Employee Benefits Security Administration: Improvements Have Been Made to Pension Enforcement Program but Significant Challenges Remain
Published: 2005-06-09T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Congress passed the Employee Retirement Income Security Act of 1974 (ERISA) to address public concerns over the mismanagement and abuse of private sector employee benefit plans by some plan sponsors and administrators. The Department of Labor's Employee Benefits Security Administration (EBSA) shares responsibility with the Internal Revenue Service and the Pension Benefit Guaranty Corporation for enforcing ERISA. EBSA works to safeguard the economic interest of more than 150 million people who participate in an estimated 6 million employee benefit plans with assets in excess of $4.4 trillion. EBSA plays a primary role in ensuring that employee benefit plans operate in the interests of plan participants, and the effective management of its enforcement program is pivotal to ensuring the economic security of workers and retirees. Recent scandals involving abuses by pension plan fiduciaries and service providers, as well as trading scandals in mutual funds that affected plan participants and other investors, highlight the importance of ensuring that EBSA has an effective and efficient enforcement program. Accordingly, this testimony focuses on describing EBSA's enforcement strategy, EBSA's efforts to address weaknesses in its enforcement program along with the challenges that remain.
section_title: What GAO Found
paragraphs: EBSA's enforcement strategy is a multifaceted approach of targeted plan investigations. To leverage its enforcement resources, EBSA provides education to plan participants and plan sponsors. EBSA allows its regional offices the flexibility to tailor their investigations to address the unique issues in the regions, within a framework established by EBSA's Office of Enforcement. The regional offices then have a significant degree of autonomy in developing and carrying out investigations using a mixture of approaches and techniques they deem most appropriate. Participant leads are still the major source of investigations. EBSA officials told us that they open about 4,000 investigations into actual and potential violations of ERISA annually. To supplement their investigations, the regions conduct outreach activities to educate both plan participants and sponsors. The purpose of these efforts is to gain participants' help in identifying potential violations and to educate sponsors in properly managing their plans and avoiding violations. Finally, EBSA maintains a Voluntary Fiduciary Correction Program through which plan officials can voluntarily report and correct some violations without penalty. EBSA has taken steps to address many of the recommendations we have made over the years to improve its enforcement program, including assessing the level and types of noncompliance with ERISA, improving sharing of best investigative practices, and developing a human capital strategy to better respond changes in its workforce. EBSA reported a significant increase in enforcement results for fiscal year 2004, including $3.1 billion in total monetary results and closing about 4,400 investigations, with nearly 70 percent of those cases resulting in corrections of ERISA violations. Despite this progress, EBSA continues to face a number of significant challenges to its enforcement program, including (1) the lack of timely and reliable plan information, which is highlighted by the fact that EBSA is currently using plan year 2002 and 2003 plan information for its computer targeting, (2) restrictive statutory requirements that limit its ability to assess certain penalties, and (3) the need to better coordinate enforcement strategies with the Securities and Exchange Commission, which is highlighted by recent scandals involving the trading practices and market timing in mutual funds and conflicts of interest by pension consultants.

section_title: Letter
paragraphs: I am pleased to be here today to provide an overview of our past work  reviewing the Department of Labor’s Employee Benefits Security  Administration (EBSA) enforcement program. EBSA works to safeguard  the economic interest of more than 150 million people who participate in  an estimated 6 million employee benefit plans with assets in excess of $4.4  trillion. EBSA plays a primary role in ensuring that employee benefit plans  operate in the interests of plan participants, and the effective management  of its enforcement program is pivotal to ensuring the economic security of  workers and retirees.
Congress passed the Employee Retirement Income Security Act of 1974  (ERISA) to address public concerns over the mismanagement and abuse  of private sector employee benefit plans by some plan sponsors and  administrators. ERISA is designed to protect the rights and interests of  participants and beneficiaries of employee benefit plans and outlines the  responsibilities of the employers and administrators who sponsor and  manage these plans. The recent bankruptcies of some large corporations  and the effects on employees’ retirement savings and the federal pension  insurance program expose certain vulnerabilities in our private pension  system. Such problems point out the need for comprehensive pension  reform. Also, recent scandals involving abuses by pension plan fiduciaries  and service providers, as well as trading scandals in mutual funds that  affected plan participants and other investors highlight the importance of  ensuring that EBSA has an effective and efficient enforcement program.
Today, I would like to discuss the evolution of EBSA’s enforcement  program and the challenges that remain. GAO has conducted several  studies of ERISA enforcement issues, and my statement is largely based on  that work.
In summary, EBSA’s enforcement strategy is a multifaceted approach of  targeted plan investigations supplemented by outreach and education. To  leverage its enforcement resources to prevent and detect violations and  promote overall compliance with ERISA, EBSA provides education to plan  participants and sponsors and allows the voluntary self-correction of  certain transactions without penalty. EBSA’s education program for plan  participants aims to increase their knowledge of their rights and benefits  under ERISA. EBSA has taken steps to address many of the  recommendations we have made over a number of years to improve its  enforcement program, including assessing the level and types of  noncompliance with ERISA, improving sharing of best investigative  practices, analyzing the sources of cases, and developing a human capital  strategy to better respond changes in its workforce. EBSA reported a  significant increase in enforcement results for fiscal year 2004, including  $3.1 billion in total monetary results and closing nearly 4,400  investigations, with nearly 70 percent of those cases resulting in  corrections of ERISA violations. Despite this progress, EBSA continues to  face a number of significant challenges to its enforcement program. Such  challenges include lack of timely and reliable plan information, restrictive  statutory requirements that limit its ability to assess certain penalties, and  the need to better coordinate enforcement strategies with the Securities  and Exchange Commission. As we have previously reported, legislative  changes will be required to address some of these issues. Furthermore, the  Congress should consider providing EBSA with additional enforcement  tools, such as enhanced penalty authority, to meet these challenges.  Finally, EBSA needs to continue to look for ways to better target  investigations to leverage its limited resources.
subsections: section_title: Background
paragraphs: Three agencies share responsibility for enforcing ERISA: the Department  of Labor (EBSA), the Department of the Treasury’s Internal Revenue  Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC).  EBSA enforces fiduciary standards for plan fiduciaries of privately  sponsored employee benefit plans to ensure that plans are operated in the  best interests of plan participants. EBSA also enforces reporting and  disclosure requirements covering the type and extent of information  provided to the federal government and plan participants, and seeks to  ensure that specific transactions prohibited by ERISA are not conducted  by plans. Under Title I of ERISA, EBSA conducts investigations of plans  and seeks appropriate remedies to correct violations of the law, including  litigation when necessary. IRS enforces the Internal Revenue Code (IRC)  and provisions that must be met which give pension plans tax-qualified  status, including participation, vesting, and funding requirements. The IRS  also audits plans to ensure compliance and can levy tax penalties or  revoke the tax-qualified status of a plan as appropriate. PBGC, under Title  IV of ERISA, provides insurance for participants and beneficiaries of  certain types of tax-qualified pension plans, called defined benefit plans,  that terminate with insufficient assets to pay promised benefits. Recent  terminations of large, underfunded plans have threatened the long-term  solvency of PBGC. As a result, we placed PBGC’s single-employer  insurance program on our high-risk list of programs needing further  attention and congressional action.
ERISA and the IRC require plan administrators to file annual reports  concerning, among other things, the financial condition and operation of  plans.  EBSA, IRS, and PBGC jointly developed the Form 5500 so that plan  administrators can satisfy this annual reporting requirement.  Additionally,  ERISA and the IRC provide for the assessment or imposition of penalties  for plan sponsors not submitting the required information when due.
About one-fifth of Americans’ retirement wealth is invested in mutual  funds, which are regulated by the Securities and Exchange Commission  (SEC), primarily under the Investment Company Act of 1940. The primary  mission of the SEC is to protect investors, including pension plan  participants investing in securities markets, and maintain the integrity of  the securities markets through extensive disclosure, enforcement, and  education. In addition, some pension plans use investment managers to  oversee plan assets, and these managers may be subject to other securities  laws.
section_title: EBSA Uses a Multifaceted Enforcement Strategy
paragraphs: EBSA’s enforcement strategy is a multifaceted approach of targeted plan  investigations supplemented by providing education to plan participants  and plan sponsors. EBSA allows its regions the flexibility to tailor their  investigations to address the unique issues in their regions, within a  framework established by EBSA’s Office of Enforcement. The regional  offices then have a significant degree of autonomy in developing and  carrying out investigations using a mixture of approaches and techniques  they deem most appropriate. Participant leads are still the major source of  investigations. To supplement their investigations, the regions conduct  outreach activities to educate both plan participants and sponsors. The  purpose of these efforts is to gain participants’ help in identifying potential  violations and to educate sponsors in properly managing their plans and  avoiding violations. The regions also process applications for the  Voluntary Fiduciary Correction Program (VFCP) through which plan  officials can voluntarily report and correct some violations without  penalty.
subsections: section_title: EBSA Enforces ERISA Primarily Through Targeted Investigations
paragraphs: EBSA attempts to maximize the effectiveness of its enforcement efforts to  detect and correct ERISA violations by targeting specific cases for review.  In doing so, the Office of Enforcement provides assistance to the regional  offices in the form of broad program policy guidance, program oversight,  and technical support. The regional offices then focus their investigative  workloads to address the needs specific to their region. Investigative staff  also have some responsibility for selecting cases.
The Office of Enforcement identifies national priorities—areas critical to  the well-being of employee benefit plan participants and beneficiaries  nationwide—in which all regions must target a portion of their  investigative efforts. Currently, EBSA’s national priorities involve, among  other things, investigating defined contribution pension plan and health  plan fraud. Officials in the Office of Enforcement said that national  priorities are periodically re-evaluated and are changed to reflect trends in  the area of pensions and other benefits.
On the basis of its national investigative priorities, the Office of  Enforcement has established a number of national projects. Currently,  there are five national projects pertaining to a variety of issues including  employee contributions to defined contribution plans, employee stock  ownership plans (ESOP), and health plan fraud. EBSA’s increasing  emphasis on defined contribution pension plans reflects the rapid growth  of this segment of the pension plan universe. In fiscal year 2004, EBSA had  monetary results of over $31 million and obtained 10 criminal indictments  under its employee contributions project. EBSA’s most recent national  enforcement project involves investigating violations pertaining to ESOPs,  such as the incorrect valuation of employer securities and the failure to  provide participants with the specific benefits required or allowed under  ESOPs, such as voting rights, the ability to diversify their account balances  at certain times, and the right to sell their shares of stock. Likewise, more  attention is being given to health plan fraud, such as fraudulent multiple  employer welfare arrangements (MEWAs). In this instance, EBSA’s  emphasis is on abusive and fraudulent MEWAs created by promoters that  attempt to evade state insurance regulations and sell the promise of  inexpensive health benefit insurance but typically default on their benefit  obligations.
EBSA regional offices determine the focus of their investigative workloads  based on their evaluation of the employee benefit plans in their  jurisdiction and guidance from the Office of Enforcement. For example,  each region is expected to conduct investigations that cover their entire  geographic jurisdiction and attain a balance among the different types and  sizes of plans investigated. In addition, each regional office is expected to  dedicate some percentage of its staff resources to national and to regional  projects—those developed within their own region that focus on local  concerns. In developing regional projects, each regional office uses its  knowledge of the unique activities and types of plans in its jurisdiction.  For example, a region that has a heavy banking industry concentration  may develop a project aimed at a particular type of transaction commonly  performed by banks. We previously reported that the regional offices  spend an average of about 40 percent of their investigative time  conducting investigations in support of national projects and almost 25  percentage of their investigative time on regional projects.
EBSA officials said that their most effective source of leads on violations  of ERISA is from complaints from plan participants. Case openings also  originate from news articles or other publications on a particular industry  or company as well as tips from colleagues in other enforcement agencies.  Computer searches and targeting of Form 5500 information on specific  types of plans account for only 25 percent of case openings. In 1994, we  reported that EBSA had done little to test the effectiveness of the  computerized targeting runs it was using to select cases. Since then, EBSA  has scaled down both the number of computerized runs available to staff  and its reliance on these runs as a means of selecting cases. Investigative  staff are also responsible for identifying a portion of their cases on their  own to complete their workloads and address other potentially vulnerable  areas.
As shown in figure 1, EBSA’s investigative process generally follows a  pattern of selecting, developing, resolving, and reviewing cases. EBSA  officials told us that they open about 4,000 investigations into actual and  potential violations of ERISA annually. According to EBSA, its primary  goal in resolving a case is to ensure that a plan’s assets, and therefore its  participants and beneficiaries, are protected. EBSA’s decision to litigate a  case is made jointly with the Department of Labor’s Regional Solicitors’  Offices. Although EBSA settles most cases without going to court, both the  agency and the Solicitor’s Office recognize the need to litigate some cases  for their deterrent effect on other providers.
As part of its enforcement program, EBSA also detects and investigates  criminal violations of ERISA. From fiscal years 2000 through 2004,  criminal investigations resulted in an average of 54 cases closed with  convictions or guilty pleas annually. Part of EBSA’s enforcement strategy  includes routinely publicizing the results of its litigation efforts in both the  civil and criminal areas as a deterrent factor.
section_title: EBSA Uses Education, Outreach, and a Voluntary Fiduciary Correction Program to Supplement Its Investigations
paragraphs: To further leverage its enforcement resources, EBSA provides education  to plan participants, sponsors, and service providers and allows the  voluntary self-correction of certain transactions without penalty. EBSA’s  education program for plan participants aims to increase their knowledge  of their rights and benefits under ERISA. For example, EBSA anticipates  that educating participants will establish an environment in which  individuals can help protect their own benefits by recognizing potential  problems and notifying EBSA when issues arise. The agency also conducts  outreach to plan sponsors and service providers about their ongoing  fiduciary responsibilities and obligations under ERISA.
At the national level, EBSA’s Office of Participant Assistance develops,  implements, and evaluates agency-wide participant assistance and  outreach programs. It also provides policies and guidance to other EBSA  national and regional offices involved in outreach activities. EBSA’s  nationwide education campaigns include a fiduciary education campaign,  launched in May 2004, to educate plan sponsors and service providers  about their fiduciary responsibilities under ERISA. This campaign also  includes educational material on understanding fees and selecting an  auditor.
EBSA’s regional offices also assist in implementing national education  initiatives and conduct their own outreach to address local concerns. The  regional offices’ benefit advisers provide written and telephone responses  to participants. Benefit advisers and investigative staff also speak at  conferences and seminars sponsored by trade and professional groups and  participate in outreach and educational efforts in conjunction with other  federal or state agencies. At the national level, several EBSA offices direct  specialized outreach activities. As with EBSA’s participant-directed  outreach activities, its efforts to educate plan sponsors and service  providers also rely upon Office of Enforcement staff and the regional  offices for implementation. For example, these staff make presentations to  employer groups and service provider organizations about their ERISA  obligations and any new requirements under the law, such as reporting  and disclosure provisions.
To supplement its investigative programs, EBSA is promoting the self- disclosure and self-correction of possible ERISA violations by plan  officials through its Voluntary Fiduciary Correction Program. The purpose  of the VFCP is to protect the financial security of workers by encouraging  plan officials to identify and correct ERISA violations on their own.  Specifically, the VFCP allows plan officials to identify and correct 18  transactions, such as delinquent participant contributions and participant  loan repayments to pension plans. Under the VFCP, plan officials follow a  process whereby they (1) correct the violation using EBSA’s written  guidance; (2) restore any losses or profits to the plan; (3) notify  participants and beneficiaries of the correction; and (4) file a VFCP  application, which includes evidence of the corrected transaction, with the  EBSA regional office in whose jurisdiction it resides. If the regional office  determines that the plan has met the program’s terms, it will issue a “no  action” letter to the applicant and will not initiate a civil investigation of  the violation, which could have resulted in a penalty being assessed  against the plan.
section_title: EBSA Has Taken Steps to Address Weaknesses in Its Enforcement Program, but Significant Challenges Remain
paragraphs: EBSA has taken steps to address many of the recommendations we have  made over a number of years to improve its enforcement program,  including assessing the level and types of noncompliance with ERISA,  improving sharing of best investigative practices, and developing a human  capital strategy to better respond changes in its workforce. EBSA reported  a significant increase in enforcement results for fiscal year 2004, including  $3.1 billion in total monetary results and closing nearly 4,400  investigations, with nearly 70 percent of those cases resulting in  corrections of ERISA violations. Despite this progress, EBSA continues to  face a number of significant challenges to its enforcement program,  including the lack of timely and reliable plan information, restrictive  statutory requirements that limit its ability to assess certain penalties, and  the need to better coordinate enforcement strategies with the SEC.
subsections: section_title: EBSA Has Made Progress in Improving Its Enforcement Program
paragraphs: EBSA has taken a number of steps, including addressing  recommendations from our prior reports that have improved its  enforcement efforts across a number of areas. For example, EBSA has  continued to refine its enforcement strategy to meet changing priorities  and provided additional flexibility to its regional office to target areas of  investigations. More recently, EBSA implemented a series of  recommendations from our 2002 enforcement report that helped it  strategically manage its enforcement program, including conducting  studies to determine the level of and type of noncompliance with ERISA  and developing a Human Capital Strategic Management Plan (see table 1).
EBSA has reported a substantial increase in results from its enforcement  efforts since our last review. For fiscal year 2004, EBSA closed 4,399 civil  investigations and reported $3.1 billion in total results, including $2.53  billion in prohibited transactions corrected and plan assets protected, up  from $566 million in fiscal year 2002. Likewise, the percentage of civil  investigations closed with results rose from 58 percent to 69 percent. Also,  applications received for the VFCP increased from 55 in fiscal year 2002 to  474 in 2004. EBSA has been able to achieve such results with relatively  small recent increases in staff. Full-time equivalent (FTE) authorized staff  levels increased from 850 in fiscal year 2001 to 887 FTEs in fiscal year  2005. The President’s budget for fiscal year 2006 requests no additional  FTEs.
section_title: Untimely and Incomplete Plan Information Continues to Hinder Enforcement Efforts
paragraphs: Previously, we and others have reported that ERISA enforcement was  hindered by incomplete, inaccurate, and untimely plan data. We recently  reported that the lack of timely and complete of Form 5500 data affects  EBSA’s use of the information for enforcement purposes, such as  computer targeting and identifying troubled plans. EBSA uses Form 5500  information as a compliance tool to identify actual and potential violations  of ERISA. Although EBSA has access to Form 5500 information sooner  than the general public, the agency is affected by the statutory filing  deadlines, which can be up to 285 days after plan year end, and long  processing times for paper filings submitted to the ERISA Filing  Acceptance System. EBSA receives processed Form 5500 information on  individual filings on a regular basis once a form is completely processed.  However, agency officials told us that as they still have to wait for a  sufficiently complete universe of plan filings from any given plan year to  be processed in order to begin their compliance targeting programs. As a  result, EBSA officials told us that they are currently using plan year 2002  and 2003 Form 5500 information for computer targeting. They also said  that in some cases untimely Form 5500 information affects their ability to  identify financially troubled plans whose sponsors may be on the verge of  going out of business and abandoning their pension plans, because these  plans may no longer exist by the time that Labor receives the processed  filing or is able to determine that no Form 5500 was filed by those  sponsors.
The Form 5500 also lacks key information that could better assist EBSA,  IRS, and PBGC in monitoring plans and ensuring that they are in  compliance with ERISA. EBSA, IRS and PBGC officials said that they have  experienced difficulties when relying on Form 5500 information to identify  and track all plans across years. Although EBSA has a process in place to  identify and track plans filing a Form 5500 from year to year, problems still  arise when plans change employer identification numbers (EIN) and/or  plan numbers. Identifying plans is further complicated when plan sponsors  are acquired, sold, or merged. In these cases, agency officials said that  there is an increased possibility of mismatching of EINs, plans, and their  identifying information. As result, EBSA officials said they are unable to  (1) verify if all required employers are meeting the statutory requirement  to file a Form 5500 annually, (2) identity all late filers, and (3) assess and  collect penalties from all plans that fail to file or are late. Likewise, PBGC  officials said that must spend additional time each year trying to identify  and track certain defined benefit plans so that they can conduct  compliance and research activities. EBSA officials said they are  considering measures to better track and identify plans but have not  reached any conclusions.  Our recent report makes a number of  recommendations aimed at improving the timeliness and content of Form  5500 that will likely assist EBSA’s enforcement efforts.
In addition to problems with Form 5500 information, concerns remain  about the quality of annual audits of plans’ financial statements by  independent public accountants. For many years, we, as well as the  Department of Labor’s Office of Inspector General (OIG), have reported  that a significant number of these audits have not met ERISA  requirements. For example, in 1992 we found that over a third of the 25  plan audits we reviewed had audit weaknesses so serious that their  reliability and usefulness were questionable. We recommended that the  Congress amend ERISA to require full-scope audits of employee benefit  plans and to require plan administrators and independent public  accountants to report on how effective an employee benefit plan’s internal  controls are in protecting plan assets. Although such changes were  subsequently proposed, they were not enacted. In 2004, Labor’s OIG  reported that although EBSA had reviewed a significant number of  employee benefit plan audits and made efforts to correct substandard  audits, a significant number of substandard audits remain uncorrected.  Furthermore, plan auditors performing substandard work generally  continue to audit employee benefit plans without being required to  improve the quality of the audits. As a result, these audits have not  provided participants and beneficiaries the protections envisioned by  Congress. Labor’s OIG recommended, among other things, that EBSA  propose changes to ERISA so that EBSA has greater enforcement  authority over employee benefit plan auditors.
section_title: Restrictive Statutory Requirements Limit Assessment of Fiduciary Penalties
paragraphs: As we have previously reported, restrictive legal requirements have limited  EBSA’s ability to assess penalties against fiduciaries or other persons who  knowingly participate in a fiduciary breach. Unlike the SEC, which has  the authority to impose a penalty without first assessing and then securing  monetary damages, EBSA does not have such statutory authority and must  assess penalties based on damages or, more specifically, the restoration of  plan assets. Under Section 502(l), ERISA provides for a mandatory  penalty against (1) a fiduciary who breaches a fiduciary duty under, or  commits a violation of, Part 4 of Title I of ERISA or (2) against any other  person who knowingly participates in such a breach or violation. This  penalty is equal to 20 percent of the “applicable recovery amount,” or any  settlement agreed upon by the Secretary or ordered by a court to be paid  in a judicial proceeding instituted by the Secretary. However, the  applicable recovery amount cannot be determined if damages have not  been valued. This penalty can be assessed only against fiduciaries or  knowing participants in a breach who, by court order or settlement  agreement, restore plan assets. Therefore, if (1) there is no settlement  agreement or court order or (2) someone other than a fiduciary or  knowing participant returns plan assets, the penalty may not be assessed.   For example, last year we reported that ERISA presented legal challenges  when developing cases related to proxy voting by plan fiduciaries,  particularly with regards to valuing monetary damages. As a result,  because EBSA has never found a violation that resulted in monetary  damages, it has never assessed a penalty or removed a fiduciary because  of a proxy voting investigation. Given the restrictive legal requirements  that have limited the use of penalties for violations of ERISA’s fiduciary  requirements, we recommended that Congress consider amending ERISA  to give the Secretary of Labor additional authority with respect to  assessing monetary penalties against fiduciaries. We also recommended  other changes to ERISA to better protect plan participants and increase  the transparency of proxy voting practices by plan fiduciaries.
section_title: Recent Scandals Highlight the Need for Better Coordination with SEC
paragraphs: Recent events such as the abusive trading practices of late trading and  market timing in mutual funds and new revelations of conflicts of interest  by pension consultants highlight the need for EBSA to better coordinate  enforcement strategies with SEC. Last year we reported that SEC and  EBSA had separately taken steps to address abusive trading practices in  mutual funds. At the time we issued our report, SEC had taken a number  of actions to address the abuses including:    charging some fund companies with defrauding investors by not  enforcing their stated policies on market timing,  fining some institutions hundreds of millions of dollars (some of this  money was to be returned to long-term shareholders who lost money  due to abusive practices),    permanently barring some individuals from future work with  investment companies, and    proposing new regulations addressing late trading and market timing.
Separate from SEC activities, EBSA began investigating possible fiduciary  violations at some large investment companies, including those that  sponsor mutual funds, and violations by plan fiduciaries. EBSA also issued  guidance suggesting that plan fiduciaries review their relationships with  mutual funds and other investment companies to ensure they are meeting  their responsibilities of acting reasonably, prudently, and solely in the  interest of plan participants.  Although SEC’s proposed regulations on late  trading and market timing could have more adversely affected some plan  participants than other mutual fund investors, EBSA was not involved in  drafting the regulations because it does not regulate mutual funds.
In another example of how EBSA and SEC enforcement responsibilities  can intersect, SEC recently found that potential conflicts of interest may  affect the objectivity of advice pension consultants are providing to their  pension plan clients.  The report also raised important issues for plan  fiduciaries who often rely on the advice of pension consultants in  operating their plans. Recently, EBSA and SEC issued tips to help plan  fiduciaries evaluate the objectivity of advice and recommendations  provided by pension consultants.
section_title: Concluding Observations
paragraphs: Americans face numerous challenges to securing their economic security  in retirement, including the long-term fiscal challenges facing Social  Security; the uncertainty of promised pension benefits; and the potential  volatility of the investments held in their defined contributions plans.  Given these concerns, it is important that employees’ benefits are  adequately protected. EBSA is a relatively small agency facing the  daunting challenge of protecting over $4 trillion in assets of pension and  welfare benefits for millions of Americans. Over the years, EBSA has taken  steps to strengthen its enforcement program and leverage its limited  resources. These actions have helped better position EBSA to more  effectively enforce ERISA.
EBSA, however, continues to face a number of significant challenges to its  enforcement program. Foremost, despite improvements in the timeliness  and content of the Form 5500, information currently collected does not  permit EBSA and the other ERISA regulatory agencies to be in the best  position to ensure compliance with federal laws and assess the financial  condition of private pension plans. Given the ever-changing complexities  of employee benefit plans and how rapidly the financial condition of  pension plans can deteriorate, it is imperative that policymakers,  regulators, plan participants, and others have more timely and accurate  Form 5500 information. In addition, there is a legitimate question as to  whether information currently collected on the Form 5500 can be used as  an effective enforcement tool by EBSA or whether different information  might be needed. Without the right information on plans in a timely  manner, EBSA will continue to have to rely on participant complaints as a  primary source of investigations rather than being able to proactively  identify and target problems areas. Second, in some instances, EBSA’s  enforcement efforts continue to be hindered by ERISA, the very law it is  charged with enforcing. For example, because of restrictive legal  requirements, EBSA continues to be hindered in assessing penalties  against fiduciaries or others who knowingly participate in a fiduciary  breach. Congress may want to amend ERISA to address such limits on  EBSA’s enforcement authority. Finally, the significant changes that have  occurred in pension plans, the growing complexity of financial  transactions of such plans, and the increasing role of mutual funds and  other investment vehicles in retirement savings plans require enhanced  coordination of enforcement efforts with SEC. Furthermore, such changes  raise the fundamental question of whether Congress should modify the  current ERISA enforcement framework. For example, it is important to  consider whether the current division of oversight responsibilities across  several agencies is the best way to ensure effective enforcement or  whether some type of consolidation or reallocation of responsibilities and  resources could result in more effective and efficient ERISA enforcement.  We look forward to working with Congress on such crucial issues.
Mr. Chairman, this concludes my statement. I would be happy to respond  to any questions you or other members of the committee may have.
section_title: Contact and Acknowledgments
paragraphs: For further information, please contact me at (202) 512-7215. Other  individuals making key contributions to this testimony included Joseph  Applebaum, Kimberley Granger, Raun Lazier, George Scott, and Roger  Thomas.
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