EBSA Threats of ‘Alternative Enforcement Actions’ Trigger ARA Response

A regional office of the Employee Benefit Security Administration (EBSA) has been threatening enforcement actions against plan sponsors who correct the late deposit of participant contributions or loan repayments without making a formal submission under the DOL’s Voluntary Fiduciary Correction Program (VFCP).

The EBSA letter, signed by Chris Davis, Associate Regional Director of EBSA’s Chicago Regional Office, threatens “alternative enforcement measures” if the plan sponsor does not file a VFCP application within 60 days of receiving the letter. The EBSA letter is apparently being sent to plan sponsors who, on Form 5500, reported the late deposit of participant contributions and/or loan repayments and correction outside of VFCP.

In response, the American Retirement Association (ARA) has filed formal comments with Mable Capolongo, Director of EBSA’s Office of Enforcement, objecting to the threatening language in the letter. Noting that, “In effect, the letter is telling plan sponsors the DOL may open a full blown investigation unless a VFCP application is filed right away,” the ARA letter points out that the “inappropriate” threats are “clearly intended to scare plan sponsors into participating in what is supposed to be a voluntary program,” and “contradictory to the DOL’s own longstanding guidance with regard to VFCP.” The ARA notes that the language “flies in the face of the President’s efforts to reduce regulatory burdens and should cease immediately.”

Commenting that, “Plan sponsors should not be threatened with the heavy hand of a government investigation simply because they choose not to use a voluntary government program,” the ARA letter requests that the DOL immediately cease threatening that “alternative enforcement measures” may be taken against plan sponsors who self-correct late deposit violations outside of VFCP, and recommends that to reduce regulatory burdens, the DOL add a self-correction component to VFCP as soon as possible.

The latter “ask” refers to numerous comment letters from the ARA recommending the addition of a self-correction component to VFCP. “We have regularly brought this subject up in meetings with the DOL and we are disappointed nothing has moved forward over the last nine years,” the ARA reminds, noting that adding a self-correction component is directly in line with the President’s directive to reduce regulatory costs and burdens.