Initiative by Plan May Blunt DOL Probe Impact
The Department of Labor (DOL) has been investigating your client’s plan, and release of its findings is imminent. There’s not much guidance on how to avoid running afoul of the rules, but that doesn’t mean you’re helpless.
In “How to Respond to DOL Pension Plan Investigatory Findings
,” an entry in Morgan Lewis BeneBits Blog, Partner Brian Dougherty discusses DOL probes and offers some suggestions about what to do.
The DOL has been investigating or auditing “a number of large employer defined benefit pension plans” for “the last couple of years,” Dougherty observes. While such probes purportedly are intended to examine plan documents and administration, he says that they “nearly always focus on deferred vested participants who are eligible to receive, but are not receiving, pension distributions.”
Accordingly, Dougherty says, DOL investigators typically request lists of such participants, develop random samples of them, and try to locate, contact and direct payments to them. And the DOL is often better at it than plans are, he says.
After the Probe
After an investigation, the DOL sends a plan administrator a letter containing its findings, as well as enforcement steps and penalties. The DOL typically offers to forestall enforcement steps if a plan administrator spells out in a settlement with the DOL what it will do to rectify deficiencies the investigation revealed.
However, “nowhere do these letters articulate the specific standards or prudent processes to which the fiduciary is being held, nor do they correlate the required corrective actions with standards or processes that the DOL believes would satisfy ERISA’s fiduciary requirements,” Doughtery notes. Instead, he says, “it appears that the DOL overlooks the longstanding and well-established hallmark of fiduciary compliance — a prudent process — by focusing instead on the outcomes of the plan’s administration, with the benefit of hindsight.”
With few exceptions, Dougherty says, the DOL provides no guidance on a fiduciary’s responsibility to maintain good records, nor on the scope of its obligations to resolve discrepancies. Rather, he suggests that rather than being helpful, the DOL exerts pressure by threatening enforcement.
What to Do
Plan administrators underestimate the amount of attention the DOL pays to such investigations —
as well as the risk of an unfavorable outcome — at their peril, Dougherty warns.
Preemptive action by plan administrators may be especially helpful, he suggests — both before and after the investigation. “Early and clear communication with the DOL, including the clarification of any misperceptions that may occur from reviewing plan records without the benefit of dialog, can help direct the course of an investigation and even help close the investigation,” Dougherty writes. In addition, he suggests that it may behoove plan administrators to respond to DOL investigations and requests for documents and information “promptly and proactively.”
Doughtery also suggests that plan administrators take initiative regarding settlement agreements, and that they consider proposing agreements that will be “reasonable and workable” for them. And since there is a dearth of formal guidance, he says, there therefore also is “an opportunity for plan administrators to take the initiative to try to conclude these matters favorably and without any finding of fiduciary breach.”