Yes, the Department of Labor’s Employee Benefits Administration (EBSA) regularly pursues violations of ERISA, recovering funds for retirement plan participants. Civil corrections, litigation and even criminal indictments are all possibilities for plan fiduciaries under the high standards of ERISA. Failures related to missing participants and cybersecurity continue to be high on the priority list.
Fiduciary Failures
The Department of Labor provides these examples of civil violations related to pension plans:
- Failing to operate the plan prudently and for the exclusive benefit of participants;
- Using plan assets to benefit certain related parties to the plan, including the plan administrator, the plan sponsor, and parties related to these individuals;
- Failing to properly value plan assets at their current fair market value, or to hold plan assets in trust;
- Failing to follow the terms of the plan (unless inconsistent with ERISA);
- Failing to properly select and monitor service providers;
- Taking any adverse action against an individual for exercising his or her rights under the plan (e.g., being fired, fined, or otherwise being discriminated against);
Legal experts at Morgan Lewis report that from October 2021-September 2022, EBSA investigations “recovered more than $1.4 billion for plans, participants, and beneficiaries, with $931 million being recovered through enforcement actions.” These results were accomplished largely through civil investigations:
EBSA closed 907 civil investigations, 595 of which led to monetary results for plans or other corrective activities. EBSA also obtained 402 nonmonetary civil corrections in connection with its enforcement program, and it referred 55 cases for litigation. Of its criminal investigations, EBSA closed 164 criminal investigations, which led to the indictment of 103 individuals for plan-related offenses.
Compliance Assistance
While maintaining a steady flow of investigatory efforts, the DOL, through the EBSA division, offers a variety of Compliance Assistance resources, including periodic webinars, to help plan fiduciaries avoid problems. Here is a sampling of support materials currently available from the federal government:
Meeting Your Fiduciary Responsibilities – To meet their responsibilities as plan sponsors, employers need to understand some basic rules, specifically the Employee Retirement Income Security Act (ERISA). ERISA sets standards of conduct for those who manage an employee benefit plan and its assets (called fiduciaries). This publication provides an overview of the basic fiduciary responsibilities applicable to retirement plans under the law.
Understanding Retirement Plan Fees And Expenses – This booklet will help retirement plan sponsors better understand and evaluate their plan’s fees and expenses. While the focus is on fees and expenses involved with 401(k) plans, many of the principles discussed in the booklet also will have application to all types of retirement plans.
Tips For Selecting And Monitoring Service Providers For Your Employee Benefit Plan – Business owners are responsible for ensuring that their 401(k) plans comply with Federal law and rely on other professionals to assist them with their plan
Protecting retirement funds and data from cybercrime is high on the priority list for the DOL, which offers this related guidance for plan sponsors; Cybersecurity Program Best Practices and Tips for Hiring a Service Provider with Strong Security Practices. The DOL has also specifically directed plan sponsors to proactively address challenges related to missing participants and provides this Missing Participants Guidance “to help plan fiduciaries meet their obligations to locate and distribute retirement benefits to missing or nonresponsive participants.”
Good To Know: ERISA Bonds Explained
ERISA bonds are confusing for plan sponsors—which likely explains why so many plan sponsors fail to maintain adequate coverage and end up triggering additional compliance problems. Here’s help understanding ERISA bonds and how to obtain them, as well as advice about further protections critical for plan sponsors.
The Employee Retirement Income Security Act (ERISA) requires ERISA fidelity bonds as a protection against theft. Specifically, as JD Supra explains: “For retirement plans, ERISA imposes a requirement that every fiduciary and every person who handles plan assets be bonded to protect the plan from risk of loss due to fraud or dishonesty. This bond must cover at least 10% of the plan’s assets, up to a maximum of $500,000 per loss…” Experts note that among the mistakes commonly made by plan sponsors are both failure to have an ERISA bond at all, and failing to have adequate coverage. In either case, plan sponsors expose themselves to personal liability—as well as regulatory action and investigation, as Fiduciary News points out:
“Some plan sponsors have a fidelity bond covering just 3-5% of total assets when it should be at least 10% according to ERISA Section 412…“Many 401k plan sponsors are simply not aware of: 1) the fidelity bond itself; 2) what’s required of that bond so that it protects the plan from losses due to fraud or dishonesty; or, 3) the risks associated with insufficient coverage, including triggering a plan audit or holding the plan fiduciary personally liable for losses that should have been covered by an ERISA fidelity bond.”
The ERISA fidelity bond required by the Department of Labor can only be obtained from a surety listed by the U.S. Department of Treasury—like Colonial Surety. As a leading national ERISA bond provider, Colonial helps plan sponsors ensure compliance. Uniquely, Colonial includes retroactive ERISA fidelity bond coverage for years when the plan was not adequately covered. Additionally, plan sponsors can opt for multi-year coverage, ensuring the ERISA bond remains Department of Labor compliant for the life of its term. Obtain ERISA Fidelity Bond Here Now.
Plan sponsor mistakes related to seemingly simple regulations are known to open the doors for deeper investigations and audits. For example, compliance failures related to the ERISA fidelity bonds required by the Department of Labor for everyone involved in handling funds or property of the retirement plan (in any way) routinely draw attention. ERISA fidelity bonds protect the retirement plan against acts of fraud or dishonesty, as Eisner Amper explain:
Section 412 of the Employee Retirement Income Security Act of 1974 (“ERISA”) requires every person who handles funds or other property of a plan to be bonded (excluding certain exempted individuals). Such persons include plan fiduciaries but may also include any director, officer or employee of the fiduciary. This is referred to as ERISA’s bonding requirement. The ERISA fidelity bond, also known as an employee dishonesty bond, is a legal requirement arising from ERISA to protect plans against losses resulting from an act of fraud or dishonesty by persons handling a plan’s assets.
As a leading national ERISA Bond provider, listed with the Department of the Treasury, Colonial helps plan sponsors ensure compliance. Uniquely, Colonial includes retroactive ERISA fidelity bond coverage for years when the plan was not adequately covered. Additionally, plan sponsors can opt for comprehensive, multi-year coverage packages, ensuring the ERISA bond remains Department of Labor compliant for the life of its term. Conveniently, plan sponsors can secure affordable packages that contain the ERISA bond, plus fiduciary and cyber liability insurance. Update your protection today:
ERISA Bond+Liability Insurance HERE
It’s important for plan sponsors–and everyone with a role in the management of the retirement plan to understand that neither diligent effort, nor the ERISA fidelity bonds required by the Department of Labor (DOL), provide protection in the face of lawsuits: only Fiduciary Liability Insurance does.
Armed with Fiduciary Liability coverage from Colonial Surety, for a few dollars a day, you’ll have defense costs and penalty limits up to $1,000,000 if faced with alleged or actual breaches of duty in connection with the employee retirement plan. Cyber Liability coverage is included at no extra cost, providing additional protection–for the plan and your company–against regulatory actions related to data and privacy, as well as expert response services.
Trust us: Defense is lots more affordable than offense!
Fiduciary+Cyber Insurance Here
Pension Plan Professional?
Colonial can help you make sure your plan sponsor clients have the coverage they need—and we’ve got you too. From Errors and Omissions Insurance to Fiduciary Liability Insurance, Employment Practices Liability Insurance–and more, we’re HERE with the coverages pension professionals need to keep the business going—and growing.
Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country. Serving customers since 1930, we are the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. We help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.