Pension Plans:

Stronger Labor ERISA Enforcement Should Better Protect Plan Participants

HEHS-94-157: Published: Aug 8, 1994. Publicly Released: Aug 8, 1994.

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GAO reviewed the Department of Labor's (DOL) enforcement of the Employee Retirement Income Security Act, focusing on the DOL: (1) enforcement strategy; (2) methodology for targeting pension and welfare plans for investigation; and (3) use of penalties to increase compliance.

GAO found that: (1) DOL could strengthen its enforcement program by maximizing the use of its investigative resources and increasing the use of authorized penalties; (2) the Pension and Welfare Benefits Administration (PWBA) cannot determine whether it is sufficiently prioritizing its enforcement actions or whether its allocation formula is effective because it has not evaluated its enforcement strategy; (3) PWBA investigators may not be targeting the pension and welfare plans that are in possible violation of the act because PWBA has not evaluated, tested, or corrected the procedural weaknesses in its computer targeting programs; (4) PWBA lacks the staff and resources necessary and does not routinely follow up on Internal Revenue Service (IRS) referrals so that it can take appropriate legal action and impose penalties against those firms that do not comply with ERISA fiduciary requirements; and (5) PWBA needs to determine whether additional administrative guidance and legal changes are needed to enhance PWBA penalty enforcement.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Pension and Welfare Benefits to evaluate the significant issue strategy to determine whether: (1) financial institutions and service providers continue to be the issue areas with the greatest potential for achieving maximum ERISA enforcement results; and (2) 40 percent is the resource allocation formula that will provide the greatest enforcement results or whether the formula should be tailored for each area office.

    Agency Affected: Department of Labor

    Status: Closed - Not Implemented

    Comments: Labor agreed that its ERISA enforcement program should maximize the use of resources but generally disagreed with many of the recommendations. Labor said that its strategy and resources for computer targeting leverage enforcement are extremely limited in view of the large universe of participants and plans covered by ERISA. Labor has not disclosed the changes it might implement in its targeting programs.

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Pension and Welfare Benefits to begin testing the revised computer targeting programs as soon as possible. If PWBA opts to test each individual program using the same criteria described in a September 30, 1993, letter to the Assistant Secretary, PWBA should: (1) randomly select plans for testing so results can be projected and programs properly validated; and (2) use a formula to set a sample size that will require less calendar and staff time to test each program. PWBA should also test the feasibility of using multivariate analysis to target plans for investigation.

    Agency Affected: Department of Labor

    Status: Closed - Implemented

    Comments: Labor used the latter part of fiscal year 1994 to consider changes to its approach to testing the computer targeting programs. Labor has not disclosed the changes it might implement in its targeting programs.

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Pension and Welfare Benefits to increase the use of penalties authorized by ERISA by establishing procedures to routinely review referrals of potential reporting violators from IRS service centers and using decentralized legal staff to help assess prohibit transaction penalties when warranted. PWBA should also determine whether additional administrative guidance, changes to the law, or both are needed to remedy confusion associated with the penalty and enhance PWBA penalty enforcement.

    Agency Affected: Department of Labor

    Status: Closed - Not Implemented

    Comments: Labor agreed that its ERISA enforcement program should maximize the use of resources but generally disagreed with many of the recommendations. Labor said that its strategy and resources for computer targeting leverage enforcement are extremely limited in view of the large universe of participants and plans covered by ERISA. Labor also said that recent and anticipated changes to the use of field office staff should improve the program.

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