Later in the month, my colleague will be hosting a webinar on the significant uptick in participant litigation against retirement plan fiduciaries and the corresponding impact on how plan sponsors should elect to manage risk.
This increased risk seems to be occurring simultaneously to a significant reduction to staff and enforcement activity at the Department of Labor’s (DOL) Employee Benefit Security Agency (EBSA).
Staffing at the EBSA is down 17% from its peak in 2012. The rate of decline has significantly increased since the close of 2016. While a reduction in enforcement action may benefit plan sponsors, those that are caught in normal department examinations may anticipate longer periods before examinations can be closed, thereby increasing the cost to the sponsor.
The risk trade-offs for plan sponsors from a fiduciary perspective are tricky. While DOL audits are more prevalent, resolving any findings with the DOL are generally amicable and straightforward. The rare litigation against fiduciaries by participants is infinitely more expensive to resolve, and the de facto examiner, (the plaintiffs’ attorney) is typically motivated to inflict the most pain upon the plan sponsor on behalf of their clients.
For those either under examination, or who find themselves subject to an examination, the course of action remains the same but becomes even more impactful. Creating an organized response to any DOL inquiry that demonstrates the prudence of process and compliance allows the examiner to quickly identify potential areas to probe and can swiftly move auditors to close an examination where no material findings are presented.
For a review of some of the typical information requested by the Department of Labor, please see our white paper, Get your Ducks in a Row: 58 Questions from the Department of Labor.
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