EBSA Press Release: Labor Secretary Herman Supports New Legislation to Protect Pensions [07/29/1997]

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Secretary of Labor Alexis M. Herman applauded Representatives Christopher Shays (R-Ct.) and Donald Payne (D-N.J.) for introducing legislation today that would give the Labor Department greater enforcement authority to protect the $3.5 trillion held in private pension plans for American workers.

"One of my top priorities is to guarantee that all Americans enjoy a secure pension when they retire. This bipartisan legislation will enable the Labor Department to move more quickly against serious fraud and abuse that jeopardizes workers' pensions," Herman said.

"We will continue to work closely with Congressmen Shays and Payne to improve pension enforcement to make retirement security a reality for all Americans," said Herman.

The legislation, called the Security and Enforcement Compliance for Retirement under ERISA Act (SECURE Act), is virtually identical to the Administration's proposal transmitted to Congress on June 10, 1997. The SECURE Act would amend the Employee Retirement Income Security Act (ERISA) to:

• repeal the limited scope audit and require that plans of 100 or more participants be subjected to a full audit by independent public accountants;
• require direct reporting by the plan administrator or accountants of serious cases of fraud and abuse involving plan assets; and
• create new qualification standards for accountants who conduct ERISA audits.

Note to Editors: A fact sheet explaining the provisions of the
SECURE Act is attached.

Fact Sheet

U.S. Department of Labor 
July 29, 1997

Security and Enforcement Compliance for Retirement under ERISA Act (SECURE)

The SECURE Act amends the Employee Retirement Income Security Act of 1974 (ERISA) and would:

• REPEAL LIMITED SCOPE AUDITS: ERISA currently permits plan assets held in certain regulated financial institutions to be excluded from the annual financial audit requirements for plans with 100 or more participants. Auditors, however, may disclaim any opinion as to whether the financial statements are fairly presented, even for assets not held by financial institutions. Under the proposal, accountants would no longer be able to issue audit reports that provide no assurance that plan assets are secure.
• PROVIDE QUALITY CONTROL REVIEWS FOR AUDITORS: This proposal would require ERISA auditors to have an external quality control review and satisfy continuing education requirements relating to ERISA plan audits. Substandard auditors' reports were the basis for rejecting more than 1,800 annual reports over the past 2-1/2 years.
• REQUIRE DIRECT REPORTING OF EGREGIOUS VIOLATIONS: The audit proposal would place new, faster reporting duties on auditors who are terminated by an ERISA plan or who discover evidence of serious violations of law or other irregularities. Auditors would provide notice directly to the Pension and Welfare Benefits Administration only if they first notified the plan administrator and the administrator failed to notify PWBA within a certain time, unless the administrator is implicated. Under the bill, auditors would have mainly "backup" reporting responsibilities: the primary reporting obligation would remain with the plan administrator.
• CLARIFY THE ASSESSMENT OF CERTAIN FIDUCIARY PENALTIES: The legislation also clarifies that section 206(d)(1) of ERISA does not preclude an ERISA-covered pension plan from offsetting a participant's accrued benefits against amounts owed to the plan due to the participant's breach of fiduciary duty. It would also amend ERISA section 502(l) to provide the Secretary of Labor with discretion to reduce the 20 percent penalty that otherwise applies to amounts recovered after breaches of fiduciary duty. Without this change, parties have a disincentive to voluntarily settle when the Secretary of Labor finds violations because current law triggers the 20 percent penalty.