DOL Investigations: Establishing a Standard to Go By


“We’re establishing a standard for you to go by.” That is how J.K. Nowiejski of Nova 401(k) Associates characterized the Department of Labor’s (DOL) approach in auditing and investigating retirement plans. He was joined by Drinker Biddle Reath LLP Partner Heather Abrigo in addressing trends in government audits and investigations in an Oct. 25 session at the ASPPA Annual Conference held at National Harbor, MD.

Abrigo and Nowiejski made it abundantly clear that the DOL means business regarding retirement plans’ compliance with applicable law and regulation. Figures they shared from the DOL’s Employee Benefits Security Administration (EBSA) 2016 enforcement activities offer a snapshot:

  • oversight was extended to 681,000 retirement plans;
  • more than $777 million was recovered for direct payment to plans, participants and beneficiaries;
  • more than 2,000 civil cases were closed;
  • 333 criminal investigations were closed;
  • 62 federal lawsuits were filed; and
  • there were 96 indictments.

The DOL “is sometimes flabbergasted” that people don’t understand the rules, said Abrigo, who noted that the DOL “is definitely targeting retirement plans.” That includes their named fiduciaries, functional fiduciaries, plan administrators and service providers. And they haven’t forgotten plan sponsors and plan trustees; Abrigo added that the DOL is especially interested in them regarding their fiduciary responsibilities.

DOL investigations, said Nowiejski, are never random. “The DOL always has a reason,” he said. And while they can come as result of action by employees and participants, enforcement projects, referrals or reviews of Forms 5500, they can also result from information gleaned from other sources — including social media and even local newspapers, from which information can be found concerning notices of bankruptcy.

Nowiejski said that there are red flags that can heighten the chances of being investigated; for instance, fees that look high and that are not explained to the DOL’s liking, which he said will result in DOL attention “every time,” and assets that are hard to value.

“How you respond and what you say is very important,” said Abrigo, adding that being glib or flippant can result in agents coming to investigate. Nowiejski agreed, noting that how one answers a “yes” or “no” question and responses that are equivocal regarding who made a mistake in plan administration or compliance also can draw the DOL’s attention.

But comments and responses by plan professionals, administrators and service providers say are not all that matters, they cautioned. Nowiejski said that investigators and can even glean information from conversations conducted in an employer’s break rooms. In addition, Abrigo observed, “you never know what exactly what your client will say.”

There are steps an employer, plan sponsor and service provider can take to head off potential trouble from such inadvertent communication. Nowiejski suggested that it may be useful to tell employees to be aware when investigators are onsite, and that arranging meetings offsite may be an option to consider. Abrigo said that it helps to meet with one’s clients before they meet with the DOL as part of the process of preparing for an investigation.

But most important, Abrigo said, “The truth is always your best defense.”


By John Iekel

October 27, 2017