GAO Releases ERISA Enforcement Report; Highlights COVID-19 Challenges, Fiduciary Breaches, and Prohibited Transactions

August 11, 2021
Hall Benefits Law, LLC

On May 27, 2021, the U.S. Government Accountability Office (GAO) released the results of a 15-month investigation into ERISA enforcement by the Department of Labor’s Employee Benefits Security Administration (EBSA). 

EBSA is charged with protecting the rights of participants in employer sponsored benefit plans. As of fiscal year 2020, this included about 154 million participants in 722,000 retirement plans and 2.5 million health plans with combined assets of over $10.7 trillion.

The GAO report examines (1) how EBSA manages its enforcement process, (2) EBSA’s strategies to improve investigative processes and ensure enforcement quality, and (3) the immediate and long-term challenges of COVID-19 for EBSA and private sector retirement and health plans. 

EBSA Enforcement

EBSA primarily enforces ERISA through civil investigations of retirement and health plans and by encouraging plans to voluntarily remedy any violations identified by EBSA’s regional office investigative staff, such as by restoring plan or participant assets, paying for erroneously denied services, and making needed administrative changes.

In fiscal year 2020, EBSA investigators identified 4,273 violations in the 1,411 investigations closed. This included 3,776 retirement plan violations from 1,056 closed investigations and 377 health plan violations from 288 closed investigations. In fiscal year 2020, EBSA also closed 67 investigations of other plans that identified 120 violations. The 10 most frequent violation categories account for almost 97% of all violations:

  1. Violation of the fiduciary prudence standard
  2. Violation of the exclusive purpose standard
  3. Section 406(b)(1) fiduciary self-dealing 
  4. Section 406(a) prohibited transactions with parties in interest
  5. Failure to follow the plan documents 
  6. Improper benefit to the plan sponsor 
  7. Summary plan descriptions and other disclosure violations 
  8. Bonding violations 
  9. Form 5500 violations 
  10. Failure to hold plan assets in trust 

COVID-19 Challenges

The GAO report highlighted that the COVID-19 pandemic created immediate and long-term challenges for EBSA and benefit plans. For example, according to stakeholders, plans were initially concerned about how to implement provisions in the Families First Coronavirus Response Act (FFCRA) and the CARES Act, but those concerns were addressed as the agency issued FAQs and notices. 

In addition, EBSA officials reported that court closures temporarily slowed criminal cases, but as virtual hearings increased, litigation resumed. Stakeholders and EBSA officials also described potential long-term challenges, including difficulties locating the many participants who may have left a job due to the pandemic and may be unaware they left behind retirement funds.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you follow the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 678-439-6236.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.