterrent effect and could better enable us to 
identify emerging areas of noncompliance. 

Deterring violations: 

We agree that deterring violations is critical; it is so important that 
it forms part of our agency's mission statement. However, we disagree 
with the premise that investigating randomly-selected plans would have 
a greater deterrent effect than our current efforts. Given the size of 
the plan universe, and the remote likelihood that a particular plan 
would be randomly selected for investigation, a program of routine 
compliance examinations could well have the opposite effect. Plan 
fiduciaries might take more risks with plan assets, knowing that, under 
a random selection, their plan was unlikely to be investigated. 

Instead of trying to create a deterrent effect through routine 
compliance examinations, we try to create that effect through strategic 
deployment of our available investigative resources. Our regional 
directors are required, as part of our strategic plan, to establish an 
enforcement program that creates a visible EBSA presence throughout 
each region, pursuant to national priorities, regional priorities, and 
individually selected cases. We also try to create a deterrent effect 
by publicizing the results of investigations that are resolved through 
litigation. In addition, we try to prevent violations through the 
compliance assistance components of our outreach, education, and 
assistance program. 

Identifying emerging areas of noncompliance: 

Your report suggests that routine compliance examinations could enable 
EBSA to identify emerging areas of noncompliance. In past years, we 
conducted routine compliance examinations as a regular part of our 
investigative program. However, this resulted in a low percentage of 
cases with violations found and corrected, with no discemable deterrent 
effect. Therefore, we began to target plans or other entities with a 
high likelihood of having violated ERISA. 

Targeting is done through a variety of techniques, many of which you 
identified in your report. Investigations are now opened mainly as a 
result of different targeting methods, including specified projects 
(both regional and national), analyses of Form 5500s, referrals from 
other agencies, and participant complaints. We believe that these 
methods of selecting cases have been very successful, and have enabled 
us to fully meet the GPRA goals by which the Department and OMB measure 
the success of our enforcement program. The percentage of 
investigations with violations corrected has steadily increased over 
the years. In fiscal year 2005, over 75% of our civil cases closed 
resulted in corrected violations and approximately 45% of our criminal 
cases were referred for prosecution. 

It should be noted that all investigations include a review of general 
records, such as the plan document, financial statements, claims 
procedures (for health plans), timing of contributions (when there are 
participant contributions), and the like. Therefore, even if an 
investigation initially focuses on a specific issue, every plan 
investigated does get an overall review. This approach enables us to 
identify emerging areas of noncompliance and is aimed at achieving our 
goal of protecting the pensions of workers' and their families. 

You correctly identified participant complaints as a significant source 
of investigations, and they certainly assist us in our risk assessment 
activities. As participants become more computer savvy, and their 
pension and health insurance information becomes more available 
electronically, participants are able to identify problems such as 
delinquent contributions almost immediately. We also receive valuable 
information from employee benefits professionals. Investigators, 
supervisors, and managers, both in the field and in the national 
office, regularly attend industry events. This gives EBSA staff the 
opportunity to speak with professionals, and these professionals will 
often identify potential problems within their particular field. In 
fact, many of our employees' performance standards require that they 
keep abreast of changes in the industry. In addition, when we conduct 
our annual evaluation of our enforcement strategy, we incorporate 
information concerning trends in the economy, such as the rate of 
employer bankruptcies; findings by other agencies, such as the SEC's 
Pension Consultant Project; and Departmental policy concerns. 

Dedicating staff to risk assessment: 

While we have not formally labeled it as a "risk assessment program," 
EBSA has a process in place for administering our enforcement program 
which has many of the same characteristics as the specific risk 
assessment process described in the draft report. 

On the national level, we identify broad topic areas where we believe 
plan participants and beneficiaries are most susceptible to actual loss 
of benefits. Long-tern policy goals are articulated in the Strategic 
Enforcement Plan (StEP); the three current investigative priorities, 
designed to protect at-risk populations, are plan service providers, 
health care plans, and defined contribution pension plans. Once the 
broad framework has been established, initiatives are developed to 
support these priorities. There are two types of initiatives: national 
projects, which are directly based on the StEP goals; and regional 
projects, which are localized investigative projects undertaken by 
individual EBSA regional offices. These regional initiatives may focus 
on a narrower part of an existing StEP goal or may explore a new area 
where benefit plans may be at risk. In addition, regions conduct 
investigations that are not part of an existing national or regional 
initiative, based on case selection guidance issued by the Office of 
Enforcement. This guidance directs the regions to target cases 
throughout their geographic areas, to concentrate on larger plans, and 
to target a variety of ERISA issues. In this manner, EBSA 
systematically draws upon the talents of its investigators and managers 
to evaluate and analyze areas of risk in the employee benefits field, 
integrating their professional judgment and considerable experience 
into our enforcement program planning and management process. 

In each annual planning cycle, the information developed through 
investigations is analyzed at both the regional and national levels, 
and is used to develop new initiatives and/or investigative priorities. 
If a region finds enough cases with a similar compliance problem, the 
region may decide to conduct a regional initiative on that issue. 
Similarly, if more than one region finds a high rate of noncompliance 
in similar regional initiatives, or if a single regional initiative 
finds a high rate of noncompliance on an issue that is likely to affect 
plans nationwide, the Agency may decide to develop a new national 
initiative. In addition, information developed through the enforcement 
program has pointed out the need for new regulations. It is also used 
to help prioritize the development of compliance assistance workshops 
and publications. In short, the enforcement program has a systematic 
and integrated approach toward identifying at-risk populations, 
developing initiatives to address those risks at both the national and 
regional levels, providing a structured way for investigators and field 
managers to identify new and emerging risks, and incorporating these 
findings into not only the strategic plans for the enforcement program, 
but also the strategic plans for the whole Agency. 

We agree that we should continue to evaluate our enforcement practices 
on an ongoing basis. Identifying successful practices used by similar 
enforcement agencies would, of course, be helpful. However, although 
you recommended conducting routine compliance examinations and 
dedicating staff for risk assessment, as is done in certain other 
agencies, we note that GAO ". . . did not evaluate the effectiveness of 
these agencies' compliance examination, enforcement, or risk assessment 
programs." (Page 32) The draft report mentions that (1) the IRS will 
not complete its first round of benchmark assessments until 2007, (2) 
the SEC program also is fairly new, and (3) while "IRS officials said 
that they believe that their [routine compliance examinations] program 
deters violations from occurring. . .", no evidence of such a deterrent 
value is presented. (Page 22) As these programs have not been fully 
evaluated and their effectiveness has not been determined, we are 
concerned that a recommendation to copy one of these models is 
premature, given the diversion of investigative resources it would 
require. 

However, we will work to identify successful, proven risk assessment 
practices in other enforcement agencies and determine if they can be 
integrated into EBSA's enforcement program. 

Recommendation No. 2: 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. 

As you noted, ERISA's filing deadlines are established by statute. 
Congress has amended ERISA many times since 1974 and has not changed 
these deadlines. Most recently, in enacting the Pension Protection Act 
of 2006, Congress made some changes to filing requirements but left the 
basic deadlines as they were. You noted in the report GAO-05-491, 
Private Pensions, that the "current statutory filing requirements are . 
intertwined with other statutory deadlines relating to private pension 
plans," including the date that final contributions for minimum funding 
purposes (defined benefit plans) can be made, which is 30 days before 
the final date the 5500 can be filed. (Pages 21-22) GAO spoke with 
service providers and plans sponsor representatives who expressed their 
view that the current statutory time frame (210 days after the end of 
the plan year) is necessary. 

As noted in your report, EBSA is working on decreasing the time to 
process Form 5500s. We have requested funding for an updated electronic 
filing system-known as EFAST2-which would greatly reduce the processing 
time. In addition, EBSA will require the electronic filing of Form 5500 
beginning with the 2008 filing cycle. We believe these new requirements 
and system features will provide our investigators with more timely 
data. 

We will adopt your recommendation and undertake a review of a sample of 
cases opened on Form 5500 information. We will attempt to determine 
whether the outcome of these cases would have been impacted by an 
earlier filing of the Form 5500. 

Recommendation No. 3: Establish, where appropriate, formal SEC 
coordination groups in the regional offices, similar to those already 
in place in some EBSA regions. 

All EBSA field offices have contact with the SEC. As we understand it, 
the securities laws limit the ability of the SEC to disclose 
investigative information to other enforcement agencies, including 
EBSA. However, we have worked with the SEC staff to put in place a 
formal system under which they can disclose and we can obtain 
information from the SEC's investigative files. We have effective 
coordination with the SEC at the national level. For example, EBSA and 
the SEC jointly issued the compliance assistance tool, "Selecting and 
Monitoring Pension Consultants - Tips for Plan Fiduciaries." We also 
coordinated with the SEC regarding their findings under the Pension 
Consultants Project. The SEC shared their investigative files to assist 
us with our investigations of selected pension consultants. Over the 
years, the SEC has provided us with a number of leads, some of which 
have led to investigations and monetary results. 

EBSA has formed successful relationships with several other 
governmental agencies, such as the federal financial institutions 
regulatory agencies, state insurance commissioners, and local 
prosecutors. We fully recognize the importance of establishing 
effective working relationships with other agencies, and will continue 
to do so. Accordingly, we agree with the recommendation and will 
continue to work with our colleagues at the SEC to put into place 
regional coordination groups. 

Recommendation No. 4: 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. 

EBSA employees are among the most highly educated within DOL. Our 
investigators have wide-ranging skills and backgrounds, which are 
needed for the diverse plans we investigate. Although we would like to 
retain all of our highly skilled staff, some attrition is inevitable 
given the wages private sector employers offer for these specialized 
skills. EBSA's attrition rates for 2001-2004 are generally lower than 
the comparative groups. We do agree that there has been an increase in 
the rates for the past two years. Because we would like to retain our 
highly-qualified investigators, the EBSA Office of Program Planning, 
Evaluation and Management will further evaluate staff attrition in the 
enforcement program to identify trends and potentially contributing 
factors. 

We have implemented a number of recruiting initiatives, such as 
offering both undergraduate and graduate students the opportunity to 
work for EBSA while attending school. This program is successful in 
helping us find talented new employees. However, the inclusion of these 
persons hired under the student temporary employment program in Table 4 
on page 19 makes our overall attrition rate appear higher than is the 
case for our career employees. In addition, the tables do not include 
the GS-511 auditors, who have the same function as our investigators. 
If these figures were revised, we believe the numbers would show a 
lower and more accurate attrition rate. 

Conclusion: 

The Employee Benefits Security Administration is dedicated to 
protecting the employer-provided benefits of American workers, 
retirees, and their families. We will continue to improve our 
enforcement program to deter, detect and correct violations of ERISA. 
We appreciate having bad the opportunity to review and comment on this 
draft report. Please do not hesitate to contact us if you have 
questions concerning this response or if we can be of further 
assistance. 

Sincerely, 

Signed by:  

Bradford P. Campbell: 
Acting Assistant Secretary: 

[End of section] 

Appendix IV: Comments from Securities and Exchange Commission: 

United States Securities And Exchange Commission: 
Washington, D.C. 20549: 

Division of Enforcement: 
Linda Chatman Thomsen: 
Director: 
(202) 551-4894: 
(202) 772-9279 (fax): 
thomsenl@Sec.gov: 

December 13, 2006: 

Barbara D. Bovbjerg: 
Director: 
Education, Workforce, and Income Security Issues: 
U.S. Government Accountability Office: 
441 G Street, N. W. 
Washington, DC 20548: 

Re: GAO Report Entitled "Employee Benefits Security Administration: 
Enforcement Improvements Made but Additional Actions Could Further 
Enhance Pension Plan Oversight" (GAO-07-22), dated January 2007: 

Dear Ms. Bovbjerg: 

Thank you for sharing with us a copy of the Government Accountability 
Office's report entitled "Employee Benefits Security Administration: 
Enforcement Improvements Made but Additional Actions Could Further 
Enhance Pension Plan Oversight" (GAO-07-22), dated January 2007. We 
were glad to assist GAO by meeting with your staff and providing 
information in connection with the preparation of the report. 

While none of the recommendations in the report apply directly to the 
SEC, GAO recommends that the Secretary of Labor direct the Assistant 
Secretary of Labor, Employee Benefits Security Administration (EBSA), 
to direct EBSA's Office of Enforcement to establish, where appropriate, 
formal SEC coordination groups in the regional offices, similar to 
those already in place in some EBSA regions. We have enjoyed a 
collegial and cooperative relationship with EBSA in the past, and look 
forward to continuing and developing that relationship through the 
establishment of these groups. 

If I can be of any further assistance, please contact me or have your 
staff contact Joan McKown, Chief Counsel, who can be reached at 202- 
551-4933. 

Sincerely, 

Signed. 

[End of section] 

Appendix V: GAO Contacts and Acknowledgments: 

GAO Contact: 

Barbara D. Bovbjerg, (202) 512-7215: 

Acknowledgments: 

The following team members made key contributions to this report: David 
Lehrer, Assistant Director; Jason Holsclaw; David Eisenstadt; Joe 
Applebaum; Kevin Averyt; Susan Bernstein; Sharon Hermes; Annamarie 
Lopata; Jean McSween; Michael Morris; Lisa Reynolds; Roger Thomas; 
Dayna Shah; and Gregory Wilmoth. 

[End of section] 

Related GAO Products: 

Mutual Fund Industry: SEC's Revised Examination Approach Offers 
Potential Benefits, but Significant Oversight Challenges Remain. GAO- 
05-415 (Washington, D.C.: August 2005). 

Private Pensions: Government Actions Could Improve the Timeliness and 
Content of Form 5500 Pension Information. GAO-05-491 (Washington, D.C.: 
June 2005). 

Employee Benefits Security Administration: Improvements Have Been Made 
to Pension Enforcement Program but Significant Challenges Remain. GAO- 
05-784T (Washington, D.C.: June 2005). 

Mutual Fund Trading Abuses: Lessons Can Be Learned from SEC Not Having 
Detected Violations at an Earlier Stage. GAO-05-313 (Washington, D.C.: 
April 2005). 

Securities and Exchange Commission Human Capital Survey. GAO-05-118R 
(Washington, D.C.: November 2004). 

Pension Plans: Additional Transparency and Other Actions Needed in 
Connection with Proxy Voting. GAO-04-749 (Washington, D.C.: August 
2004). 

Mutual Funds: Additional Disclosures Could Increase Transparency of 
Fees and Other Practices. GAO-04-317T (Washington, D.C.: January 2004). 

Answers to Key Questions about Private Pension Plans. GAO-02-745SP 
(Washington, D.C.: September 2002). 

Private Pensions: IRS Can Improve the Quality and Usefulness of 
Compliance Studies. GAO-02-353 (Washington, D.C.: April 2002). 

Pension and Welfare Benefits Administration: Opportunities Exist for 
Improving Management of the Enforcement Program. GAO-02-232 
(Washington, D.C.: March 2002). 

Securities and Exchange Commission: Human Capital Challenges Require 
Management Attention. GAO-01-947 (Washington, D.C.: September 2001). 

Financial Services Regulators: Better Information Sharing Could Reduce 
Fraud. GAO-01-478T (Washington, D.C.: March 2001): 

FOOTNOTES 

[1] GAO, Pension and Welfare Benefits Administration: Opportunities 
Exist for Improving Management of the Enforcement Program, GAO-02-232 
(Washington, D.C.: March 2002). 

[2] GAO, Employee Benefits Security Administration: Improvements Have 
Been Made to Pension Enforcement Program but Significant Challenges 
Remain, GAO-05-784T (Washington, D.C.: June 9, 2005). 

[3] Defined benefit pension plans commonly provide a guaranteed monthly 
benefit based on a formula that considers salary and years of service 
to a company. Under defined contribution plans, employees have 
individual accounts to which an employer, an employee, or both can make 
periodic contributions. Defined contribution plan benefits are based on 
contributions and investment returns (gains and losses). 

[4] To achieve tax benefits, referred to as tax qualified status, plans 
must comply with a number of requirements in the Internal Revenue Code 
governing the provisions of contributions and benefits. ERISA also 
includes minimum standards for how employees become eligible to 
participate in pension plans (participation standards), how employees 
earn a nonforfeitable right to their benefits (vesting standards), and 
how the plans are to be funded (funding provisions). 

[5] EBSA also has responsibility for also overseeing other welfare 
plans, such as those plans established to provide vacation benefits or 
child care services. However, welfare plans with fewer than 100 
participants that are fully insured or otherwise unfunded (hold no 
assets in trust) are not required to file annual reports, so estimates 
must be made based on surveys. As of July 2006, EBSA could not provide 
GAO with an estimate of the total number of these plans, because it had 
not yet completed an updated survey of such plans. In past years, EBSA 
has estimated the number of health and other welfare plans at 6 million 
plans. 

[6] IRS's responsibility centers on plans covered by Internal Revenue 
Code Section 401(a). EBSA shares some responsibility for the same 
plans; focusing on fiduciary responsibility and prohibited 
transactions. 

[7] As of January 31, 2006, EBSA reported that it employed 108 benefits 
advisers in the field and the National Office of Participant 
Assistance. These positions are generally responsible for responding to 
participant complaints and inquiries as well as providing education and 
outreach to participants and the regulated community. 

[8] We did not independently verify whether the amount reported as a 
recovery by EBSA was actually restored to the respective employee 
benefit plans and participants. 

[9] The Office of the Chief Accountant comprises three divisions: the 
Division of Accounting Services, the Division of Reporting and 
Compliance, and the Division of Federal Employees' Retirement Income 
Security Act of 1986 Compliance. 

[10] To be eligible for the SCEP, students must be enrolled or accepted 
for enrollment in a program of study leading to a degree, diploma, or 
certificate at an accredited high school, technical or vocational 
school, 2-or 4-year college or university, or graduate or professional 
school. 

[11] Part 7 of ERISA includes requirements on group health plan 
portability, access, and renewability, including limitations on the use 
of preexisting condition exclusions based on health status. 

[12] The U.S. Office of Management and Budget assists the President in 
overseeing the preparation of the federal budget and supervising its 
administration of executive branch agencies. Furthermore, the agency 
evaluates the effectiveness of agency programs, policies, and 
procedures; assesses competing funding demands among agencies; and sets 
funding priorities. 

[13] GAO-05-784T. 

[14] SEC personnel are prohibited from disclosing information obtained 
as a result of an examination or investigation without the approval of 
senior management at the SEC acting pursuant to delegated authority of 
the SEC. 

[15] In prior fiscal years, the following number of investigators left 
EBSA for various reasons including retirement, resignations, and 
terminations: 45 ('00) 26 ('01), 13 ('02), 14 ('03), and 23 ('04). 

[16] ERISA requires that most pension plan sponsors file an annual 
report called the Form 5500, which is a major source of information 
about the plan and provides a key compliance tool for identifying and 
targeting potential violations. The 5500 is the primary source of 
detailed pension plan information and is used by EBSA, IRS, and PBGC 
for compliance, research, and public disclosure purposes. Information 
collected on the form includes basic plan identifying information as 
well as detailed plan information, including assets, liabilities, 
insurance and financial transactions, audited financial statements, and 
for defined benefit plans, an actuarial statement. 

[17] An excise tax applies to certain types of distributions from 
qualified plans. According to IRS, about 16,000 plans owed excise taxes 
totaling roughly $129 million for various violations, including failure 
to meet certain funding standards, excess fringe benefits, and failure 
to protect liquidity shortfalls between December 2004 and November 
2005. 

[18] SEC's examination program includes three main types of 
examinations--cause, routine, and sweep. Cause examinations are 
initiated for a specific reason, such as an investor complaint of an 
alleged violation. Routine examinations, compliance examinations 
initiated on a risk-based cycle, are the most common. SEC conducts 
sweep examinations, which focus on specific industry issues rather than 
a specific registrant, to examine specific risk areas. 

[19] An employee stock ownership plan is a retirement plan into which 
the company contributes its stock for the benefit of the company's 
employees. With such plans, employees do not buy or hold the stock 
directly. 

[20] U.S. Securities and Exchange Commission. Staff Report Concerning 
Examinations of Select Pension Consultants (Washington, D.C.: May 16, 
2005). 

[21] EBSA can also seek removal of a fiduciary for breaches of 
fiduciary duty or seek other sanctions. 

[22] The Secretary of Labor may waive or reduce the penalty if: (1) the 
fiduciary or other person acted reasonably and in good faith, or (2) 
because of severe financial hardship. 

[23] A plan has 210 days from the end of the plan year to file the 
5500, and plans may apply for an extension of an additional 2½ months. 

[24] GAO, Private Pensions: Government Actions Could Improve the 
Timeliness and Content of Form 5500 Pension Information, GAO-05-491 
(Washington, D.C.: June 2005). 

[25] GAO. Internal Control Management and Evaluation Tool. GAO-01-1008G 
(Washington, D.C.: August 2001). 

[26] GAO, OPM's Central Personnel Data File: Data Appear Sufficiently 
Reliable to Meet Most Customer Needs, GAO/GGD-98199 (Washington, D.C.: 
Sep. 30, 1995). 

[27] Whenever the term "investigators" is used, it also includes GS-511 
auditors who perform the same functions. 

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