Earlier this month, the Department of Labor (DOL) announced that Employee Benefits Security Administration (EBSA) investigators, in the enforcement of the Employee Retirement Income Security Act of 1974 (ERISA), recovered $1.435 billion for ERISA complaints and other benefits violations in fiscal year (FY) 2023. Markedly, the funds were direct payments to plans, participants, and beneficiaries. Consequently, ERISA complaints can result in significant fines and penalties if the Employee Benefits Security Administration finds violations. For example, in September 2022, the DOL announced a settlement costing a sizeable financial institution $131.8 million for ERISA violations.
The Employee Retirement Income Security Act of 1974 (ERISA)
Generally, ERISA gives the Employee Benefits Security Administration authority to protect employee retirement investments. In brief, federal law sets minimum standards for private industry plans. Among the retirement plan requirements set forth by ERISA are fiduciary responsibilities for managers and controllers of plan assets. Specifically, ERISA requires plan fiduciaries to act in the financial interests of plan participants. To that end, plan fiduciaries must take professional care when choosing investment options for inclusion in 401(k) plan menus. In fact, these obligations of prudence and loyalty are called “the highest known to the law.” Pension plans alone hold $12.8 trillion in assets. And in the end, fiduciaries are personally liable for any losses resulting from a breach of duty.
Overall, EBSA oversees approximately 765,000 retirement plans, 2.8 million health plans, and 619,000 other welfare benefit plans. In sum, these plans cover 153 million workers, retirees, and dependents.
Employee Benefits Security Administration Enforcement Fact Sheet
In February 2024, the EBSA published a fact sheet providing an overview of its enforcement actions for fiscal year 2023. Specifically, the fact sheet covers actions taken from October 1st, 2022, to September 30th, 2023. The following figures break down EBSA’s more than $1.4 billion in recoveries for plan participants. In detail, the agency reported:
- 731 civil investigations closed, with 505 resulting in monetary recoveries totaling $844.7 million
- Recovery of $444.1 million in total benefits from individual complaints
- $61.2 million recovered through the Abandoned Plan program
- Voluntary Fiduciary Correction Program recoveries of $84.5 million
Through its enforcement of ERISA, the EBSA is responsible for ensuring the integrity of the private employee benefit plan system in the United States. According to EBSA, these results demonstrate a strong, fair, and effective program that protects the benefits of America’s workers, retirees, and their families.
Employer Takeaways
In conclusion, fiduciaries and employers should always manage plan assets in the best financial interests of plan participants and employees. Additionally, employers should review the retention requirements for employee benefit records under ERISA so that related documentation is sufficient to determine the benefits due or which may become due to such employees.