January 15, 2015

DOL Investigations: A Shift in Focus

By Heather Abrigo

The Issue:  During a recent Department of Labor (“DOL”) investigation for a local California employer, we experienced an increased focus by the DOL on plan expenses. While this isn’t necessarily surprising given the increased focus on fees as evidenced by the issuance of regulations from the DOL (e.g., 408(b)(2) and 404(a)(5) regulations), what is surprising is that our East Coast employee benefit lawyers are not having the same experience.

The Solution:  We see this as the beginning of a trend and one that California employers (and of course all employers) need to be aware of, and take measures to be well prepared. One of the things that can prepare employers for DOL investigations is to engage in regular fiduciary training.  This will assist employers in understanding the various issues as they present themselves directly from regulations issued by the DOL and from recent litigation.

Analysis:  During this particular investigation for our California employer, the investigation focused on the standard litany of issues (e.g., late deferrals and reconciliation of trust data).  However, the DOL also focused its inquiry on the specific investments in the plan and, specifically, whether the share classes of those investments were appropriate. This investigation also involved a reconciliation of the direct and indirect compensation as reported on the Schedule C, Form 5500 to the service provider invoices which were required to be produced to the DOL.  Fortunately, the Committee had referenced in their Committee meeting minutes the fiduciary training they had received from our office, which also included a discussion on investment share classes. Thus, the issue of shares classes was something the Committee was educated about and had fully considered in selecting the appropriate investments in the Plan.  As a result of this experience and the uniqueness in some of the requests for information from the Department of Labor, we polled our national employee benefit attorneys and it was determined that this was not something being asked in DOL investigations taking place across the nation. 

All employers need to be aware of this new trend and need to be getting the necessary training to understand these issues and how they apply to their plan.

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