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LOCKTON RETIREMENT SERVICES

Department of Labor Update: Investigation Preparation Samuel A. Henson, J.D.—Senior ERISA Counsel

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ERISA is Complex

Simple WP&BC SF Spring Conference • May 17, 2012

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The “DOL”

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DOL Field Offices

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Our Goals Today

Why would the DOL investigate you?

What can you expect?

How can you prepare?

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Who Does the DOL Examine?

Single Employer

Multi-Employer

Defined Benefit

Defined Contribution

Some 403b and 457 Plans

Welfare Plans

WP&BC SF Spring Conference • May 17, 2012

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“Audit vs. Investigation”

A DOL “examination” may be referred to as:

Audit or Investigation

Your investigator or auditor may have a different expertise:

JD, CPA, or MBA

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What Causes a DOL Examination?

No DOL Investigation is Random

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Four Ways to Trigger an Investigation

Annual Report Form 5500 Red Flags and Questions

Participant Complaint

Service Provider Referral

DOL Targeting Initiatives

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Annual Report Red Flags

Partnership/Joint Venture Interests

Administrative Expenses

Employer Securities

Personal Property

Real Property

Real Estate

Loans

“Other”

WP&BC SF Spring Conference • May 17, 2012

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Compliance Questions

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Service Provider Referrals

ERISA Co-Fiduciary Liability:

Knowing participation or concealment

Enabling a breach to occur

No reasonable steps taken to remedy situation

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DOL Targeting Initiatives

Consultant Advisor Project

Health Benefits Security Project (MEWA Fraud)

Health Disclosures and Claims Issues

Settlor Fees Project

Employee Contributions Project

Recidivism

Abandoned Plans

Apprenticeship Plans WP&BC SF Spring Conference • May 17, 2012

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The Investigation

Stage 1—Appointment Letter

Stage 2—On-site Investigation

Stage 3—Compliance

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Stage 1—The Appointment Letter

A Few Tips:

v  Audit period is three years (maximum of six)

v  Photo copies only

v  Request receipt

v Organize to the appointment letter

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Stage 2—The On-site Investigation

A Few Tips:

v Where to conduct it

v Who should be available

v How long will it take

v  ERISA Counsel

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What Not To Expect . . .

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What To Expect . . .

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If Two Investigators Show Up . . .

Ask why?

Ask if this is a criminal investigation?

Cease voluntary cooperation.

Immediately seek counsel.

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Areas of Scrutiny

Corporate Governance/Plan Administration

Disclosure

Reporting

Bonding

Funding

Investment Selection/Monitoring/Fees

Service Providers Selection/Monitoring

Participant Loans

Contribution Testing

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What The DOL Is Really Looking For . . .

Violations

Monetary Recovery

Criminal Cases

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Stage 3—Compliance

Voluntary Compliance Letter (VCL)

Response

Negotiation

Action

Closing

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Potential Penalties

Civil penalty for fiduciary breach 20% of the amount recovered

The DOL may waive the penalty for financial hardship or acting in good faith

Only issue penalties for:

Civil litigation

Formal settlements

Repeat offenders

Egregious situations

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The IRS’ Role

DOL will refer to the IRS.

IRS will assess an excise tax.

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Learn From the Experience

Examine your administrative practices.

Incorporate the DOL’s findings.

Don’t repeat mistakes.

Document your decisions, actions, and considerations.

Improve record keeping and retention.

Learn to “investigate” yourself.

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Remember

Why the DOL investigates . . .

What the process involves . . .

Prepare yourself . . .

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Questions?

Samuel A. Henson, J.D.

Senior ERISA Counsel

Lockton Retirement Services

444 W 47th St., Suite 900

Kansas City, MO 64112

Tel: 816-751-2245

Mobile: 816-876-0159

E-mail: shenson@lockton.com

WP&BC SF Spring Conference • May 17, 2012