In FY 2009, EBSA closed 3,669 civil investigations, with 2,833 (77.21%) resulting in monetary results for plans or other corrective action.
“Civil Investigation Statistics Demonstrate Success In Targeting” Employee Benefit Security Administration Fact Sheet
The EBSA cites its targeting protocols as contributing to the success of enforcement efforts against ERISA plans and fiduciaries during 2009. The news release does not provide information on the methods involved in the targeting process, but that information is generally described in the EBSA Enforcement Manual.
For example, regarding the sources of data indicating selection of targets for review, the manual provides:
Sources for Potential Limited Review Cases.
Computer generated compilations of selected employee benefit plans or service providers derived from reports filed with EBSA.
Information derived from detailed review and analysis of annual reports, supporting financial statements, schedules, exemption application files, ERISA section 502 complaints, and other internal EBSA sources.
Information concerning employee benefit plans or service providers derived from other governmental agencies such as the IRS, the SEC, and state insurance agencies.
Information concerning employee benefit plans or service providers derived from non-governmental sources such as newspapers, industry journals and magazines, or leads from knowledgeable parties.
Information received as a result of complaints from participants, fiduciaries, informants, or other sources in the community, other than allegations of acts against a participant or beneficiary for exercising any right to which he/she is entitled under the provisions of an employee benefit plan, or interfering with the attainment of any right to which the participant may become entitled, which should be handled as described in Chapter 43.
Compilations of selected employee benefit plans or service providers derived by using combinations of the sources listed in (1) through (5) above.
EBSA Enforcement Manual, Chapter 53, “Targeting and Limited Reviews”
Regarding group health plans, the Manual provides some specific guidance:
12. Limited Review Cases Involving Health Plans. Part 7 of ERISA was amended by four separate statutes: the Health Insurance Portability and Accountability Act of 1996 (HIPAA); the Mental Health Parity Act of 1996 (MHPA); the Newborns’ and Mothers’ Health Protection Act of 1996 (Newborns’ Act); and the Women’s Health and Cancer Rights Act of 1998 (WHCRA).
During the course of an investigation involving an ERISA-covered health plan, Investigators/Auditors will ordinarily determine whether a plan is in compliance with these statutes. An investigative guide to assist in this effort is found at Figure 3. If the investigator finds that a large firm sponsors several covered group health plans, a compliance review for each of the plans should be conducted. Claims procedures for the plan should be reviewed to determine if they are in compliance with ERISA Section 503.
A checklist of potential review items is included in the Enforcement Manual materials. That checklist can be reviewed here.
In the case of any contact by regulators, plan fiduciaries should be aware that one thing frequently leads to another. The agenda contemplated by the auditor/investigator will likely not be conveyed to the plan fiduciary in advance.
The targeting guidelines provide that:
Generally, other than stating that the purpose of the limited review is to determine whether a violation of Title I of ERISA has occurred or is about to occur, the Department has adopted the policy of not informing plan officials or others as to the basis of its investigation.
The limited review (Program 53) is designed to expedite a decision on conversion of the case to a more serious review, such as a fiduciary violation investigation (Program 48).
The sole objective of a Program 53 case is to look at one or more issues and to determine whether to convert the case to a Program 48 case or to conclude the inquiry as quickly as possible. . .
In those instances where the limited review case identifies violations in areas such as bonding, reporting and disclosure, improper administrative practices of a de minimis nature, or prohibited transaction(s) already corrected, the case should generally remain as a Program 53.
A voluntary compliance letter will issue on matters of a de minimis nature whereby the plan is given an opportunity to correct minor violations.
In cases where fiduciary violations are found or suspected the plan is to be advised and follow up action will be taken.
In the case of potential criminal violations, the Manual provides as follows:
Apparent Criminal Violations Found.
Whenever the limited review case uncovers evidence of possible criminal violation(s), the assigned Investigator/Auditor must apprise the group supervisor at the earliest possible time. Normally, the civil case will proceed and no investigation of the criminal case will be performed until the RD has decided whether and by whom such criminal investigation(s) will be conducted.
Note: Plan fiduciaries should be aware of the stage and scope of the audit based upon the targeting criteria provided in the Enforcement Manual. The investigator is under no obligation to apprise the fiduciary of these matters, but some indication can be inferred from the nature of the inquiries as suggested by a review of the excerpts noted above from the targeting protocols. Completion of a civil case before a criminal investigation obviously poses serious risks to the targets of the audit. Therefore, plan fiduciaries and counsel must be alert to the intentions of the investigator and make appropriate judgments as to the risks posed in the course of the investigation.