	Background

Three agencies share responsibility for enforcing ERISA: the Department  of Labor (EBSA), the Department of the Treasury’s Internal Revenue  Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC). EBSA enforces fiduciary standards for plan fiduciaries of privately  sponsored employee benefit plans to ensure that plans are operated in the  best interests of plan participants. About one-fifth of Americans’ retirement wealth is invested in mutual  funds, which are regulated by the Securities and Exchange Commission  (SEC), primarily under the Investment Company Act of 1940. EBSA Uses a Multifaceted Enforcement Strategy

EBSA’s enforcement strategy is a multifaceted approach of targeted plan  investigations supplemented by providing education to plan participants  and plan sponsors. EBSA allows its regions the flexibility to tailor their  investigations to address the unique issues in their regions, within a  framework established by EBSA’s Office of Enforcement. The regional  offices then have a significant degree of autonomy in developing and  carrying out investigations using a mixture of approaches and techniques  they deem most appropriate. Participant leads are still the major source of  investigations. To supplement their investigations, the regions conduct  outreach activities to educate both plan participants and sponsors. The  purpose of these efforts is to gain participants’ help in identifying potential  violations and to educate sponsors in properly managing their plans and  avoiding violations. The regions also process applications for the  Voluntary Fiduciary Correction Program (VFCP) through which plan  officials can voluntarily report and correct some violations without  penalty. EBSA  officials told us that they open about 4,000 investigations into actual and  potential violations of ERISA annually. EBSA Has Taken Steps to Address Weaknesses in Its Enforcement Program, but Significant Challenges Remain

EBSA has taken steps to address many of the recommendations we have  made over a number of years to improve its enforcement program,  including assessing the level and types of noncompliance with ERISA,  improving sharing of best investigative practices, and developing a human  capital strategy to better respond changes in its workforce. EBSA reported  a significant increase in enforcement results for fiscal year 2004, including  $3.1 billion in total monetary results and closing nearly 4,400  investigations, with nearly 70 percent of those cases resulting in  corrections of ERISA violations. Despite this progress, EBSA continues to  face a number of significant challenges to its enforcement program,  including the lack of timely and reliable plan information, restrictive  statutory requirements that limit its ability to assess certain penalties, and  the need to better coordinate enforcement strategies with the SEC. As a  result, EBSA officials told us that they are currently using plan year 2002  and 2003 Form 5500 information for computer targeting. Recent Scandals Highlight the Need for Better Coordination with SEC

Recent events such as the abusive trading practices of late trading and  market timing in mutual funds and new revelations of conflicts of interest  by pension consultants highlight the need for EBSA to better coordinate  enforcement strategies with SEC. Given these concerns, it is important that employees’ benefits are  adequately protected. Over the years, EBSA has taken  steps to strengthen its enforcement program and leverage its limited  resources. Congress may want to amend ERISA to address such limits on  EBSA’s enforcement authority.
Why GAO Did This Study

Congress passed the Employee Retirement Income Security Act of 1974 (ERISA) to address public concerns over the mismanagement and abuse of private sector employee benefit plans by some plan sponsors and administrators. The Department of Labor's Employee Benefits Security Administration (EBSA) shares responsibility with the Internal Revenue Service and the Pension Benefit Guaranty Corporation for enforcing ERISA. EBSA works to safeguard the economic interest of more than 150 million people who participate in an estimated 6 million employee benefit plans with assets in excess of $4.4 trillion. EBSA plays a primary role in ensuring that employee benefit plans operate in the interests of plan participants, and the effective management of its enforcement program is pivotal to ensuring the economic security of workers and retirees. Recent scandals involving abuses by pension plan fiduciaries and service providers, as well as trading scandals in mutual funds that affected plan participants and other investors, highlight the importance of ensuring that EBSA has an effective and efficient enforcement program. Accordingly, this testimony focuses on describing EBSA's enforcement strategy, EBSA's efforts to address weaknesses in its enforcement program along with the challenges that remain.

What GAO Found

EBSA's enforcement strategy is a multifaceted approach of targeted plan investigations. To leverage its enforcement resources, EBSA provides education to plan participants and plan sponsors. EBSA allows its regional offices the flexibility to tailor their investigations to address the unique issues in the regions, within a framework established by EBSA's Office of Enforcement. The regional offices then have a significant degree of autonomy in developing and carrying out investigations using a mixture of approaches and techniques they deem most appropriate. Participant leads are still the major source of investigations. EBSA officials told us that they open about 4,000 investigations into actual and potential violations of ERISA annually. To supplement their investigations, the regions conduct outreach activities to educate both plan participants and sponsors. The purpose of these efforts is to gain participants' help in identifying potential violations and to educate sponsors in properly managing their plans and avoiding violations. Finally, EBSA maintains a Voluntary Fiduciary Correction Program through which plan officials can voluntarily report and correct some violations without penalty. EBSA has taken steps to address many of the recommendations we have made over the years to improve its enforcement program, including assessing the level and types of noncompliance with ERISA, improving sharing of best investigative practices, and developing a human capital strategy to better respond changes in its workforce. EBSA reported a significant increase in enforcement results for fiscal year 2004, including $3.1 billion in total monetary results and closing about 4,400 investigations, with nearly 70 percent of those cases resulting in corrections of ERISA violations. Despite this progress, EBSA continues to face a number of significant challenges to its enforcement program, including (1) the lack of timely and reliable plan information, which is highlighted by the fact that EBSA is currently using plan year 2002 and 2003 plan information for its computer targeting, (2) restrictive statutory requirements that limit its ability to assess certain penalties, and (3) the need to better coordinate enforcement strategies with the Securities and Exchange Commission, which is highlighted by recent scandals involving the trading practices and market timing in mutual funds and conflicts of interest by pension consultants.