DOL makes good on promise of ERISA plan criminal investigations

Serving as a cautionary tale for employers and their benefit advisers, the Department of Labor’s increased efforts to investigate criminal activity with regards to employee benefit plans continued in fiscal 2014, including the indictment of 106 individuals.

The DOL’s Employee Benefits Security Administration closed 365 criminal investigations in fiscal 2014, representing a nearly 30% increase since fiscal 2010. EBSA's criminal investigations, including its participation in criminal investigations with other law enforcement agencies, led to the indictment of 106 individuals — including plan officials, corporate officers and service providers — for offenses related to employee benefit plans, according to a recently released DOL fact sheet.

In November 2010, Phyllis Borzi, assistant secretary for EBSA, announced increased enforcement efforts, including the Contributory Plans Criminal Project — the agency's first criminal national enforcement project targeting persons who commit fraud and abuse against participants and beneficiaries of contributory employee benefit plans, including 401(k)s and contributory health plans.

"Workers are often the first line of defense in identifying problems with their benefit programs early," Borzi said at the time. "Therefore, we want to equip them with information to help the department protect and preserve their right to plan benefits."

See related: Is your client ready for a DOL audit of its health plan?

EBSA is responsible for investigating potential violations of the criminal provisions of ERISA and those provisions of Title 18 of the United States Code that relate to employee benefit plans. The number of criminal investigations has been trending upward since fiscal 2001, increasing 155% since then, but has accelerated in recent years, according a legal alert from the law firm Sutherland Asbill & Brennan.

The number of persons indicted has also increased over this period of increased criminal investigations, but, the law firm says, only 23% of those investigations closed in fiscal 2014 resulted in guilty pleas and/or convictions, which is consistent with experience in the preceding three years, but below the 14-year average of nearly 34% and the high water mark of nearly 57% reached in fiscal 2007.

In fiscal 2014, EBSA recovered $599.7 million for direct payment to plans, participants and beneficiaries, including $356.2 million in benefits recovered on behalf of workers and their families through informal resolution of individual complaints, according to the fact sheet. Many of the inquiries were received via EBSA's toll-free number, 1 (866) 444-EBSA (3272), and website,

See related: 10 scary mistakes that could trigger a 401(k) plan audit

These inquiries are also a major source of enforcement leads, the DOL says, adding that when EBSA receives repeated complaints with respect to a particular plan, employer, or service provider, or when there is information indicating a suspected fiduciary breach, the matter is referred for investigation. In fiscal 2014, 687 new investigations were opened as a result of these referrals.

The total number of ERISA civil investigations closed has also been trending upward since fiscal 2010. In fiscal 2014, DOL closed 3,928 civil investigations, which represents a 26% increase over fiscal 2010. DOL closed more civil investigations in FY 2014 than it has since fiscal 2004, when it closed 4,399.

The Affordable Care Act’s reporting requirements have brought increased scrutiny of employer-sponsored health care plans and the government is largely expected to respond to anomalies or red flags with an employer audit. But industry experts agree the government won’t limit its inquiries to ACA-related information only, and employers should be prepared for full-blown audits of health care plans.

“The opportunity for a DOL audit has greatly increased with the focus on compliance with the ACA; and when they come looking they will not look for just one thing,” says Mark Lam, vice president of employee benefits compliance for Schaumburg, Ill.-based insurance brokerage Assurance. “They’re going to look at everything. So whatever it is that kicks off the audit, it opens the door to review the entire plan.”

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