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What to Expect from an Employee Benefits Security Administration (EBSA) Audit Sherry Brackney Senior Benefits Advisor Cincinnati Regional Office The views expressed are those of the speaker & do not necessarily represent the official position of the Department of Labor

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Page 1: What to Expect from an Employee Benefits Security ...indianabenefitsconference.org/uploads/IBC_EBSA...What to Expect from an Employee Benefits Security Administration (EBSA) Audit

What to Expect from an

Employee Benefits Security

Administration (EBSA) Audit

Sherry Brackney

Senior Benefits Advisor

Cincinnati Regional Office

The views expressed are those of the speaker & do not necessarily

represent the official position of the Department of Labor

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National Projects (FY 09)

Contributory Plan Criminal Project (CPCP)

Rapid ERISA Action Team (REACT)

Employee Stock Ownership Plans (ESOPs)

Consultant/Advisor Project (CAP)

Health Benefit Security Project (HBSP)

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NATIONAL OFFICE

PROJECTS

CPCP

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CPCP

Untimely Contributions Continue to be a

Problem

Prior National Project focus

New Focus

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NATIONAL OFFICE PROJECTS

REACT

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REACT

Employer sponsors can go bankrupt

(or face severe financial distress)

Plans often suffer during this period

Bankruptcy filing may seek to

»continue the business (Ch. 11) – or -

»cease operations (Ch. 7)

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CONSULTANT ADVISOR

PROGRAM (CAP)

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CAP Focus

– Receipt of Improper, undisclosed compensation

by pension consultants & other investment

advisers.

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HEALTH BENEFIT SECURITY

PROJECT

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MEWAs

PLAN OR ARRANGEMENT WITH TWO OR MORE EMPLOYERS

MANY MEWAs PROMISE MORE THAN THEY CAN DELIVER

FUNDING PROBLEMS ARISE

– EXCESSIVE FEES OR THEFT?

RESERVES BECOME DEPLETED

CLAIMS ARE NOT PAID

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MEWA ENFORCEMENT

RESULTS

522 Civil Investigations

90 Criminal Investigations

$121.6 Million in Monetary Violations

84 Indictments

70 Convictions

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What to Expect from an

Employee Benefits Security Administration

(EBSA) Audit

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Sources of Cases

Participant complaints

Form 5500 Reviews

Referrals from other agencies

Media

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Civil Plan Investigations

Start with phone call from Investigator / Auditor

Followed by confirmation letter

» Date & time of visit

» Plan(s) to be reviewed

» Records / documents needed

– Varies depending on issue

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Onsite Investigative Work

Interviews with key personnel and plan fiduciaries

Basic operations / services

» Contributions

» Benefit payments

» Expenses

» Investments

Identification of

» Service providers

» Record-keeper(s)

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Basic Documents

Plan Document/ Trust Agreement

Form 5500 filings (past 3 years)

SPD

SAR for last year

Fidelity Bond

Fiduciary Insurance Policy

Trustee Statements (past 3 years) (asset records)

Service Provider Contracts

Meeting Minutes

Benefit Statements

Asset records

Payroll/contribution records

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Investigative Emphasis

Reporting Requirements » Annual Report (Form 5500)

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Investigative Emphasis

Disclosure Requirements

– Summary Plan Descriptions (SPDs)

– Summary of Material Modifications (SMM)

– Summary Annual Reports (SARs)

– “Blackout” Notices

– COBRA Notices / HIPAA Certificates & more

– Provide documents on request

– Participant Benefit Statements

» Field Assistance Bulletin 2006-03

» Field Assistance Bulletin 2007-03

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Investigative Emphasis

Bonding

– 10% of Funds Handled – not less than $1,000

nor more than $500,000 ($1,000,000 for plans

with employer securities)

– No deductible

– Plan should be named as insured

– Discovery Period of no less than one year after

termination or cancellation of bond is required

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Investigative Emphasis

Fiduciary duties

Contribution remittance

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Concluding the Investigation

Depends on any problems identified

If no problems are noted, closing letter

If problems are noted,

corrective actions are necessary

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Needing Correction

Usually, EBSA will send “Notice Letter”

» Identifies problems

» Offers chance to discuss correction

EBSA encourages Voluntary Compliance

Proper Correction >> “Closing Letter”

» Identifies problems & corrective actions

No Correction >> referral to the Solicitor’s Office

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Needing Correction

Depending upon the circumstances, EBSA may seek

» Correction of prohibited transactions

» Restoration of losses

» Penalties

» Removal of fiduciaries

» Removal of service providers

» Appointment of independent fiduciary

» Implementation of new internal controls

» Supplemental distributions to Ps & Bs

» Final accounting

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IRS Referrals

IRS Coordination Agreement and Statute requires:

– referral of prohibited transactions to IRS

» IRC 4975 excise tax

(tax qualified pension plans)

– referral of potential issues affecting

tax qualified status

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Criminal Referrals

Under some circumstances,

criminal referrals may be made

» Theft / embezzlement

» Kickbacks / bribes

» False statements to investigators

» Willful failures to file / false filings

» Health care fraud

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Allows “Plan Officials” to correct certain

violations before DOL investigates and if

done properly, receive a “No-Action” letter

from the Department.

What is the VFC Program?

DOL

NO ACTION DOL “You fixed it”

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DELINQUENT FILER

VOLUNTARY COMPLIANCE

PROGRAM (DFVCP)

Page 28: What to Expect from an Employee Benefits Security ...indianabenefitsconference.org/uploads/IBC_EBSA...What to Expect from an Employee Benefits Security Administration (EBSA) Audit

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