The US Department of Labor (DOL) recently released a fact sheet covering 2021 enforcement actions and monetary recoveries by the Employee Benefits Security Administration (EBSA), the agency responsible for enforcing ERISA regulations for qualified plans.
Employers and plan administrators can learn a lot from these statistics, including common compliance mistakes to avoid. Here’s what you need to know to stay compliant.
ERISA stands for The Employee Retirement Income Security Act of 1974, a federal law that establishes the minimum standards for most retirement and healthcare plans in the private sector. Enforced by the DOL, the law is designed to protect employees who enroll in these employer-sponsored benefits.
Employers who administer ERISA-qualified plans are called “fiduciaries” and bear responsibility for compliance. Unlike Affordable Care Act (ACA) requirements, ERISA applies to employers of all sizes who offer qualified plans. Noncompliance can be costly.
ERISA covers any retirement plan that provides either retirement income in the future or the opportunity for employees to contribute current wages to retirement. Major plans covered under ERISA also include:
Plans that do not fall under ERISA primarily include pensions or other plans provided by the United States government, state or local governments, and churches.
According to the DOL, EBSA is authorized to oversee “nearly 734,000 retirement plans, 2 million health plans, and 662,000 other welfare benefit plans,” covering “about 158 million workers and their dependents with over $12.9 trillion in plan assets.”
In 2021, EBSA recovered a total of over $2.4 billion for ERISA-qualified plans, participants, and beneficiaries:
The agency closed 1072 civil investigations in 2021, with 69% of those resulting in monetary results or other corrective action. The vast majority of those recoveries ($1.548 billion) were on the behalf of terminated vested participants in defined benefits plans.
This program allows plan officials to essentially self-report and voluntarily correct violations to avoid ERISA enforcement action.
This program facilitates the termination of plans abandoned by employer sponsors and distributes benefits from those plans.
Plan participants can directly contact EBSA’s hotline and website to file a complaint about their employee benefit plan and to seek assistance. The DOL notes, “These inquiries sometimes lead to enforcement actions,” especially after receiving repeated complaints about a particular plan, employer, or service provider.
EBSA’s ERISA enforcement actions also included 449 non-monetary corrections. For example, in various cases, EBSA removed 6 fiduciaries, barred 34 individuals from acting as fiduciaries, and appointed 16 independent fiduciaries, among other actions. Although EBSA prefers to seek voluntary compliance for correction and restoration, the agency did refer 70 cases for litigation in 2021.
Additionally, EBSA opened 188 criminal investigations in 2021, 118 of which involved health benefit plans rather than retirement or other welfare benefit plans. Including previous years’ criminal investigations, EBSA’s ERISA enforcement actions led to 72 indictments and 38 guilty pleas or convictions.
Clearly, EBSA’s ERISA enforcement actions have a high success rate and can be very costly. As fiduciaries bearing responsibility for compliance, employers should seek to avoid such effective enforcement action.
National business law firm Kutak Rock recommends the following:
Finally, small to midsize businesses in particular can simplify compliance and save on costs using an ERISA wrap document. To make the process even easier, use a qualified and experienced benefits administrator like Alpine TPA.
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