department of labor update: investigation preparation › resources › documents ›...

LOCKTON RETIREMENT SERVICES

Department of Labor Update: Investigation Preparation Samuel A. Henson, J.D.—Senior ERISA Counsel

2

ERISA is Complex

Simple WP&BC SF Spring Conference • May 17, 2012

3

The “DOL”

WP&BC SF Spring Conference • May 17, 2012

4

DOL Field Offices


5

Our Goals Today

Why would the DOL investigate you?

What can you expect?

How can you prepare?


6

Who Does the DOL Examine?

Single Employer

Multi-Employer

Defined Benefit

Defined Contribution

Some 403b and 457 Plans

Welfare Plans


7

“Audit vs. Investigation”

A DOL “examination” may be referred to as:

Audit or Investigation

Your investigator or auditor may have a different expertise:

JD, CPA, or MBA


8

What Causes a DOL Examination?

No DOL Investigation is Random


9

Four Ways to Trigger an Investigation

Annual Report Form 5500 Red Flags and Questions

Participant Complaint

Service Provider Referral

DOL Targeting Initiatives


10

Annual Report Red Flags

Partnership/Joint Venture Interests

Administrative Expenses

Employer Securities

Personal Property

Real Property

Real Estate

Loans

“Other”


11

Compliance Questions


12

Service Provider Referrals

ERISA Co-Fiduciary Liability:

Knowing participation or concealment

Enabling a breach to occur

No reasonable steps taken to remedy situation


13

DOL Targeting Initiatives

Consultant Advisor Project

Health Benefits Security Project (MEWA Fraud)

Health Disclosures and Claims Issues

Settlor Fees Project

Employee Contributions Project

Recidivism

Abandoned Plans

Apprenticeship Plans WP&BC SF Spring Conference • May 17, 2012

14

The Investigation

Stage 1—Appointment Letter

Stage 2—On-site Investigation

Stage 3—Compliance


15

Stage 1—The Appointment Letter

A Few Tips:

v  Audit period is three years (maximum of six)

v  Photo copies only

v  Request receipt

v Organize to the appointment letter


18

Stage 2—The On-site Investigation

A Few Tips:

v Where to conduct it

v Who should be available

v How long will it take

v  ERISA Counsel


19

What Not To Expect . . .


20

What To Expect . . .


21

If Two Investigators Show Up . . .

Ask why?

Ask if this is a criminal investigation?

Cease voluntary cooperation.

Immediately seek counsel.


22

Areas of Scrutiny

Corporate Governance/Plan Administration

Disclosure

Reporting

Bonding

Funding

Investment Selection/Monitoring/Fees

Service Providers Selection/Monitoring

Participant Loans

Contribution Testing


What The DOL Is Really Looking For . . .

Violations

Monetary Recovery

Criminal Cases


24

Stage 3—Compliance

Voluntary Compliance Letter (VCL)

Response

Negotiation

Action

Closing


25

Potential Penalties

Civil penalty for fiduciary breach 20% of the amount recovered

The DOL may waive the penalty for financial hardship or acting in good faith

Only issue penalties for:

Civil litigation

Formal settlements

Repeat offenders

Egregious situations


26

The IRS’ Role

DOL will refer to the IRS.

IRS will assess an excise tax.


27

Learn From the Experience

Examine your administrative practices.

Incorporate the DOL’s findings.

Don’t repeat mistakes.

Document your decisions, actions, and considerations.

Improve record keeping and retention.

Learn to “investigate” yourself.


28

Remember

Why the DOL investigates . . .

What the process involves . . .

Prepare yourself . . .


29

Questions?

Samuel A. Henson, J.D.

Senior ERISA Counsel

Lockton Retirement Services

444 W 47th St., Suite 900

Kansas City, MO 64112

Tel: 816-751-2245

Mobile: 816-876-0159

E-mail: [email protected]


department of labor update: investigation preparation › resources › documents ›...

Documents