What to Expect from an Employee Benefits Security Administration (EBSA) Audit

Transcription

1 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

2 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)

3 NATIONAL OFFICE PROJECTS CPCP

4 CPCP Untimely Contributions Continue to be a Problem Prior National Project focus New Focus

5 NATIONAL OFFICE PROJECTS REACT

6 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)

7 CONSULTANT ADVISOR PROGRAM (CAP)

8 Focus CAP Receipt of Improper, undisclosed compensation by pension consultants & other investment advisers.

9 HEALTH BENEFIT SECURITY PROJECT

10 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

11 MEWA ENFORCEMENT RESULTS 522 Civil Investigations 90 Criminal Investigations $121.6 Million in Monetary Violations 84 Indictments 70 Convictions

12 What to Expect from an Employee Benefits Security Administration (EBSA) Audit

13 Sources of Cases Participant complaints Form 5500 Reviews Referrals from other agencies Media

14 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

15 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)

16 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

17 Investigative Emphasis Reporting Requirements» Annual Report (Form 5500)

18 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 » Field Assistance Bulletin

19 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

20 Investigative Emphasis Fiduciary duties Contribution remittance

21 Concluding the Investigation Depends on any problems identified If no problems are noted, closing letter If problems are noted, corrective actions are necessary

22 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

23 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

24 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

25 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

26 What is the VFC Program? Allows Plan Officials to correct certain violations before DOL investigates and if done properly, receive a No-Action letter from the Department. DOL NO ACTION You fixed it DOL

27 DELINQUENT FILER VOLUNTARY COMPLIANCE PROGRAM (DFVCP)

28