1. DOL - Employee Benefits Security Administration (EBSA) Investigations
Klaus Placke
Acting Regional Director
San Francisco Regional Office

2. Disclaimer
This presentation may contain opinions of the presenter that may not comport with the official views of the U.S. Department of Labor and is meant for educational purposes only.

3. National Office Regional Offices EBSA - Structure
Establishes policy and agency protocols
Oversight of reporting and disclosure requirements
Drafts regulations and interpretive guidance
Conducts economic research to determine impact of policy and regulations on regulated community
Conducts outreach such as the Health Benefits Education Campaign
National Office
Conduct investigations of ERISA plans
Provide compliance assistance through Benefit Advisors
Conduct outreach to plan sponsors and other stakeholders
Regional Offices

4. EBSA Regional Offices

5. EBSA’s Mission Statement
The mission of the Employee Benefits Security Administration is to assure the security of the retirement, health and other workplace related benefits of America’s workers and their families. We will accomplish this mission by:
developing effective regulations;
assisting and educating workers, plan sponsors, fiduciaries and service providers; and
vigorously enforcing the law.

6. National Enforcement Projects (FY 18)
Contributory Plans Criminal Project
Employee Stock Ownership Plans
Health Enforcement Initiatives
Plan Investments Conflicts Project
Protecting Benefits Distribution Project

7. Types of Investigations
Investigations may be civil or criminal in nature and may focus on:
The Employee Benefit Plan
The Plan Sponsor
A Service provider
An Individual

8. General Process for Civil Plan Investigations
Case Opening Letter
Document Review
Interviews
Voluntary Compliance Letter
Correction
Closing Letter

9. Basic Documents Other Plan Records Plan Document/ Trust Agreement
Summary Plan Description
Summary Annual Report
Individual Benefit statements
Fidelity bond
Custodian/investment statements
Payroll/contribution records
Service provider contracts
Meeting minutes
Auditor’s report
Participant census
Distribution records
Health claims
Communications
Invoices, checks, and other source documentation for transactions

10. A Fiduciary is any person:
Common fiduciaries include trustees and plan administrators.
However, one does not need to hold a particular title to be deemed a fiduciary.
Named as a plan fiduciary in plan documents -or- who:
Exercises discretionary authority or control over plan management - or -
Exercises authority or control over plan assets - or -
Provides investment advice for compensation (direct or indirect)

11. Fiduciary Responsibilities under ERISA 404
Tips:
Know your duties under the governing plan instruments.
If you don’t have sufficient expertise to operate a plan, hire competent service providers to assist you.
A Fiduciary must
Act “solely in interest” of Ps & Bs
Discharge his / her / its duties prudently
(care, skill, prudence and diligence)
Diversify plan investments
Follow terms of governing documents

12. Fiduciary Responsibilities under ERISA 406(a)
Who is a Party in Interest to the plan?
Plan Fiduciaries and their relatives
Service Providers
Sponsoring Employer
Union
Certain owners, officers, employees, and related companies of the above.
A Fiduciary must NOT cause the Plan to engage in a “prohibited transaction”
Sale / exchange with party in interest (PII)
Loan / extension of credit with PII
Goods, services & facilities with PII
Transfer to, use by or for the benefit of a PII

13. Fiduciary Responsibilities under ERISA 406(b)
Tip:
Keep Company business separate from Plan business!
A Fiduciary must NOT
act in his / her own self interest
act on behalf of a party with adverse interests
accept “gratuity” from those doing business w/ the Plan (kickback)
While there are exemptions available for certain prohibited transactions under 406(a), there are no exemptions for self-dealing under 406(b).

14. Examples of Fiduciary Violations in Retirement Plans
Plan abandonment
Failure to process and pay distributions
Loans to plan sponsor
Imprudent investments – lack of due diligence in selecting, valuing & monitoring
Unreasonable or unnecessary fees
Plan property not titled in the name of Plan
Failure to timely remit contributions
Lack of prudent process to find missing participants

15. Examples of Violations in Group Health Plans
Systemic denial of promised benefits
Failure to properly adjudicate claims or provide for a full and fair review of denied claims
Failure to apply employee contributions to the payment of claims or insurance premiums
Failure to warn participants of funding problems or cancellation of benefits, resulting in unpaid claims
Excessive service provider fees
Failure to provide mental health benefits in parity with medical/surgical benefits

16. Voluntary Compliance Process
Tips:
Clarify any facts and provide supporting documentation.
Be specific about the proposed corrective actions and the timeline for completion.
Know that EBSA will generally not bargain away participants’ rights to their full benefits.
EBSA’s Voluntary Compliance / Notice Letter
Summarizes factual findings
Asserts violations and the resulting loss or harm
Identifies breaching fiduciaries
Invites fiduciaries to discuss how violations may be corrected
Asks for written reply
States that legal action is possible if corrective action is not taken
Voluntary Compliance Discussions
EBSA representatives and Plan fiduciaries (or their legal counsel) may enter into discussions to:
Resolve disputes over facts and liability, if any
Finalize loss calculations, including lost opportunity costs
Determine how and when losses will be restored
Clarify what type of proof of correction is needed
Discuss prospective corrections to prevent future violations

17. Co-fiduciary Liability: Fiduciary A can also be held personally liable for losses resulting from a breach by Fiduciary B
if A’s failure(s) allowed B to breach
if A knowingly participated in or knowingly concealed B’s breach
if A knows about B’s breach and fails to make reasonable efforts to correct B’s breach
Fiduciaries can be held personally liable for losses resulting from a fiduciary breach
Tip: If you become aware of a problem (whether or not you caused it), take action to get it fixed!

18. Possible Remedies (depending on the circumstances)
Goals:
Put plan and its participants in the same position they would have been in had the breach not occurred; and ensure plan is administered prudently on a going forward basis.
Reversal of prohibited transactions
Restoration of losses, including lost opportunity costs
Disgorgement of profits
Implementation of new internal controls
Paying unpaid benefits
Re-adjudication of claims
Payment of Plan’s administrative costs and expenses
Removal of fiduciaries
Appointment of independent fiduciary
Notification to P’s and B’s of the correction

19. Other Enforcement Actions
Tip:
Voluntary compliance is the favorable way to resolve a civil case.
If resolved through a settlement agreement or court order, there is a mandatory Civil Penalty imposed under ERISA 502(l), which is 20% of the “applicable recovery amount”.
EBSA may seek to enter into a settlement agreement with breaching fiduciaries to resolve the case.
If fiduciary is unwilling or unable to fully correct, EBSA refers the case to the Solicitor’s Office for litigation.
By statute, EBSA must refer prohibited transactions (whether or not corrected) to the IRS.
EBSA’s Office of Chief Accountant may take further action on Form 5500 reporting violations.
If the case involves fraud or embezzlement, EBSA will open a separate criminal investigation and refer the case to the U.S. Attorney’s Office for prosecution.