“Reduced regulation” doesn't mean “no regulation.” (Photo: Mike Scarcella/ALM)
Wait. Wasn't Trump supposed to be the president that reduced regulation?
With all the hubbub about the death of the Fiduciary Rule, many have overlooked the reality of the DOL enforcement numbers. The Trump administration has shepherded the most dollars in recoveries from enforcement actions in at least the last eight years. Additionally, in Trump's first year, total recoveries exceeded $1 billion for the first time since the current EBSA reporting format began in 2014.Last year did see the second lowest percentage of civil investigations closed with results (65.3 percent) and the lowest number of civil investigations referred for litigation since 2010; however, the number of individuals indicted stands as the third highest (113) in that same time period.
Christopher Carosa, CTFA, is chief
contributing editor for FiduciaryNews.com,
a leading provider of essential news and
information, blunt commentary and practical examples for ERISA/401(k) fiduciaries, individual trustees and
professional fiduciaries.
These statistics hardly suggest an administration dead set against regulation. They do, on the other hand, remind plan sponsors they better pay attention to compliance matters. The astute plan sponsor might ask, “What do these trends suggest regarding where the DOL might be focusing when it comes to enforcement?”
The numbers—and the commentary offered by EBSA—may indicate a couple of specific areas of enforcement concentration. As always when it comes to this type of analysis, “past enforcement does not guarantee future enforcement.”
The first area of discussion centers on what appears to be declining. It's quite evident that enforcement results from the Voluntary Fiduciary Correction Program (VFCP) have fallen considerably since they peaked in 2013 at 72.1 million. Last year's total (10 million) remains slightly above the previous year's (9 million), but the downward trend appears to remain. The DOL states the VFCP “is a voluntary enforcement program that allows plan officials to identify and fully correct certain transactions.”
One specific category that appears to be on the upswing is the Abandoned Plan Program, which is up 50 percent from 2014 and nearly double the number from 2015. According to the DOL, this program “facilitates the termination of, and distribution of benefits from, individual account pension plans that have been abandoned by their sponsoring employers.”
Tie this together with the commentary provided by EBSA in its 2017 Fact Sheet, which states: “Of the $682.3 million recovered in its investigations, EBSA helped terminated vested participants in defined benefit plans collect benefits of $326.7 million due and owing to them.” Nearly half of the recoveries from enforcement actions benefited former employees.
What does this all mean for plan sponsors? First, don't get your hopes up that you can skate by when it comes to compliance. “Reduced regulation” doesn't mean “no regulation.” Second, if plan sponsors want to pick an area in which to be more diligent, it would be in matters pertaining to former employees.
Perhaps now is the time to rethink the plan's strategy for catering to participants no longer affiliated with the firm. It may be in the best interest of the plan providers to keep them in the plan, but is it in the best interests of the plan sponsor and the former employee?
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
