As to informal complaint resolutions, the EBSA did close a greater number of those complaints, 197,000 than previous years (such as 2021) but for less total amount. In 2023 the EBSA recovered $444.1 million, whereas in 2021 the EBSA closed 175,000 informal complaints for $499.5 million. In other words, the total number of complaints rose to 11% yet the amount recovered dropped by 12%.
One of the goals of our communications is to help financial advisors spot and address trends. We watch state and federal legislation, court cases, and regulatory actions. Early in the Biden Administration, we even examined the President’s choice of leaders in the Department of Labor. In that article, we said: “Overall, the chose of Su for Deputy Secretary of Labor and the early nomination of Frederick may indicate that the White House’s plans center on enforcement of workplace safety and prosecution of current labor standards and less on creating new regulations in the Labor and Employment area.”[1]
The best data on enforcement trends comes from, well, the enforcers themselves. We noticed that the Employee Benefits Security Administration recently issued its yearly overview of its enforcement activities covering its activities in 2023.[2] By way of refresher, the EBSA is the arm of the Department of Labor that enforces retirement plan regulations, specifically the Employee Retirement Income Security Act (ERISA).
To examine whether the agency had increased enforcement we did a side-by-side comparison of the 2023 overview with that of 2021.[3] The most noticeable difference is the significant drop in total recoveries by amount.In 2023, the EBSA “recovered $1.435 billion in direct payment to plans, participants, and beneficiaries….”. In 2021, it recovered $2.4 billion, a decrease of more than one third. Of the $1.435 billion recovered in 2023, the EBSA reported that more than half of the recovery actions came from enforcement action, and about a third were from informal complaint resolution. In 2021, the agency noted that it had a significant number of other actions, stating “In FY 2021, EBSA obtained 449 non-monetary corrections. Examples of these results included removal of 6 fiduciaries, orders barring 34 individuals from acting as fiduciaries, court appointments of 16 independent fiduciaries, and 124 cases involving reforms of plan procedures, such as improved search procedures for missing participants.”[4]
For 2023, the EBSA also noted that recoveries for former employees (those terminated) played a large role, amounting to almost a third of the total recovered across 5,690 vested participants in defined benefits pension plans. In 2021, the portion of the total recoveries for terminated vested participants made up slightly more (37%) but the program helped significantly more participants, 16,024.
Turning to the main event, the EBSA reported a total number of 731 cases, of which it closed 505 for a closure rate of 69%. Interestingly, this is the same percentage as in 2021, but shows a significant drop in overall cases. In 2021, the EBSA reported 1,072 civil investigations with 741 of those cases closed. Additionally of interest, in 2023, the EBSA referred 50 cases for litigation, a small drop from those referred in 2022, but a significant drop from the 70 cases it referred in 2021.
The data for criminal investigations is also nearly similar between the two years, with the EBSA opening 196 cases and closing 77 of them. It referred 60 cases to the Attorney General’s office for additional litigation as it cannot bring direct action in federal courts. In 2021, the EBSA opened 188 criminal investigations and closed 208 criminal investigations and referred 70 cases to the Attorney General. However, 118 of the 188 criminal cases it opened during 2021 involved health benefit plans. EBSA’s criminal investigations, including criminal investigations conducted in coordination with other law enforcement agencies, led to the indictment of 72 individuals.
The total number of annual reports the EBSA received in 2021 and 2023 differ in a somewhat significant manner. In 2021, the EBSA received 22,553 annual reports and “handled over 21,000 filer inquiries to help filers meet their reporting obligations.” In 2023, the EBSA received 18,955 annual reports and “handled over 16,000 filer inquiries to help filers meet their reporting obligations.” The drop in annual reports between the two years is 16%, a significant amount.
As to those informal complaint resolutions, the EBSA did close a greater number of those complaints, 197,000 than previous years (such as 2021) but for less total amount. In 2023 the EBSA recovered $444.1 million, whereas in 2021 the EBSA closed 175,000 informal complaints for $499.5 million. In other words, the total number of complaints rose to 11% yet the amount recovered dropped by 12%.
Interestingly, in 2023 the agency touted its “other victories” in its overview of actions. “ EBSA also achieved other victories for workers and their families, such as the elimination of illegal benefit plan provisions, improved fiduciary governance of plans and increased access to mental health benefits.”[5]
Overall, it appears we may have gotten our prediction on increased enforcement action slightly wrong. While the agency did continue to move on additional regulations, including those involving independent contractors and the resurrection of the fiduciary rule, the slight increase in enforcement action is not the larger uptick we predicted in 2021.
[1] https://www.bcgbenefits.com/blog/looking-ahead
[2] https://www.dol.gov/newsroom/releases/ebsa/ebsa20240213
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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