What You Need to Know
- With fewer than 1,000 employees, EBSA oversees benefit plans with 154 million participants.
- EBSA has refocused its enforcement efforts on the biggest cases.
- Finding missing participants in retirement plans will remain a long-term challenge and may require more resources, GAO says..
The COVID-19 pandemic created “immediate and long-term challenges” for the Labor Department’s Employee Benefits Security Administration, which enforces Title 1 of the Employee Retirement Income Security Act, or ERISA — namely, closed courts temporarily slowing criminal cases, as well as difficulty locating “missing participants” who have left retirement funds behind when exiting jobs.
Those are just some of the findings in a new report by the Government Accountability Office. The GAO found that as virtual hearings increased, litigation resumed, but finding missing participants would remain a long-term challenge and may require more investigative resources.
EBSA has also refocused its enforcement efforts on “major cases,” GAO found.
EBSA is charged with protecting the rights of participants in employer-sponsored benefit plans and enforcing Title 1 of ERISA. As of fiscal 2020, GAO said, this included about 154 million participants in 722,000 retirement plans and 2.5 million health plans with combined assets of over $10.7 trillion.
The architect of the fiduciary prohibited transaction exemption, EBSA shares responsibility for administering provisions within ERISA with the Internal Revenue Service and the Pension Benefit Guaranty Corp.
The Labor Department arm generally focuses its enforcement efforts under ERISA in three broad categories of requirements that apply to both retirement and health plans and their service providers, attorneys at Eversheds Sutherland wrote in a recent brief on the GAO report. Those areas of focus relate to disclosure of plan information to participants, reporting to relevant agencies and fiduciary responsibilities.
“In providing effective oversight and enforcement for the vast array of private sector employee benefit plans and the more that 154 million participants that rely on them, EBSA’s job is enormous,” said Phyllis Borzi, who led EBSA during the Obama administration. “The report is balanced and comprehensive and recognizes both the opportunities and challenges that EBSA faces.
“I am encouraged, but not surprised, that the GAO found much to commend, but the most important service that the GAO Performance Audit report provides is in its description of the impressive range of strategies used by the agency to fulfill its protective mission. Most policymakers, taxpayers, and plan participants may not know just how extensive and critical the work of this relatively small agency is, but now, thanks to this GAO report, they know and they can begin to appreciate EBSA’s efforts on their behalf,” Borzi said.
The Eversheds attorneys stated that “EBSA has always been a smaller federal agency, with fewer than 1,000 employees, and its full-time investigative staff is quite modest relative to its regulated community — which currently includes over 700,000 retirement plans, about 2.5 million health plans, and countless service providers.”
EBSA’s full-time regional office enforcement staff started at 506 employees in fiscal 2011, peaked in fiscal 2014 at 569, and ended in fiscal 2020 at 492 — 97% of where it started, the Eversheds lawyers state. By comparison, the Securities and Exchange Commission “has a staff of over 2,400 personnel engaged in comparable functions.”
The GAO report also includes details about the enforcement priorities of EBSA at both the national and regional level.
Focus on ‘Major Cases’
EBSA argued in a 2012 paper, the Eversheds attorneys state, “that it would best leverage its resources and maximize recoveries for plans and participants if it focused its investigations on ‘major cases’ involving service providers to many plans or plans with systemic compliance problems.”
The agency has since steered its enforcement efforts toward these major cases.