(Photo: Mike Scarcella/ALM)
The Employee Benefits Security Administration needs additional oversight powers and resources to protect benefit plans under ERISA, the Labor Department's Office of Inspector General says.
"We have previously found that as much as $3.3 trillion in pension assets, including an estimated $800 billion in hard-to-value alternative investments, held in otherwise regulated entities such as banks, received limited-scope audits that provided few assurances to participants regarding the financial health of their plans," the OIG said in his semiannual report to Congress.
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The report includes the OIG's activities between March 2021 and September 2021, but also includes recommendations to Congress for legislative changes and to the Labor Department for administrative changes.
The OIG said that EBSA needs to focus its resources on investigations that are "most likely to result in the deterrence, detection, and correction of ERISA violations" particularly when the number of benefits plans it oversees is compared with the number of investigators it has.
In addition, EBSA lacks the authority under the Federal Employees' Retirement System Act to effectively oversee more than $790 billion in federal employee Thrift Savings Plan assets, the IG said.
The IG said that Congress should make changes to ERISA to enhance the protection of assets in retirement plans. Those legislative changes include:
Repealing ERISA's limited-scope audit exemption. The exemption excludes pension plan assets invested in financial institutions from audits of employee benefit plans. The exemption keeps accountants who are auditing pension plans from offering an opinion on the plans' financial statements, according to the report.
Expand EBSA's authority to correct substandard benefit plan audits and to ensure that auditors with poor records do not perform additional plan audits. The changes should include the authority to levy civil penalties against auditors, the IG said.
Require pension plan auditors to report ERISA violations to the Labor Department. Under existing law, an auditor is required to report potential violations to the plan administrator, but not to the DOL.
Strengthen criminal penalties for such crimes as embezzlement or theft from employee pension and welfare plans, making false statements in documents required by ERISA and bribery. The sentences for those violations now stand at between three and five years. The OIG suggested increasing those penalties to ten years.
In addition to concerns about the oversight of retirement plans, the OIG raised serious concerns about the Labor Department's ability to safeguard data and information systems. The report said that the department has implemented a new Information Technology governance model, but that deficiencies remain in the DOL's ability to identify vulnerable areas, protect systems and data and to recover from security incidents.
"These deficiencies represent ongoing risks to the confidentiality, integrity, and availability of DOL's information systems, which are necessary to support the Department's mission," the OIG said.
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