Department of Labor Inspector General Larry Turner issued a semi-annual report Tuesday arguing that the Employee Benefit Security Administration lacks both the resources and authority to fulfill its mandate to employee benefit plans.
The report particularly emphasized EBSA’s limited authority to conduct thorough audits of workplace retirement plans.
“ERISA provisions allow billions of dollars in pension assets to escape full audit scrutiny,” the report stated, addressing limited-scope plan audits, which occur when pensions with at least 100 participants can get certain assets verified by a bank or insurance company, thereby avoiding an additional EBSA audit.
The report stated that this approach to auditing provides “little to no confirmation regarding the actual existence or value of the assets.”
Bradford Campbell, a partner at Faegre Drinker and former head of EBSA, says limited-scope audits have been “a perennial favorite of the OIG.” He argues that where assets are overseen by another body, “it would be expensive, impractical and wasteful to require multiple, duplicative audits.”
If a bank or insurance company “certifies the assets subject to their own regulatory requirements,” as opposed to government requirements, then it does not make sense for the plan to also be audited by EBSA, according to Campbell.
The Office of the Inspector General also highlighted in the report EBSA’s lack of authority over the Federal Retirement Thrift Investment Board; EBSA is limited to making recommendations, but it cannot compel the board to follow them.
The report highlighted the cybersecurity risks facing the Thrift Savings Plan and lamented EBSA does not have more oversight of third-party cybersecurity vendors and practices, noting that “cyber threats potentially place at risk trillions of dollars in other ERISA-covered retirement plan assets.”
Campbell counters that the limited authority over the Federal Thrift Board “was not an oversight but intentional policy: EBSA serves as an experienced and effective watchdog but was never intended to have discretionary authority over federal employee retirement plans.”
Among other areas, the 176-page report noted that EBSA lacks the resources to protect an estimated 70 million plan participants in self-insured health plans from “improper denial of health claims.”
Campbell says the issues raised by the Office of the Inspector General are those “that require statutory changes unlikely to be made,” and the office should instead focus on the “agency’s effectiveness in utilizing the resources and authority that it currently has.”