Fiduciary Investigations Program

1. Purpose. The purpose of this section is to provide guidance on fiduciary investigations.

2. Statutory Requirements. The Employee Retirement Income Security Act (ERISA) expressly gives the Secretary direct responsibility and authority to investigate fiduciary violations of Title I of ERISA. In accordance with that authority, fiduciary investigations will be used to investigate potential violations involving ERISA, Title I, Part 4:

   1. Section 402 - Establishment of plan;
   2. Section 403 - Establishment of trust;
   3. Section 404 - Fiduciary duties;
   4. Section 405 - Liability for breach of co-fiduciary;
   5. Section 406 - Prohibited transactions;
   6. Section 407 - 10 percent limitation with respect to acquisition and holding of employer securities and employer real property by certain plans;
   7. Section 409 - Liability for breach of fiduciary duty;
   8. Section 410 - Exculpatory provisions; insurance; and
   9. Section 412 - Bonding.

   ROs investigate violations of ERISA, Title I, Part 1 in terminated plans that have assets either not allocated or distributed prudently and in accordance with the terms of the plan.

3. Elements of Fiduciary Violations. The following are basic elements of ERISA fiduciary violations:
   1. The plan and the assets involved are subject to the provisions of Part 4 of Title I of ERISA in accordance with the requirements of ERISA Section 401.
   2. At least one violator was a fiduciary within the meaning of ERISA Section 3(21) at the time the breach occurred.
   3. The fiduciary violated one or more sections in Part 4 of Title I of ERISA, resulting in a breach of fiduciary duty. Investigators/Auditors must show that the fiduciary action(s) are not subject to statutory or regulatory exemptions or regulatory variances.
   4. Evidence collected satisfies the various statutory definitions of terms contained in Title I of ERISA. For example, if a party in interest transaction is involved, establish that the individual or entity is a party in interest within the meaning of ERISA Section 3(14).
   5. Each fiduciary violation must fall within the timeliness provisions of ERISA Section 413.

4. Case Development. Enforcement strategies, annual operating plans, and National Office (NO) policy statements provide direction to identify areas of potential non-compliance and may emphasize the review and investigation of certain types of fiduciary investigations or issues. ROs should consider factors such as local economic conditions, geographical coverage within an RO’s jurisdiction, and specialized plan types.

   Sources for potential fiduciary investigations include:

   1. Computer generated compilations of selected employee benefit plans or service providers derived from reports filed with EBSA;
   2. Information derived from detailed review and analysis of annual reports, supporting financial statements, schedules, exemption application files, and other internal EBSA sources;
   3. Information concerning employee benefit plans or service providers derived from other governmental agencies such as PBGC and OLMS;
   4. Information concerning employee benefit plans or service providers derived from non-governmental sources such as newspapers, industry journals, and industry magazines;
   5. Information concerning employee benefit plans or service providers derived from knowledgeable parties such as advocacy groups or private litigants;
   6. Complaints from participants, fiduciaries, informants, or other sources in the community. Allegations of acts against a participant or beneficiary for exercising any right to which they are entitled under the provisions of an employee benefit plan, or interfering with the attainment of any right to which the participant may become entitled, should be handled as described in the Enforcement Manual (EM) section on Participant Rights; and
   7. Compilations of selected employee benefit plans or service providers derived by using combinations of the sources.
5. Preliminary Investigative Activities. Before opening a case or going on-site, the RO should:
   1. Obtain all recent financial reports filed by the plan.
   2. If the plan has filed an exemption application pertaining to a prohibited transaction, get a complete copy of the application from the National Office for review.
6. Case Opening.
   1. Consistent with National and Regional priorities, the RO will open cases when:
      1. The RO acquires information indicating a potential ERISA violation; or
      2. The NO directs it.
   2. ROs will open fiduciary investigations and pension service provider investigations as a Program 48. Although health investigations may include fiduciary violations, health plan investigations should be opened under Program 50, unless they qualify for opening under a Program 43 or 47.
   3. The case opening should briefly describe the reasons for opening the case, any materials reviewed before opening the case, and the dates of such review. The summary section of the case opening form will include:
      1. The pertinent facts that form the basis for opening an investigation,
      2. The nature of the complaint or other information received,
      3. Whether a service provider is involved and if so, the identification of the service provider(s),
      4. The ERISA related issues raised by the complaint or information,
      5. The specific ERISA sections potentially violated, and
      6. The results of the global search of EBSA’s indices.
7. Planning the Investigation.

   1. Written Investigative Plan. At the RD's discretion, prepare investigative plans for cases in the form of a memorandum to the supervisor. A written investigative plan can help supervisors and Investigators/Auditors use limited resources productively. See Figure 1 for the suggested format for preparing the investigative plan.

      Further, when working complex matters that are categorized as Major Cases, ROs should capture substantive case characteristics and track and document the development of case progress, as appropriate.

   2. Supervisor Review. The supervisor will review the investigative plan, make any necessary changes, and indicate the date of approval of the original investigative plan. After approval of the original plan and notification to Investigator/Auditor, the investigative plan becomes part of the file.
   3. Updating the Investigative Plan. Whenever the Investigator/Auditor or the supervisor concludes a need for a major change in the original investigative plan, the Investigator/Auditor should prepare a written update of the investigative plan. As appropriate, the supervisor will review and approve the updated investigative plan. See Figure 2 for the suggested format in updating the investigative plan.
8. Disclosure of Basis of Investigation. EBSA generally does not reveal the basis or source of an open investigation.
9. Investigation of Possible Criminal Violations. Follow the procedures set forth in the EM section on the Criminal Investigations Program when there are possible criminal violations of ERISA Sections 411, 501, 511, and related sections of USC Title 18.
   1. Dual Responsibility. If a criminal investigation is appropriate, ROs will open a separate Program 52 case to investigate the possible criminal violations. The RD must decide whether to investigate both cases simultaneously or sequentially. Criteria to assist in making this decision are set forth in the EM section on the Criminal Investigations Program.
   2. Postponement or Delay Requests. Federal, state, or local governmental agencies may request that EBSA postpone or delay a civil ERISA investigation or witness interviews/testimony. The RO should consider such requests after receiving a written request or an oral request confirmed in a letter to the requesting agency by the RD, stating the reasons why a postponement or delay is appropriate and the length of the anticipated delay. The RO may consult with OE before making any EBSA decision or response regarding the request.
10. Prohibited Persons. If the investigation discloses possible civil violations of ERISA Section 411, ROs will open a Program 47 case. Follow the procedures for a Program 47 case in the EM section on Prohibited Persons.
11. Apparent Violations of Participant Rights. If the investigation discloses possible ERISA Section 510 violations involving acts against a participant or beneficiary for exercising any right to which they are entitled under the provisions of an employee benefit plan, or interfering with the attainment of any right to which the participant may become entitled, the RO should immediately open a Program 43 case. Follow the procedures for a Program 43 case in the EM section on Participant Rights.

12. Fiduciary Violations Involving Gifts and Gratuities. Investigations may disclose possible fiduciary violations involving a plan fiduciary's acceptance, from a party dealing with the plan, of consideration such as meals, gifts, entertainment, or expenses associated with educational conferences. In such cases, the Investigator/Auditor should determine whether the facts support an allegation that the receipt of gifts, gratuities, or other consideration were for the fiduciary's personal account and received in connection with a transaction or transactions involving the assets of the plan as required for a violation of ERISA section 406(b)(3). The Investigator/Auditor should also determine whether the fiduciary or the plan maintained a reasonable written policy or plan provision governing the receipt of items or services from parties dealing with the plan and whether the fiduciary adhered to that policy.

    Further, for enforcement purposes only, the Investigator/Auditor generally should adhere to the following guidelines:

    1. The Investigator/Auditor should treat as insubstantial, and not as an apparent violation of ERISA section 406(b)(3), the receipt by a fiduciary (including their relatives) of the following items or services from any one individual or entity (including any employee, affiliate, or other related party). These items will be treated as insubstantial, if their aggregate annual value is less than $250 and their receipt does not violate any plan policy or provision: (a) gifts, gratuities, meals, entertainment, or other consideration (other than cash or cash equivalents) and (b) reimbursement of expenses associated with educational conferences.
    2. The Investigator/Auditor should not treat the reimbursement to a plan of expenses associated with a plan representative's attendance at an educational conference as a violation of ERISA section 406(b)(3) under the following conditions. A plan fiduciary must have reasonably determined, in advance and without regard to whether such expenses will be reimbursed that: (a) the plan's payment of educational expenses in the first instance was prudent, (b) the expenses were consistent with a written plan policy or provision designed to prevent abuse, (c) the conference had a reasonable relationship to the duties of the attending plan representative, and (d) the expenses for attendance were reasonable in light of the benefits afforded to the plan by such attendance and unlikely to compromise the plan representative's ability to carry out their duties faithfully in accordance with ERISA. The fiduciary's determination should be in writing.

13. Investigative Checklists. As part of a fiduciary investigation, an Investigator/Auditor will complete certain checklists to determine compliance with ERISA. In addition, Investigator/Auditors should complete other checklists appropriate to the issues identified in the investigation. The following are the checklists that will be completed.

    1. IRS checklist. For further guidance about the IRS checklist, see the EM section on the Relationship with IRS.
    2. Bonding Checklist & Bonding Computation Checklist. Investigator/Auditor will use these checklists to determine whether a plan’s fidelity bond complies with ERISA Section 412 (Figure 3).
    3. Reporting and Disclosure Checklist. Investigator/Auditor will use this checklist to determine whether the plan complies with its ERISA reporting and disclosure requirements (Figure 4).
    4. Individual Benefit Statement Compliance Checklist. Investigator/Auditor will use this checklist to determine whether the Individual Benefit Statements issued to plan participants complies with ERISA (Figure 5).

    All completed checklists will be retained in the case file. If the RO discovers a potential bonding, reporting, or disclosure violation in a fiduciary case, the Investigator/Auditor may attempt to resolve such a violation during the investigation with the RD’s approval. The Investigator/Auditor will report bonding, reporting, and disclosure corrections in the report of investigation and include documentation of the correction in case file.

14. Investigative Activity.

    1. Investigation Guidelines. Items in the investigation guidelines (Figure 6) are not mandatory or all-inclusive, but applied as appropriate for the plan or other entity under investigation. The guidelines are arranged in two parts:

       1. Part I - Background Information. This part includes plan information such as data related to the type and size of plan, the responsible parties, etc., and
       2. Part II - Review Procedures. This part is designed to investigate compliance with and potential violations of ERISA, particularly fiduciary violations.

       The Investigator/Auditor performs additional investigative steps not covered in the guidelines when required to develop and investigate possible violations.

    2. Additional Investigative Activity. The scope of the investigation can expand beyond the original allegations or areas of inquiry after new information has been uncovered.

15. Document Request Letters and Subpoenas. After the case opening, the Investigator/Auditor may use a document request letter to request information beyond what is necessary to support information filed with the Secretary under Title I of ERISA. Letters may be sent to the plan, Plan Sponsor, and plan service providers, including the Plan Administrator and Third-Party Administrator. Figure 7 is an example of a plan document request letter.

    Depending on the facts and circumstances, the Investigator/Auditor may send a subpoena in conjunction with or instead of a document request letter. In consultation with SOL and before a subpoena is issued, EBSA will request the minimum information necessary to accomplish investigative objectives. See EM section on Subpoenas for more information.

    Subsequent document requests or subpoenas may be necessary.

16. Receipts for Books, Records, and Documents Obtained. For guidance, see the EM section on Collection and Preservation of Evidence.
17. Investigations Involving Applications for Exemptions.
    1. If a plan has a pending application for exemption from a prohibited transaction, the RO should advise OE of the pending application. OE will coordinate with OED. In no instance should the RO provide OED with information obtained during the investigation.
    2. The RO should not assume that because the factual situation under investigation is similar to previously granted individual exemptions, further investigation is unnecessary. The investigation should continue to its completion.

18. No ERISA Violations Found. When the investigation does not identify any ERISA violation(s), the Investigator/Auditor will prepare a Closed ROI in the appropriate ROI format (see Form 203a (Figure 8), Form 203b (Figure 9), or Form 203c (Figure 10)) and a pattern closing letter to be sent to plan officials. The RD will approve and sign all closing letters prior to issuance.

    For further guidance on Voluntary Compliance and Closing letters, see the EM section on Voluntary Compliance Guidelines.

19. Technical Advice. When the RO needs technical advice concerning the existence of actionable ERISA violations, appropriate remedial procedures including voluntary compliance, or similar matters, ROs will contact OE or OFA for assistance.
20. ERISA Violations and Voluntary Compliance (VC). When the investigation identifies ERISA violations, the RD will determine, in accordance with EBSA policy, whether to pursue corrective action through voluntary compliance. For guidance on pursuing voluntary compliance and issuing a VC notice letter, see the EM section on Voluntary Compliance Guidelines.
21. VC Notice Letters and Reports of Investigation for Voluntary Compliance Cases.
    1. The Investigator/Auditor should prepare a VC notice letter (see the EM section on Voluntary Compliance Guidelines) and statute of limitations matrix for Supervisory and RD review.
       1. If the case involves numerous or complex issues or the basis for the asserted violations is not apparent from the VC notice letter alone, the RD may require the Investigator/Auditor to provide supporting workpapers (see the EM section on Collection and Preservation of Evidence).
       2. The RD may also require the Investigator/Auditor to prepare a detailed memorandum explaining all the issues and citing supporting facts or a Closed ROI or Action ROI (see paragraph 22 below).
    2. RDs will approve and sign all VC notice letters and closing letters prior to issuance. Copies of all approved and dated VC notice letters and closing letters sent to plan officials or other related parties become part of the case file and available to OE and OFA. The case and program number should be noted on all VC notice and closing letters.
    3. In voluntary compliance cases in which full compliance is achieved, or if partial or no compliance is achieved but the case will not be referred for litigation, the Investigator/Auditor will prepare a Closed ROI in the appropriate ROI format (see Form 203a (Figure 8), Form 203b (Figure 9), or Form 203c (Figure 10)).
    4. If an Action ROI has already been prepared, the Investigator/Auditor may prepare a supplemental memorandum to reflect the outcome of the voluntary compliance process, rather than preparing a Closed ROI.
    5. All 502(l) and 502(i) civil penalty issues must be resolved before a case may be closed. The outcome of the penalty issues must be addressed in the Closed ROI or supplemental memorandum.
    6. In a voluntary compliance case where there is only partial or no compliance, and the case is appropriate for litigation referral, the Investigator/Auditor will prepare an Action ROI and accompanying documents in accordance with paragraph 22 below.

22. Action Reports of Investigation. The Investigator/Auditor will prepare an Action ROI together with exhibits and a cover memorandum whenever: (1) the RD determines that there are established violation(s) of Part 4 of Title I of ERISA that remain uncorrected, and (2) the litigation referral serves enforcement priorities.

    The RO must send the approved Action ROI, cover memorandum, and exhibits to PBSD and RSOL. A copy of the approved and dated Action ROI, cover memorandum, and exhibits must be maintained in the case file.

    1. Preparation of Action ROIs. An Action ROI should describe the facts obtained during the investigation and necessary to show each element of the alleged violations. The ROI should also set forth evidence, if any, that contradicts or does not support the elements of the violations. In addition, it should contain facts regarding each element of any applicable statutory or administrative exemption. The ROI should not state that all elements are met unless it also describes the facts that support that conclusion.

       Every Action ROI must include both a list of exhibits attached to the Action ROI and a list of file material, documents, and workpapers maintained in the RO that were obtained or prepared during the investigation, but not exhibited. See Figure 11 for the format of an Action ROI.

       The following general rules apply to the preparation of all ROIs:

       1. Report all material allegations and leads pursued during an investigation.
       2. The ROI should be objective and not contain legal analysis, recitation or paraphrasing of ERISA, assumptions, Investigator/Auditor opinions, or other extraneous matters. Such items are more appropriately included, if at all, in a cover memorandum accompanying the ROI.
       3. All significant facts presented in the report must be supported by a reference to an exhibit (Action ROIs) or by file material and workpapers (Closed ROIs). Cite the page and paragraph number of the exhibit when an exhibit exceeds two pages in length.
       4. The ROI should be concise and clearly written.
       5. The ROI should identify or define terms, individuals, or abbreviations the first time they are used.
       6. The ROI should report all significant facts contained in the exhibits.
       7. Investigator/Auditor should promptly prepare a ROI after an investigation is completed.

    2. RD Cover Memorandum Format. The RD’s cover memorandum must accompany each Action ROI and include:

       1. a summary of the facts;
       2. a discussion of ERISA violations;
       3. loss computation(s);
       4. statute of limitations analysis;
       5. potential defendants' defenses and financial condition, if known;
       6. voluntary compliance efforts;
       7. the existence (if any) of a parallel criminal investigation;
       8. recommendation(s) for remedies; and
       9. footnotes on page 1 reflecting IRC 6103 material or referrals to OCA, as appropriate.

       See Figure 12 for the format of the RD cover memorandum.

    3. Notification of Current and Upcoming Litigation Referrals. ROs will send quarterly reports to PBSD, RSOL, OE, and OFA of all current litigation referrals and any upcoming litigation referrals.
23. Case Closing - No Other Action. When the RO pursues voluntary compliance with full, partial, or no compliance, the RO should follow case closing procedures outlined in the EM section on Voluntary Compliance Guidelines.
24. SBREFA Notice. ROs will provide the SBREFA Notice to all plan sponsors, plans, or plan service providers with fewer than 100 participants or employees during the course of a Title I of ERISA civil investigation. See EM section on Voluntary Compliance Guidelines for more information on the SBREFA notice.

(Figure 1)
Memorandum Format for Fiduciary Case Investigative Plan

Subject:
Name of Plan
Location
EIN
File No.
To: Supervisor
Date:

Investigative Plan for Subject Case

Results of Search of Indices and Exemption Applications

Summarize any pertinent information in the Regional Office files, which might have a bearing on the investigation.

Analysis and Scope of Investigation

1. Allegations/Investigative Leads/Basis for Investigation.

   Analyze each allegation, investigative lead, or area of investigation within the context of the applicable sections of the statute, interpretations, and regulations. Identify and individually address each allegation, investigative lead, or area of investigation using the following general outline:

   1. Set forth the issue being investigated, being as concise as possible without sacrificing the meaning.
      1. Indicate which sections of ERISA, if known, appear to have been violated, including applicable references to the statute, regulations, and/or agency guidance.
      2. List the elements of proof needed to establish that a violation has occurred.
      3. Describe the scope of the proposed inquiry. (This section of the work plan should be used to limit, if possible, the expected duration of the inquiry, and to estimate when the investigation should be closed if no evidence of potential violations is found. A well- planned investigation should estimate how much time and effort should be expended before the costs of pursuing the investigation outweigh its potential benefits).

Planned Investigative Activity

By issue, describe what records will be reviewed, what interviews will be conducted, and what information and documentation will be developed. Use the following outline to describe the planned investigative activity.

1. General.

   Set forth any investigative activity not related to resolving a specific issue such as verifying the adequacy of the plan's bond.

2. Allegation/Lead/Area of Investigation.

   Identify all the activity needed to fully investigate the allegation/lead identified in II.A. above.

3. Allegation/Lead/Area of Investigation #2. Repeat as in b, for all allegations/leads. Investigator's/Auditor's Name, Signature, and Date

Approved: ____________________ Date: ____________________ (Initials of Supervisor)

(Figure 2)
Memorandum Format for Updated Fiduciary Case Investigative Plan

Subject:
Name of Plan
Location
EIN
File No.
To: Supervisor
Date:

Update of Investigative Plan

1. Changes in Original Plan

   Fully describe any deletions from the original plan together with the reasons for the deletions.

2. Additional Planned Investigative Activity

   Fully describe changes in direction or what additional investigation will be conducted. Investigator's/Auditor's Name, Signature, and Date

Approved: ____________________ Date: ____________________ (Initials of Supervisor)

(Figure 3)
Bonding Checklist

Bonding Computation Sheet

The amount of bond shall be fixed at the beginning of each reporting year and is determined by the funds "handled" by plan officials during the preceding year.

1. Total assets, beginning of preceding year

   	Asset	Total
   1.	Cash (on hand and in banks)	__________
   2.	Governmental securities	__________
   3.	Corporate debt securities	__________
   4.	Corporate stocks (common and preferred)	__________
   5.	Shares in registered investment companies	__________
   6.	Real Estate	__________
   7.	Mortgages	__________
   8.	Loans other than mortgages	__________
   9.	Value of interest pooled fund	__________
   10.	Value of unallocated group annuity contracts, cash surrender values	__________
   11.	Other assets	__________
   	Total A	__________

2. Receipts during preceding reporting year

   	Receipts	Total
   1.	Contributions	__________
   2.	Interest	__________
   3.	Dividends	__________
   4.	Rents	__________
   5.	Profit from sale of assets (sale price less market value at beginning of preceding reporting year or value at transactions date if purchased during the preceding year) Note: The proceeds (profit or loss) from the sale of assets have not been included in this bonding computation since it is not possible to identify the necessary valuations to obtain this specific computation from the annual report.	__________
   6.	Other	__________
   	Total, B	__________
   	Total, A and B	__________

3. Applicable Adjustments

   	Applicable Adjustments	Total
   1.	Accrual basis accounting: Plus accts. receiv. – beginning of year Less accts. receiv. – end of year	__________
   2.	Small plan (using audit waiver) (Note: the small plan waiver calculation is determined as of the end of the preceding year.) Year ending:	__________
   	a. Qualifying employer securities	__________
   	b. Permitted participant loans	__________
   	c. Total assets held by:	__________
   	i. Bank or financial institution	__________
   	ii. State-qualified insurance company	__________
   	iii. Registered broker-dealer	__________
   	iv. Other entity authorized to act as trustee for an IRA	__________
   	d. Shares held by registered investment comp.	__________
   	e. Participant directed assets that appear on a statement issued by an entity described in (c)	__________
   	f. Sub-total: (qualifying plan assets)	__________
   	Plan total (A):	__________
   	Divide sub-total by plan total	__________

4. Required Bond

   	Required Bond	Total
   1.	General Required Bond: Minimum $1,000, Maximum $500,000	__________
   2.	If the plan holds employer securities, for plan years beginning after December 31, 2007, the maximum bond is $1,000,000	__________
   3.	Small plan (using audit waiver): If the percentage in C.2.f is 95% or more, general bonding rules apply: If the percentage in C.2.f is less than 95%, the bond must be the greater of the general required bond or the amount of the non-qualifying assets: (Reg. §2520.104-46)**	__________

   ** Note: If a small plan is required to have a bond in the higher amount of the non-qualifying assets, the correction is not merely to obtain a bond in the future, but to either obtain one retroactively or to conduct an audit for the years in which the plan failed to have the proper bond.

Prepared by:
Date Prepared:
Case #:
Case Name:

(Figure 4)
Reporting and Disclosure Checklist

Prepared by:
Date Prepared:
Case #:
Case Name:

(Figure 5)
Investigative Guidelines Individual Benefit Statements

Individual Benefit Statement Compliance Checklist
Participant-Directed Individual Account Plans

[For use with plans that permit participants to direct the investment of assets held in their individual account]

Timing:

1. Within what period of time following the end of the quarter(s) were statements furnished to participants? __________
2. If statements were furnished within a period longer than 45 days following the end of the quarter(s):
   1. Within what period were statements (typically) furnished? __________.
   2. What was the reason given for taking longer than 45 days?
3. ____________________________________________________________________________________________________ With regard to furnishing benefit statements to plan beneficiaries, were statements generally furnished within a reasonable period of time (such as 30 days) following receipt of a written request, taking into account the circumstances of the request?
   Yes _____ No _____. If “No”, what was the reason given for the longer period?
   ____________________________________________________________________________________________________
   ____________________________________________________________________________________________________

Content:

Did the benefit statement furnished or made available to participants contain the following information:

Individual Benefit Statement Compliance Checklist
Individual Account Plans WITHOUT Participant Direction

[For use with plans that do not permit participants to direct the investment of assets held in their individual account. Note: the ability to obtain a participant loan is not participant direction for this purpose]

Timing:

1. Within what period of time following the end of the year were statements furnished to participants? __________
2. If statements were furnished within a period longer than 45 days following the end of the year: a) Within what period were statements (typically) furnished? __________. b) What was the reason given for taking longer than 45 days?
   ____________________________________________________________________________________________________
   ____________________________________________________________________________________________________
   ____________________________________________________________________________________________________.
3. ____________________________________________________________________________________________________ With regard to furnishing benefit statements to plan beneficiaries, were statements generally furnished within a reasonable period of time (such as 30 days) following receipt of a written request, taking into account the circumstances of the request?
   Yes _____ No _____. If “No”, what was the reason given for the longer period?
   ____________________________________________________________________________________________________
   ____________________________________________________________________________________________________

Content:

Did the benefit statement furnished or made available to participants contain the following information:

Individual Benefit Statement Compliance Checklist
Defined Benefit Plans

Election:

Defined benefit plans are required to furnish benefit statements to participants and beneficiaries at least once every 3 yearsOR such plans may elect to furnish at least once a year a notice informing participants of the availability of a pension benefit statement and how to obtain such a statement.

Plan has elected to furnish benefit statements every three years (earliest statement required to comply with the new requirements would be due for the 2009 plan year). Yes _____ No _____
(Note: If the plan is furnishing or intends to furnish benefit statements annually, although not required to do so, answer “Yes.”)

If “No,” has the plan provided (or does the plan intend to) furnish an annual notice (Note: first required annual notice would be for the 2007 plan year).
Yes _____ No _____
Date on which notice was (or will be) furnished ____________________

Annual Notice Alternative:

If a plan has elected to furnish an annual notice, does the annual notice:

1. Explain that participants have a right to request and receive a pension benefit statement? Yes _____ No _____
2. Explain how participants can request and receive a pension benefit statement from the plan? Yes _____ No _____

Pension Benefit Statement:

Did the plan provide a pension benefit statement to each participant with nonforfeitable benefits and who is employed by the employer maintaining the plan at the time the statement is furnished?

Yes ____________________________________________________________________________________________________
No ____________________________________________________________________________________________________

Did the benefit statement furnished or made available to participants contain the following information:

Statements Upon Request

1. With regard to furnishing benefit statements to participants and beneficiaries following receipt of a written request, were statements generally furnished within a reasonable period of time (such as 30 days) following receipt of a written request, taking into account the circumstances of the request?
   Yes _____ No _____. \If “No”, what was the reason given for the longer period?
   ____________________________________________________________________________________________________
   ____________________________________________________________________________________________________
   ____________________________________________________________________________________________________.
2. Did the furnished statements contain the “content” information described above?
   Yes _____ No _____

Prepared by:
Date Prepared:
Case #:
Case Name:

(Figure 6)
Investigation Guidelines

Part I. Background Information

Obtain the following data for the pension or welfare plan which has been selected for investigation.

Note: You need not complete the following items to the extent that the data is already in your possession; for example, on Form 5500.

1. General
   Plan name __________________________________________________
   Plan sponsor name __________________________________________
   Plan administrator name ____________________________________
   Sponsor EIN _______________________ Plan number ___________
   Plan address _______________________________________________
   ____________________________________________________________
   Contact person ____________________ Telephone _____________

2. Coverage (describe types and locations of employees covered by the plan) number of participants __________
   active __________
   retired or separated

   Type of Plan

   Pension	Welfare	Administration
   _____ defined benefit	_____ health benefit	_____ single employer
   _____ profit sharing	_____ fully insured	_____ multi-employer
   _____ stock bonus	_____ self-funded	_____ other
   _____ target benefit	_____ life insurance
   _____ other money purchase	_____ other
   _____ ESOP
   _____ other

   total __________

3. Type of Plan
4. Contributions
   Sponsor (number and types of employers, unions or other organizations contributing to plan)
   __________________________________________________
   __________________________________________________
   Participants contribute _____ yes _____ no
5. Funding
   __________ trusteed
   __________ insured
   __________ both trusteed and insured from sponsor assets name and location of trust fund
   __________________________________________________
   insurance carriers and insurance vehicles_________
   __________________________________________________
   total plan assets $ __________ at (date) _________

6. Plan Managers (include named fiduciaries)

   Name	Title (officer, trustee, committee member, etc.)

7. Service Providers (attorney, accountant, actuary, insurance agent, contract administrator, investment manager, etc.)

   Name	Company	Type of Service

8. Verifications
   date of most recent audit by outside auditors _______________
   date of most recent review by internal auditors _____________
   date of most recent actuarial valuation ____________________
9. Plan Documents
   List the basic documents, which establish and govern the plan and/or trust
   ____________________________________________________________________________________________________
   ____________________________________________________________________________________________________
   ____________________________________________________________________________________________________
10. Plan Records
    List the basic books and records of the plan, e.g., contribution records, participant hours/earnings/ benefits, records, investment policies, claim forms and files, bank statements, trust reports, cash books, journals, ledgers, inventories, investment reports, etc.
    ____________________________________________________________________________________________________
    ____________________________________________________________________________________________________
    ____________________________________________________________________________________________________
    ____________________________________________________________________________________________________
11. List related plans and trusts
    ____________________________________________________________________________________________________
    ____________________________________________________________________________________________________

Part II. Review Procedures

1. Fiduciary - Establishment of Plan
   1. Determine that the employee benefit plan has been established pursuant to a written instrument.
   2. Determine that the written instrument provides for one or more named fiduciaries.
   3. Determine that the plan
      1. provides a procedure for establishing and carrying out a funding policy consistent with plan objectives.
      2. describes any procedure for allocating responsibilities for the operation and administration of the plan.
      3. provides a procedure for amending the plan and for identifying the persons who have authority to amend the plan.
      4. specifies the basis on which payments are made to and from the plan.
2. Fiduciary - Establishment of Trust
   Ascertain that assets of the plan are held in trust [unless the assets are insurance contracts, are held by insurance companies or are otherwise exempted by section 403(b)].
3. Fiduciary Duties
   1. Examine all or selected expenses paid or incurred by the plan for the last year in an attempt to identify expenses which were not incurred exclusively to provide benefits to participants and their beneficiaries or to defray reasonable plan administrative costs. Examine income and expense statements and the general ledger accounts for unusual expenses (accounts). Examine selected cash disbursements and non-cash transactions and supporting documentation for transactions, which appear unrelated to operating the plan.
   2. Examine administrative expenses for categories that appear unreasonably costly in relation to other similar plans.
   3. Explore the management of plan operations by examining whether contributions are collected timely; cash is deposited promptly; investment certificates are properly safeguarded; assets are appropriately insured; reserves and retentions held by insurance carriers are not unreasonable; tax qualified status with IRS is maintained; PBGC insurance is current.

   4. Analyze plan investments to ascertain extent of diversification. Consider diversification:

      1. among types of investments, i.e., stocks, bonds, real estate, etc.;
      2. within types, i.e., is common stock all of one or two companies; and
      3. geographical areas of investment.

      Determine if investment portfolio appears to adhere to investment policy in plan instruments, minutes of meetings, etc.

   5. Read the basic plan documents and note substantive policy direction (other than investment policy) to the plan fiduciaries and examine if it is being followed.
   6. Inquire whether any plan funds are invested in assets which are beyond the reach of United States courts in contravention of section 404(b).
4. Fiduciary - Co-Fiduciary Liability
   Examine selected allocations of fiduciary responsibilities (other than trustee responsibilities) to both named fiduciaries and other fiduciaries, to determine if they have been allocated in accordance with the instrument under which the plan is maintained.
5. Fiduciary - Prohibited Transaction
   1. Obtain a list of parties in interest from the plan. Compare to the lists of plan sponsors, plan managers, and service providers obtained in Part I of these guidelines. Determine how plan management identifies parties in interest and how plan fiduciaries prevent inadvertent party in interest transactions from occurring.
   2. Inquire as to any applications for individual exemptions from prohibited transactions for the plan and their status. Compare with OED information available at RO, and clarify if necessary. Also be aware of applicable statutory and class exemptions.
   3. For selected sales, purchases, and lease property transactions by the plan during the period being investigated, examine property records and supporting documentation to ascertain if any of the transactions were between the plan and a party in interest.
   4. Examine accounts receivable, accounts payable, cash receipt records, and cash disbursement records for the period under examination in an attempt to identify any loan of money or extension of credit by the plan to or from a party in interest.
   5. For the period being investigated, examine expense accounts representing acquisition of goods, services or facilities by the plan. For selected transactions, ascertain whether they were acquired by the plan from a party in interest.
   6. Inquire as to any plan assets, which have been transferred. Ascertain whether such assets were transferred to parties in interest.
   7. For some of the larger and continuous transactions in which the plan engages, e.g., purchases/sales of securities, purchases/sales of properties, placing of insurance contracts, advisory and consulting fees, etc., ascertain the organizations that acted as broker, agent, consultant, etc. Determine whether any of the plan's fiduciary have had any ownership or direct involvement in these organizations, or have received any remuneration from their organizations.
6. Fiduciary - Employer Securities and Real Property
   Request a listing of all employer securities and properties held by the plan. Ascertain whether any such post-ERISA acquisitions have resulted in holdings by the plan of employer securities and properties in excess of 10% of total plan assets (measured on a fair market value basis).
7. Bonding
   The Bonding Checklist and Bonding Computation Sheet will ordinarily be completed for every plan. See Figure 3.
8. Reporting and Disclosure
   The Reporting and Disclosure Checklists and Individual Benefit Statement Compliance Checklist will ordinarily be completed for every plan. See Figure 4 and Figure 5.
9. Verifying Financial Data Reported
   Verify the accuracy of plan financial data reported to DOL on the most recent annual report by:
   1. Determining whether the plan is exempt from completing financial data on annual report forms and from engaging an independent qualified public accountant pursuant to DOL regulation.
   2. Determining for non-exempt plans that the annual report, related schedules, and accountant's opinion have been completed and reported, as appropriate.
10. Verifying Assets Held by Third Parties
    If a plan fiduciary or other plan official indicates that plan assets are being held by a third party, such as an investment manager or custodian, verify that the assets exist and are in the name of the plan by contacting the third party directly.
11. Claims Procedures
    Determine whether plan instruments and operating procedures provide for:
    1. Prompt handling of claims from participants and beneficiaries.
    2. Notice in writing to participants and beneficiaries of claim denials and reasons therefore.
    3. Full and fair review by a named fiduciary of claim denials.

Prepared by:
Date Prepared:
Case #:
Case Name:

(Figure 7)
Sample Document Request Letter

Month DD, YYYY

Plan Administrator XYZ Corporation
234 N. Fairfield Street
Somewhere, Illinois 12345

Re: XYZ Plan

Dear Sir:

As you know, our office will be reviewing XYZ Plan for compliance with Title I of the Employee Retirement Income Security Act (ERISA), which establishes standards governing the operation of employee benefit plans such as XYZ Plan.

Submitting relevant documents to our office before the on-site field investigation begins, can help to:

• increase the speed of the process,
• reduce the administrative burden for plan and corporate officials, and
• (in some cases) eliminate the need for an on-site visit entirely.

Please submit to this office by DATE OF LETTER + 10 WORKING DAYS the documents indicated on the checklist below for the XYZ plan. You can also send the documents electronically to: [INVESTIGATOR NAME]@dol.gov.

Thank you for your cooperation. If you have any questions, please contact Investigator/Auditor ______________________________ at 200-321-1234.

Sincerely,

Please Submit Copies of the Items Listed Below:

(Figure 8)
Form 203a ROI – Fiduciary Case - Plans

(Figure 9)
Form 203b ROI – Fiduciary Case – Financial Institutions

(Figure 10)
Form 203c ROI Fiduciary Case – Service Providers

(Figure 11)
Action Report of Investigation - Sample Format

This document is the property of the Employee Benefits Security Administration.
Its contents are not to be disclosed to unauthorized persons.

File No.

Subject: (Last Name of Complainant) v. Employer

Date

Address of Employer

By Investigator/Auditor
Approved by

EIN/PN
Status: Action

1. Predication
   State the reasons for case opening and for making an investigative effort. Briefly present facts potentially relevant to timeliness under Section 413. Such facts would include, but are not limited to, the following:
   1. The date the case was opened;
   2. The date on which information was received which resulted in the opening of the investigation and a description of that information (including source and recipient);
   3. The date the investigation began; and
   4. The earliest date that any information or document was received that suggested a violation of ERISA and a description, including source and recipient, of that information.
2. Potential Jurisdictional Problems
   If no jurisdictional problems are anticipated, enter "None". If any are known, set forth the facts to identify them and document jurisdiction under the appropriate section of ERISA. Any issue or potential defense relating to whether the plan is covered under ERISA should be set forth in this section.
3. Background
   Briefly cite the facts that will establish the following:
   1. Type of Plan
   2. Date and place Plan was established
   3. Plan Sponsor
   4. Type of benefits provided
   5. Type of administration
   6. If jointly administered, name the participating union(s)
   7. Number of Participants - active/retired
   8. Plan Assets - Gross
   9. Include other background facts as appropriate such as, private litigation and bankruptcy proceedings.
4. Bonding; Reporting And Disclosure; And Fiduciary Liability Insurance
   1. Briefly cite the facts that will establish that the bonding and reporting and disclosure requirements have been met, or cite the violations uncovered and the corrective actions taken.
   2. If the fiduciaries do not have fiduciary liability insurance, state that fact. If the fiduciaries have fiduciary liability insurance cite the name of the company, effective date of the policy, and amount of the policy. If, because of the nature of the fiduciary breach, more than one company had the fiduciary liability contract, cite the relevant companies, effective dates, and amount of policies.
5. Plan Administration And Financial Operation
   Where appropriate this section of the report should include, but not be limited to, information concerning: identities and principal duties of all plan officials and principal employees and service providers during the relevant period, including dates of service; funding method; internal controls; investment policies and practices; benefit payment procedures; collection of contributions; and other relevant information relating to plan administration and financial operation.
6. Request for Variances and Exemptions
   Include under this heading any variances or exemptions that have been requested, and the decision, if any, by OED, or present the status of the request.
7. Issues & Findings⁽¹⁾
   1. Use the heading "The Issue/Alleged Violation of Section(s) ______________." Present all the facts from which a conclusion(s) can be drawn that the pertinent section(s) of Part 4 was violated (support with exhibits). In the first paragraph(s) under this heading, set forth facts, which establish whether at least one violator was a fiduciary within the meaning of section 3(21) of ERISA at the time of the occurrence of the fiduciary breach.
      In subsequent paragraphs, set forth the facts to establish the breach of fiduciary responsibilities.
      In the next paragraph(s) present facts necessary to show timeliness under section 413.
      In the next paragraph(s), in situations where efforts were made to obtain voluntary compliance, indicate the results of such efforts. Include copies of any correspondence or RIs of conferences with plan officials as exhibits.
      In the final paragraph(s) set forth the position of the fiduciary and any other involved party on the possible violation.
   2. Describe the next issue, and alleged ERISA violation, in the format set forth above.
8. Other Findings
   This heading can be used to present facts or any other investigative activity not previously mentioned.

Exhibits

All significant facts presented in the report should be supported with exhibit citations. The following procedures should be used in submitting exhibits.

1. State the name of the individual who is the subject of an RI, signed statement or sworn administrative testimony and the date of the interview or testimony.
2. Documents, schedules, etc., should be complete and precisely identified.
3. Each supporting document should be the final version of the document under which the parties are operating at the time of the alleged breach.
4. Each supporting document should be a separate exhibit.
5. Multiple page exhibits should be numbered.
6. Exhibits should be identified by number.
7. All copies must be legible.
8. All plan documents (trust agreement, etc.), relevant minutes of meetings of plan fiduciaries, canceled checks, contracts/agreements, or any other supporting documents pertaining to the transaction(s) at issue, third-party corroborating interviews and/or records, and expert opinions, if any, must be included as exhibits.
9. Fiduciary liability insurance policy(s) held on the date(s) of the alleged violation(s) and/or at any time subsequent to that date should be included as exhibits. Attempts should be made to determine if the policies are/were in force.
10. Copies of all annual reports, with attachments, which have been filed by the subject plan subsequent to the transaction or action at issue, must be included as exhibits.

List of documents and workpapers available in RO but not used as exhibits

List documents, schedules, RIs etc., in the RO file that were not included as exhibits. Identify all applicable dates of such documents (e.g., date prepared, date received, etc.).

(Figure 12)
Format For Regional Director’s Cover Memorandum To An Action Report

Memorandum For:
____________________
Office of the Solicitor
(Regional Solicitor and PBSD)

From:
____________________
Regional Director
XYZ Regional Office

Subject:

Name and Address of Plan/Related Entity^(2,3)
EIN/PN ____________________
And/or ____________________

Introduction: Identify the RO/DO which conducted the investigation, the plan and plan sponsor name(s), and the related entity, if applicable.

Briefly describe the issues and the total apparent losses involved.

Background: Briefly describe the plan(s) and/or related entities involved, including type, nature of benefits/services provided, type of administration, number of participants/plans serviced, and amount of plan assets.

Facts/Violations: Briefly summarize the essential facts demonstrating each violation. For each issue discuss ERISA section(s) violated, and explain the basis for any loss computation.

Statute of Limitations: Discuss the statute of limitations date applicable to each issue identifying the earliest applicable date(s).

Position of the Fiduciaries/Related Parties: Discuss the position of the fiduciaries and/or other parties on each issue, if known. If unknown, state the reason(s) why the RO was unable to obtain this information (e.g., parties' refusal to be interviewed).

Financial Condition of the Fiduciaries/Related Parties: Discuss the financial condition of the fiduciaries and/or related parties, if known. If unknown, state the steps taken by the RO to obtain this information. Also state whether the fiduciaries have fiduciary liability insurance.

Issues Resolved Through Voluntary Compliance: Briefly discuss any issue(s) resolved through voluntary compliance, including any 502(l) implications.

Parallel Investigations: Note any parallel criminal investigations being conducted involving the subject plan and/or its fiduciaries.

Recommendations: Discuss the appropriate remedies, for each violation identified, including but not limited to restitution, rescission of prohibited transactions, removal of fiduciaries, appointment of a receiver, disgorgement, indemnification of the plan against future losses, injunctions against future service to ERISA plans, imposition of 502(i) and 502(l) penalties as applicable, etc.

Footnotes

1. The Secretary of Labor has the authority to conduct such reviews under Section 504 of ERISA, 29 USC §1134, which states in part: "The Secretary shall have the power, in order to determine whether any person has violated or is about to violate any provision of this title or any regulation or order thereunder ... to make an investigation, and in connection therewith to require the submission of reports, books, and records, and the filing of data in support of any information required to be filed with the Secretary under this title ...."
2. This memorandum and the Action ROI on page(s)____ , and exhibits ____ contain IRC 6103 information and should be handled accordingly.
3. This case presents possible reporting deficiencies and/or blackout deficiencies for which ERISA section 502(c)(2) and/or 502(c)(7) civil penalties may be imposed by OCA and which have been referred to OCA. This case presents possible IQPA deficiencies referred to OCA.