The U.S. Department of Labor (DOL) recently announced a nationwide campaign to educate employers and service providers about their fiduciary responsibilities under the Employee Retirement Income Security Act (ERISA). The program, entitled “Getting it Right- Know Your Fiduciary Responsibilities” is the latest in a series of compliance initiatives by the DOL’s Employee Benefits Security Administration (EBSA).
In her initial press release announcing the program, Secretary of Labor Elaine L. Chao indicated that “[s]trong fiduciary oversight and protecting workers’ benefits is our highest priority.” In a subsequent speech regarding the program, Secretary Chao emphasized the need for chief executive officers to be more vigilant about their responsibilities and for an executive level focus on benefit plan governance. Secretary Chao noted that, in the DOL’s view, such individuals may become personally liable as plan fiduciaries by their actions, even if they are not specifically named in plan documents.
The DOL’s increased focus on fiduciary issues also has been illustrated by several other announcements over the last few months including the following: a recent release on fiduciaries’ responsibilities in light of problems in the mutual fund industry; an announcement of the filing of proposed settlements to restore at least $66.5 million to the Enron 401(k) and employee stock ownership plans (including a requirement that certain former outside directors of the Enron Board of Directors and certain Human Resources employees personally reimburse the Enron retirement plans $1.5 million); and a proposed fiduciary regulatory safe harbor for automatic rollovers to individual retirement plans of certain mandatory cash-outs from tax-qualified pension plans. Further, the DOL’s website indicates that the DOL’s enforcement activity last year alone resulted in closing nearly 3,000 civil cases producing more than $1.3 billion in monetary results for plans or other corrective action involving a variety of pension, 401(k) and health plans.
Specifics on the Current DOL Program
The DOL’s current fiduciary education program is intended to increase awareness and understanding about basic fiduciary responsibilities when operating a benefit plan. The DOL has geared the program to small and medium-sized employers that have limited time, resources, and access to professional help with benefit programs. The new program combines free seminars around the country, new educational materials, and a dedicated webpage on EBSA’s website. (The DOL web page may be accessed at http://www.dol.gov/ebsa/fiduciaryeducation.html).
Although the DOL’s focus predominantly is on smaller employers, the DOL materials may be of some interest to employers of all sizes. First, there are some basic materials on fiduciary duties that may serve as a high-level overview of fiduciary duties. Second, the additional information the DOL has provided on its web page and in its seminar announcements provides some unique insight into what the DOL may view as common defects (and possible subjects of enforcement actions). The DOL topics include the following:
Understanding the terms of your plan and your responsibilities
Selecting and monitoring service providers such as a plan auditor
Making contributions on time
Avoiding prohibited transactions;
Analyzing the types of plan fees and expenses and evaluating whether they are reasonable and necessary
Making appropriate disclosures to plan participants and filing annual reports to the government on time
In addition to addressing these topics, the DOL also has provided links to some of its existing programs and publications including the latest version of its publication Reporting and Disclosure Guide for Employee Benefit Plans (updated April 2004); the DOL’s Delinquent Filer Voluntary Compliance Program (for those in violation of ERISA annual reporting requirements); and its Voluntary Fiduciary Correction Program (by which fiduciaries may avoid the 20 percent penalty the DOL imposes on an applicable recovery from a fiduciary breach and, in limited circumstances, IRS excise taxes associated with those transactions).
Going Beyond the DOL Program
For those employers needing a more comprehensive examination of fiduciary duties, McDermott Will & Emery offers its own fiduciary education program: “Managing ERISA Fiduciary Responsibility.” We designed this program because many of our clients are: (1) concerned about the extent to which directors or officers can be held personally liable under ERISA plans, including not just retirement plans but also health, life, LTD, and severance pay plans; (2) worried about the extent to which plaintiffs’ attorneys have begun to bring breach of ERISA fiduciary duty claims in addition to (or instead of) securities lawsuits; and (3) examining ERISA fiduciary compliance as a natural outgrowth of their Sarbanes-Oxley internal controls analysis.
Our ERISA fiduciary training program not only explains general fiduciary principles but, more importantly, provides practical suggestions on how fiduciary liability can be minimized or avoided entirely through careful planning, drafting and training. Our ERISA experts help directors, officers, and employees understand the legal requirements, identify their goals for an effective ERISA fiduciary structure, and provide concrete “next steps” to manage ERISA fiduciary liability. The program contains numerous sample documents and checklists to help fulfill ERISA fiduciary duties.