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DOL Investigations of Employee Benefit Plans: Navigating Enforcement Actions, Audits and Settlements

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

WEDNESDAY, November 7, 2018

Ivelisse Berio LeBeau, Partner, Sugarman & Susskind, PA, Miami

José M. Jara, Partner, FisherBroyles, LLP, New York

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DOL Investigations of Employee Benefit Plans: Navigating Enforcement

Actions, Audits and SettlementsWednesday, Nov. 7, 2018

Ivelisse Berio LeBeau, Esq. José M. Jara, Esq.Sugarman & Susskind, PA CKR Law, LLPMiami, FL New York, NY

Background: DOL and EBSA● U.S. Department of Labor has many

sub-agencies, including:● Employee Benefits Security

Administration (EBSA)◦ Charged with investigating ERISA violations◦ Subpoena Power

● Office of the Solicitor of Labor (SOL)◦ “in house” DOL counsel◦ Independent litigation authority

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EBSA● National Office ◦ Different divisions with different missions

● Regional Offices◦ Regional Directors◦ Pension Benefit Advisors● “customer service”; handle calls◦ Investigators●Usually attorneys or accountants◦ Supervisors●Usually former investigators

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EBSA: Civil and Criminal● EBSA has broad investigative authority● Most EBSA investigations are civil, but

EBSA also has authority to conduct criminal investigations◦ Same investigators◦ Some different rules for criminal cases◦ Criminal cases go to the U.S. Attorney’s

Office instead of DOL Solicitor’s● Enforcement Manual on website

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EBSA Enforcement Statistics● For FY2017 EBSA reports:◦ $1.1 billion recovered for direct payment to

plans, participants, beneficiaries● $682.3 million Enforcement Actions● $418.7 million Informal Complaint Resolutions◦ Over 1,700 civil cases closed; 65.3% with

results◦ 134 cases referred for litigation; 50 federal

lawsuits filed◦ 307 criminal cases closed; 113 indictments

● Presentation describes EBSA regional office investigations that led to these results

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Why me? (or who does EBSA investigate?)● EBSA investigators likely will not tell

you why your plan is being reviewed● Reasons for initiating reviews:◦ Employee/Participant Complaints●Other Complaints◦ Targeted: ●National Office Enforcement Projects●Regional Office Enforcement Projects● Information Reported on Form 5500s◦ Random?◦ Referrals from other agencies

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EBSA Enforcement Projects and Initiatives

● Available on EBSA website (https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/enforcement)

● National Enforcement Projects on:◦ Health Benefits Security Project (Part 7)◦ Contributory Plans Criminal Project◦ Protecting Benefits Distribution (new FY2018)◦ Employee Stock Ownership Plans◦ Plan Investments Conflicts

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EBSA Enforcement Projects and Initiatives

• Compliance Assistance/Enforcement: ◦ Abandoned Plans◦ Voluntary Fiduciary Correction◦ Delinquent Filer

• Enforcement Priorities◦ Major Case Enforcement Priority◦ Employee Contributions Enforcement

Initiative◦ Bankruptcy (REACT)

Investigation Subjects● All Types of Employee Benefit Plans:◦ Retirement, Health, Apprenticeship, Legal

● Plan Sponsors● Plan Trustees● Named Fiduciaries● Functional Fiduciaries● Plan Administrators● Service Providers◦ Consultants Custodians◦ Investment Advisors Directed Trustees

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What are they looking for?● Focus on investigating potential

breaches of ERISA fiduciary duty● Violations of:● ERISA §404 Fiduciary Duties● ERISA §406 Prohibited Transactions● ERISA §405 Co-Fiduciary Duties● ERISA Part 7 Health Plan

Requirements

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What are they looking for?● Common Scenarios:◦ Delinquent Employee Contributions◦ Excessive Service Provider Fees◦ Imprudent Investments◦ Plan Sponsor Bankruptcies◦ Part 7 violations in Health Plans◦ Abandoned Pension Plans◦ Hard to Value Assets

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EBSA Investigative Process

● EBSA Enforcement Manual on website● Initial Contact◦ Usually a letter/could be a phone call

● Request for Documents◦ Standard and non-standard requests◦ If don’t cooperate expect a subpoena◦ Accommodation subpoenas

● Notify Insurance Carrier? !16

Documents● Does request ask for copies to be sent

to EBSA office or for on-site review?◦ Pros and Cons to both◦ Copying Costs/Electronic Media

● Standard Requests:◦ Governing Plan Documents●Plan Document/Amendments●Trust Document/Amendments●SPD/SMMs

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Documents● Standard Requests◦ Required Reporting● 5500s●Annual Funding Notices●SBCs●Participant Statements●SARs ◦ Audits◦ Fidelity Bond/Fiduciary Liability Policy◦ Service Provider Contracts

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Documents● Standard Requests:◦ Plan Contribution records●Employee contributions●CBAs◦ Meeting Minutes◦ Participant Loan records◦ Income/Expenses/Journals◦ Appraisals◦ Part 7/ACA related◦ COBRA/HIPAA/other notices◦ Correspondence/E-mails

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Documents● Standard Requests:◦ Bank Accounts/Statements◦ Investment Accounts/Statements◦ Real Property Records◦ Securities/Bonds◦ Claims Adjudication Records

● Non-standard requests◦ Requests that refer to anything specific,

such as a specific investment/type of investment; a specific claim or type of claim; specific plan details

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On-site Review● Most investigations will include an on-

site review◦ “desk audit” exception

● What to Expect:◦ Usually at primary place of business◦ Can last days or weeks◦ Investigator will likely review documents ◦ Investigator may conduct interviews

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Interviews● Typically interviews held on-site,

sometimes at EBSA office◦ Voluntary◦ Not recorded◦ Not under oath◦ No time limit

● Attorney Present? ◦ Who’s the Client?

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Interviews● Common interview subjects:◦ Plan Administrator● If in-house or entity, could interview several

people who perform different functions◦ Trustees● If board usually designee or officers; could

interview all◦ Fiduciaries◦ Plan Sponsor

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Interviews● Standard Procedures/Disclosures● Circumstances matter:◦ Tone of interviewer◦ Attitude of interviewee◦ Point of investigation◦ Nature of Review

● Practice Tips● Administrative Depositions

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Follow Up (and why does it take so long?)● There will be follow up questions● There will likely be follow up requests

for documents● There could very likely be long periods

of time between requests, contacts● What’s happening at EBSA?◦ Reports- Investigator, Supervisor, National◦ Reviews-Supervisor, Regional, National

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After the investigation is complete ● Most investigations lead to a letter

from EBSA reporting the results● Possibilities:◦ No findings/Closing letter◦ Findings but no action/Closing letter◦ Voluntary Compliance Request◦ Referral to Solicitor’s Office for litigation

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Voluntary Compliance● EBSA encourages voluntary

compliance● Offered in almost all matters● Work with the investigator and correct

issues identified in the review◦ Change procedures◦ Adopt policies◦ Enforce policies◦ Restore assets◦ Repay monies◦ Correct prohibited transactions

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Voluntary Compliance●Submit response to VC Letter◦ Address all issues raised◦ Include any defenses to claims◦ Describe voluntary compliance

actions◦ Include exhibits◦ Include additional information as

relevant to address issues raised

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Voluntary Compliance● If money is paid to address issues—◦ Recoveries generally go to an employee

benefit plan◦ Recoveries could go to a person◦ Recoveries do not go to the DOL or

Treasury

● If address issues to EBSA’s satisfaction, EBSA will issue a No Action letter

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502(l)● ERISA §502(l) requires that the DOL

assess a 20% penalty on amounts recovered by settlement agreement or court order

● Are voluntary compliance actions taken in response to a VC letter from EBSA a settlement agreement?

● EBSA discretion to reduce penalty

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Referral to Solicitor’s Office● If voluntary compliance efforts fail, or

EBSA does not seek voluntary compliance, EBSA refers matter to Solicitor’s Office for litigation

● Office of the Solicitor◦ National Office/Pension Benefits Security

Division (PBSD)◦ Regional Offices◦ Represent DOL in federal court cases◦ Has independent litigation authority

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Solicitor’s Office (SOL)● SOL attorney will receive all

investigation materials, interview reports, and documents, along with EBSA report describing investigation and findings

● SOL attorney will conduct independent review of facts and claims

● SOL attorney will likely reach out to subjects of investigation

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Solicitor’s Office (SOL)● SOL response may include:◦ Request for tolling agreement◦ Request for documents◦ Request for meeting to discuss issues◦ Filing case in federal court

● Cases frequently settle with SOL ◦ Both before and after filing in federal court

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Solicitor’s Office (SOL)● Complaint/Consent Judgment◦ If enter into negotiations before SOL files

in federal court◦ SOL will file complaint with allegations◦ Simultaneously file negotiated consent

judgment◦ Several non-negotiable items:●No denials of liability●DOL will issue press release●DOL will assess 502(l) penalty

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Solicitor’s Office (SOL)● If negotiations with SOL fail, or if no

tolling agreement reached, or if facts show exigent circumstances, SOL will file complaint in federal court

● Will proceed as any other federal litigation

● Any settlement of case after filing will require settlement agreement with same parameters/limitations as Consent Judgment

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Related concerns● Internal Revenue Service◦ DOL only acts on its own behalf◦ Issues in DOL matter could raise excise

tax concerns, i.e.●Section 4975 if any prohibited transactions●Section 4980D if any health plan violations◦ Tax qualification issues are referred to IRS

● Participant Complaints◦ DOL action does not bind Plan participants◦ Participants can’t get same recovery twice

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Voluntary Fiduciary Correction Program (VFCP)

● The VFCP is NOT available if a plan is already under review

● If Plan is already being reviewed and attempt VFCP it will be denied

● If have self-identified fiduciary violations, and not under review, consider entering the VFCP and addressing the issues raised before EBSA opens an investigation!

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Questions? Ivelisse Berio LeBeau, Esq. José M. Jara, Esq.Sugarman & Susskind, PA CKR Law, LLP100 Miracle Mile, Suite 300 330 Ave. of Americas, 14th Fl.Coral Gables, FL 33134 New York, NY 10019Ivelisse@sugarmansusskind.com jjara@ckrlaw.com 305-529-2801 (212) 259-7338

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Ivelisse Berio LeBeau, Esq. Ms. Berio LeBeau has worked in the employee benefits law field for more than 20 years. Ivelisse counsels the boards of trustees of jointly administered multiemployer pension and welfare benefit funds; represents fiduciaries in litigation and in connection with government agency investigations; represents employees in employment law matters, including participants in ERISA benefit plans; and provides ERISA compliance advice to plan sponsors. Her practice has focused on the requirements and implications of the Affordable Care Act; the responsibilities of service providers to benefit plans; and representing plans and their trustees in investigations conducted by the U.S. Department of Labor. Prior to private practice, Ivelisse served as a Trial Attorney in the Solicitor’s Office of the U.S. Department of Labor for 13 years. At the DOL she represented the Employee Benefits Security Administration (“EBSA”) in lawsuits brought under ERISA alleging that fiduciaries to employee pension and welfare benefit plans breached fiduciary duties imposed by ERISA or were engaged in transactions prohibited under ERISA, including actions against fiduciaries who had made imprudent investment decisions and against service providers who generated and retained undisclosed indirect compensation. Ivelisse also worked closely with EBSA investigators providing legal support and assistance during EBSA investigations. Ms. Berio LeBeau has been a Fellow of the American College of Employee Benefits Counsel, an invitation-only organization of nationally recognized employee benefits lawyers who have made significant contributions to the advancement of the employee benefits field, since 2015.Ms. Berio LeBeau is Editor in Chief of the 4th edition of Employee Benefits Law, published by Bloomberg BNA Books in 2017, and of the first two Supplements to the 4th edition, published in 2018. She was previously co-editor of the 3rd edition of Employee Benefits Law and Editor in Chief of the 2014 and 2015 Supplements to the 3rd edition. This leading legal treatise is based on contributions by members of the Employee Benefits Committee of the American Bar Association’s Labor and Employment Law Section. Ivelisse is also a frequent speaker on employee benefits law topics at conferences and seminars sponsored by organizations including the American Bar Association, the International Foundation of Employee Benefit Plans, the Florida Bar Labor and Employment Section, and local bar and trade organizations.

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Jose M. Jara, Esq.

Mr. Jara is a partner and the ERISA & Employee Benefits Practice Group Leader at CKR Law, LLP. He has over 20 years of ERISA and employee benefits experience, ranging from governmental compliance, fiduciary liability insurance, to the application of ERISA’s fiduciary standards and prohibited transaction provisions. Mr. Jara has extensive experience resolving issues for corporate plan sponsors and multiemployer plans before the U.S. Department of Labor, where he was formerly a senior pension law specialist and investigator.

LL.M., Georgetown Law CenterJ.D., Benjamin N. Cardozo School of LawB.S., Manhattan College

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