In its report, the U.S. Government Accountability Office (GAO) said the issue remains on its radar screen with EBSA even though GAO investigators first raised it in a report released five years ago.
While EBSA has promoted coordination among regional investigators; increased participation in its voluntary correction programs; and recruited investigators with advanced skills in accounting, finance, banking, and law since the March 2002 report, the agency is still not where the GAO believes it needs to be.
“Yet despite these improvements, EBSA’s ability to protect plan participants against the misuse of pension plan assets is still limited, because its enforcement approach is not as comprehensive as those of other federal agencies and generally focuses only on what it derives from its investigations,” the GAO asserted. “While it has employed some proactive measures, such as computerized targeting of pension plan documents, EBSA remains largely reactive in its enforcement approach, thus potentially missing opportunities to address problems before trends of noncompliance are well established.”
Hand-in-Hand with the SEC?
In terms of continuing EBSA weaknesses, for example, the GAO said it found that while some regional offices tried to confer with their respective regional office of the Securities and Exchange Commission (SEC) on case leads or to consider trends in potential pension violations, others did not. The GAO pointed out that the SEC oversees many of the same pension service providers under the securities laws as does EBSA.
“Although EBSA and SEC periodically coordinate efforts on multiple issues, the agencies must explore opportunities to identify questionable activities through a more systematic coordination effort throughout their regional offices,” the GAO wrote. “While we recognize that not all EBSA regional and district offices may have the same need to interact with SEC, access to information that SEC has obtained about potential violations could save investigative resources for both agencies and may also expedite the prosecution of fiduciaries who are violating the law.”
Statutory obstacles are also a problem in terms of EBSA’s oversight of private sector pension plans. Restrictive legal requirements have limited EBSA’s ability to penalize fiduciaries and can impede the restoration of plan assets, the GAO said. Officials said that the 502(l) penalty under ERISA discourages quick settlement and can reduce the amount of funds returned to pension plans.
“Moreover, opportunities to expedite settlements and restore funds to pension plans may be lost by the fact that EBSA has little authority, under current law, to waive a mandatory penalty when it prevents fully restoring assets to participants,” the GAO said. “At a time when the retirement of millions of Americans is imminent, it is more important than ever to take all possible measures to protect their pension assets.”
Also in the problem column was the fact that EBSA’s overall job attrition rates remain high, with many investigators leaving for employment outside the federal government. Despite the issue, EBSA has taken limited steps to evaluate the effect such attrition has on its operations.
Further, the GAO said, EBSA does not conduct routine compliance examinations and broad, ongoing risk assessments to focus its enforcement efforts like other agencies. Instead, the GAO said, 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,” the GAO wrote.
Also, even though EBSA is taking steps to address processing delays, in 2006, GAO said investigators were relying on information up to three years old to target new case leads in some cases.
In contrast, the GAO said, in addition to such activities, IRS and SEC incorporate routine compliance programs to detect violations and identify emerging trends that may warrant enforcement action. Also, the SEC and Pension Benefit Guaranty Corporation (PBGC) have dedicated staff to regularly analyze information from various sources, such as investigations and academic research.
The GAO recommended that the Assistant Secretary of Labor for EBSA:
- 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.
The Direct the Office of Enforcement should establish, where appropriate, formal SEC coordination groups in the regional offices, similar to those already in place in some EBSA regions, the GAO suggested. Finally, the Office of Program Planning, Evaluation and Management should evaluate the factors affecting staff attrition and take appropriate steps, as necessary.
The GAO report is here .