Fiduciary Compliance Under Intense DOL Scrutiny

State Fiduciary RulesFiduciary Compliance is much more than a catch-phrase now that the Department of Labor (DOL) is focusing on retirement plans.  The DOL is now cracking down on fiduciary compliance in retirement plans.  The DOL’s Employee Benefit Security Administration (EBSA) recovered $2.4 billion for retirement plans, participants, and beneficiaries in fiscal year 2021.  EBSA is responsible for enforcing the rules set forth in the Employee Retirement Income Security Act (ERISA).  ERISA is the law that governs tax qualified retirement plans, thus, ensuring the integrity of America’s private employee benefits plans.

The EBSA closed 1,072 civil investigations in FY 2021; 69% (741) of those ended up in monetary results for plans or other corrective action.  Many of these were recoveries on behalf of terminated vested participants.  EBSA’s enforcement program helped unite 16,024 terminated vested participants in defined benefit plans with $1.548 billion in benefits that was owed to them.  Terminated vested results represent a combination of the present values of lifetime annuity payments made to participants and beneficiaries, or lump sum balance payments, plus interest distributions.  This can be paid as either a retroactive lump sum or it can be in the form of  ‘actuarially adjusted’ future annuity amounts.

The EBSA’s enforcement program also resulted in non-monetary remedies.  In FY 2021, EBSA obtained 449 non-monetary corrections.  This included the removal of six fiduciaries, orders barring 34 individuals from acting as fiduciaries, court appointments of 16 independent fiduciaries, and 124 cases involving reforms of plan procedures, such as improved search procedures for missing participants.

The EBSA encourages fiduciaries to pursue voluntary compliance to correct violations and restore employee benefit plan losses.  Failing voluntary compliance measures or their appropriateness, EBSA may recommend litigation.  In FY 2021, EBSA referred 70 cases for litigation.  However, even after referral, the DOL can often resolve claim monetary relief without filing suit.  That said, EBSA fiduciary compliance investigations resulted in 72 criminal indictments related to employee benefit plans; 38 of those were guilty pleas or convictions.  As a result of those indictments, EBSA recovered nearly $4 million in monetary recoveries on behalf of plans and participants.

EBSA’s oversight authority extends to nearly 734,000 retirement plans, 2 million health plans, and 662,000 other welfare benefit plans, such as plans providing life or disability insurance.  These ERISA covered plans include about 158 million workers and their dependents with over $12.9 trillion in plan assets.

It’s evident that the regulatory environment is getting stricter.  Recently, the DOL also announced it is exercising greater scrutiny over cybersecurity measures and use of confidential participant data by plan service providers.  Now is the time for retirement plan sponsors and committees to ensure appropriate fiduciary compliance measures are in place and followed to the letter.


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