EBSA Has Made Improvements to Its Enforcement Program, but Challenges Remain

In 2002, we identified several weaknesses in EBSA’s management of its  enforcement program, including the lack of a centrally coordinated quality  review process, better coordination needed among its investigators, the  lack of data to assess the nature and extent of noncompliance, and limited  attention to its human capital management, despite the agency’s actions to  strengthen the program in prior years. To promote compliance, EBSA has increased its  educational outreach to plan participants, sponsors, and service providers,  and increased participation in its voluntary correction programs. As part of its workforce efforts, EBSA has recruited investigators with  advanced skills in accounting, finance, banking, and law that EBSA  believes are required because of the technical aspects of ERISA and the  changing nature of benefit plans. At the same time, EBSA has increased its enforcement results since 2002. Although the two agencies periodically share information, we found that  EBSA has not yet established a systematic procedure by which its  investigators in all its regional offices can regularly confer with their  respective SEC regional office. Since our review, we found that EBSA’s overall  attrition rate remained high, and in recent years, attrition rates for EBSA’s  investigators appear to have risen. While other agencies may face  similar attrition problems in such urban areas, EBSA has taken limited  steps to evaluate the impact such attrition has on its operations. Unlike Other Agencies, EBSA Does Not Conduct Routine Compliance Examinations or Comprehensive Risk Assessments

Although EBSA regularly targets violations, it does not conduct routine  compliance examinations or comprehensive risk assessments to direct its  enforcement practices, as do other federal agencies that share similar  responsibilities. Rather, the agency relies on various sources for case  leads, such as outside complaints and informal targeting of plans, to focus  its enforcement efforts. While these leads are important, in addition to  undertaking such activities, agencies such as IRS and SEC have developed  routine compliance programs to detect violations and identify emerging  trends that may warrant further examination by enforcement staff. IRS also uses examinations in an attempt to identify emerging areas of  noncompliance and analyze compliance risk levels among specific types of  pension plans. Statutory Obstacles May Limit EBSA’s Ability to Oversee Pension Plans Effectively

Certain statutory obstacles may limit EBSA’s effectiveness in overseeing  private sector pension plans. In fact, in some  cases, investigators were relying on data up to 3 years old to target  potential violators. Restrictive Statutory Requirements Can Impede the Restoration of Plan Assets

Restrictive legal requirements have limited EBSA’s ability to assess  penalties against fiduciaries or other persons who knowingly participate in  a fiduciary breach, and the penalty provision under Section 502(l) of  ERISA has delayed and in certain instances prevented the restoration of  funds to pension plans. Additionally, even though EBSA has taken steps  to address the Form 5500 processing delays, EBSA investigators’ access to  timely plan information necessary for targeting new case leads is still  limited by ERISA’s filing deadline. Recommendations for Executive Action

To improve overall compliance and oversight, we recommend that the  Secretary of Labor direct the Assistant Secretary of Labor, EBSA, to    evaluate the extent to which EBSA could supplement its current  enforcement practices with strategies used by similar enforcement  agencies, such as routine compliance examinations and dedicating  staff for risk assessment, and    conduct a formal review to determine the effect that ERISA’s  statutory filing deadlines have on investigators’ access to timely  information and the likely impact if these deadlines were shortened. Key contributors are listed in appendix V.

Appendix I: Scope and Methodology

To determine the steps that the Employee Benefits Security  Administration (EBSA) has taken in recent years to enforce and promote  Employee Retirement Income Security Act of 1974 (ERISA) compliance,  we collected and documented information on EBSA’s enforcement  strategy, operations, and human capital management practices. For more on the reliability of the CPDF, see  GAO’s report on the topic. To identify how EBSA practices compare to those of other agencies, we  interviewed officials from SEC, the Internal Revenue Service (IRS), and  the Pension Benefit Guaranty Corporation. Securities and Exchange Commission Human Capital Survey.
Why GAO Did This Study

The Department of Labor's (DOL) Employee Benefits Security Administration (EBSA) enforces the Employee Retirement Income Security Act of 1974 (ERISA), which sets certain minimum standards for private sector pension plans. On the basis of GAO's prior work, the Senate Committee on Health, Education, Labor and Pensions asked GAO to review EBSA's enforcement program. Specifically, this report assesses (1) the extent to which EBSA has improved its compliance activities since 2002; (2) how EBSA's enforcement practices compare to those of other agencies; and (3) what obstacles, if any, affect ERISA enforcement. To do this, we reviewed EBSA's enforcement strategy and operations, and interviewed officials at EBSA, the Internal Revenue Service (IRS) and the Securities and Exchange Commission (SEC), among others.

What GAO Found

In March 2002, we identified weaknesses in EBSA's enforcement program, despite the agency's actions to strengthen it. Since that time, EBSA has, among other things, promoted coordination among regional investigators and increased participation in its voluntary correction programs, as we recommended. EBSA also has recruited investigators with advanced skills in accounting, finance, banking, and law that officials believe are necessary due to ERISA's technicalities. Yet some weaknesses identified in 2002 remain. Specifically, EBSA still has not adequately assessed the nature and extent of ERISA noncompliance, even though it has taken steps to do so. Without these data, EBSA is not positioned to focus its resources on key areas of noncompliance nor have adequate measurable performance goals to evaluate its impact on improving industry compliance. We also found that while some regional offices did routinely attempt to confer with their respective regional office of the SEC--the agency that oversees many of the same pension service providers under the securities laws--for case leads or to consider trends in potential pension violations, others did not. Lastly, EBSA's overall attrition rates remain high, with many investigators leaving for employment outside the federal government, yet EBSA has taken limited steps to evaluate the effect such attrition has on its operations. EBSA does not conduct routine compliance examinations and broad, ongoing risk assessments to focus its enforcement efforts like other agencies. Rather, investigators rely on various sources for case leads, such as participant complaints, agency referrals, and computer targeting. While such sources are important, this approach generally limits EBSA to leads discerned by participants and other government agencies or those disclosed by plan sponsors, and not those more complex or hidden. Further, EBSA also has not established a comprehensive risk assessment function. Instead of broad risk assessments, EBSA's annual risk evaluations are generally limited to a risk analysis of frontline investigators' case loads. In contrast, in addition to such activities, IRS and SEC incorporate routine compliance programs in an attempt to detect violations and identify emerging trends that may warrant enforcement action. Also, the SEC and Pension Benefit Guaranty Corporation have dedicated staff to regularly analyze information from various sources, such as investigations and academic research. Certain statutory obstacles also limit EBSA's oversight of private sector pension plans. First, restrictive legal requirements have limited EBSA's ability to assess penalties against fiduciaries and can impede the restoration of plan assets. DOL officials said that the 502(l) penalty under ERISA discourages quick settlement and can reduce the amount of funds returned to pension plans. Second, EBSA investigators' access to timely information necessary for identifying potential violations is limited by ERISA's filing requirements. Even though EBSA is taking steps to address processing delays, in 2006, investigators were relying on information up to 3 years old to target new case leads in some cases.