dol confidential: an insider's view of a dol retirement ...€¦ · defined benefit defined...
TRANSCRIPT
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DOL Confidential: An Insider's View of a DOLRetirement Investigation
Samuel Henson, CEBSSenior ERISA CounselLocktonKansas City, Missouri
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ERISA is Complex
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The “DOL”
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DOL Field Offices
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Our Goals Today
Why would the DOL investigate you?
What can you expect?
How can you prepare?
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Who Does the DOL Examine?
Single Employer
Multi-Employer
Defined Benefit
Defined Contribution
Some 403b and 457 Plans
Some Non-qualified Plans
Welfare Plans
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“Audit vs. Investigation”
A DOL “examination” may be referred to as:
Audit or Investigation
Your investigator or auditor may have a different expertise:
JD, CPA, or MBA
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What Causes a DOL Examination?
No DOL Investigation is Random
…Except “SEP Initiative”
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Four Ways to Trigger an Investigation
Annual Report Form 5500 Red Flags and Questions
Participant Complaint
Service Provider Referral
DOL Targeting Initiatives
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Annual Report Red Flags
Partnership/Joint Venture Interests
Administrative Expenses
Employer Securities
Personal Property
Real Property
Real Estate
Loans
“Other”
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Annual Report “Trap” Questions
DOL Uses ERISA Data System—“EDS”
Looking at 4 questions:
Failure to transmit employee contributions
Non-exempt party in interest transactions
Fraud or dishonesty losses
Hard to value assets
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Compliance Questions
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Service Provider Referrals
ERISA Co-Fiduciary Liability—Sect. 405(a):
Knowing participation or concealment
Enabling a breach to occur
No reasonable steps taken to remedy situation
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DOL Targeting Initiatives
MEWAs
Health Disclosures and Claims Issues
Settlor Fees
Employee Contributions
Recidivism
Abandoned Plans
Apprenticeship Plans
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The Investigation
Stage 1—Appointment Letter
Stage 2—On-site Investigation
Stage 3—Compliance
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Stage 1—The Appointment Letter
Audit period is three years (maximum of six)
Photo copies only
Request receipt
Tab to the appointment letter
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Stage 2—Onsite Investigation
Typically 1-5 days
May be away from the employer.
Organization = “Out the Door.”
Make people available.
Potentially 1-3 interviews.
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If Two Investigators Show Up . . .
Ask why?
Ask if this is a criminal investigation?
Cease voluntary cooperation.
Immediately seek counsel.
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Areas of Scrutiny
Corporate Governance/Plan Administration
Disclosure
Reporting
Bonding
Funding
Investment Selection/Monitoring/Fees
Service Providers Selection/Monitoring
Participant Loans
Contribution Testing
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What The DOL Is Really Looking For . . .
Violations
Monetary Recovery
Criminal Cases
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Stage 3—Compliance
Voluntary Compliance Letter (VCL)
Response
Negotiation
Action
Closing
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Potential Penalties
Civil penalty for fiduciary breach—502(l)20% of the amount recovered
The DOL may waive the penalty for financial hardship or acting in good faith
Only issue penalties for:Civil litigation
Formal settlements
Repeat offenders
Egregious situations
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The IRS’ Role
DOL will refer to the IRS.
IRS will assess an excise tax.
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Learn From the Experience
Examine your administrative practices.
Incorporate the DOL’s findings.
Don’t repeat mistakes.
Document your decisions, actions and considerations.
Improve record keeping and retention.
Learn to “investigate” yourself.
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Remember
Why the DOL investigates . . .
What the process involves . . .
Prepare yourself . . .
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Questions?
Thank You!
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