Do DOL stats offer EBSA enforcement clues?

Wait. Wasn’t Trump supposed to be the president that reduced regulation?

With all the hubbub about the death of the Fiduciary Rule, many have overlooked the reality of the DOL enforcement numbers. The Trump administration has shepherded the most dollars in recoveries from enforcement actions in at least the last eight years. Additionally, in Trump’s first year, total recoveries exceeded $1 billion for the first time since the current EBSA reporting format began in 2014.Last year did see the second lowest percentage of civil investigations closed with results (65.3 percent) and the lowest number of civil investigations referred for litigation since 2010; however, the number of individuals indicted stands as the third highest (113) in that same time period.

These statistics hardly suggest an administration dead set against regulation. They do, on the other hand, remind plan sponsors they better pay attention to compliance matters. The astute plan sponsor might ask, “What do these trends suggest regarding where the DOL might be focusing when it comes to enforcement?”

The numbers—and the commentary offered by EBSA—may indicate a couple of specific areas of enforcement concentration. As always when it comes to this type of analysis, “past enforcement does not guarantee future enforcement.”

Related: EBSA recovers $1.1 billion in FY 2017

The first area of discussion centers on what appears to be declining. It’s quite evident that enforcement results from the Voluntary Fiduciary Correction Program (VFCP) have fallen considerably since they peaked in 2013 at 72.1 million. Last year’s total (10 million) remains slightly above the previous year’s (9 million), but the downward trend appears to remain. The DOL states the VFCP “is a voluntary enforcement program that allows plan officials to identify and fully correct certain transactions.”

One specific category that appears to be on the upswing is the Abandoned Plan Program, which is up 50 percent from 2014 and nearly double the number from 2015. According to the DOL, this program “facilitates the termination of, and distribution of benefits from, individual account pension plans that have been abandoned by their sponsoring employers.”

Tie this together with the commentary provided by EBSA in its 2017 Fact Sheet, which states: “Of the $682.3 million recovered in its investigations, EBSA helped terminated vested participants in defined benefit plans collect benefits of $326.7 million due and owing to them.” Nearly half of the recoveries from enforcement actions benefited former employees.

What does this all mean for plan sponsors? First, don’t get your hopes up that you can skate by when it comes to compliance. “Reduced regulation” doesn’t mean “no regulation.” Second, if plan sponsors want to pick an area in which to be more diligent, it would be in matters pertaining to former employees.

Perhaps now is the time to rethink the plan’s strategy for catering to participants no longer affiliated with the firm. It may be in the best interest of the plan providers to keep them in the plan, but is it in the best interests of the plan sponsor and the former employee?