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Don't Be ERISA Jailbait

Attendees at the SPBA 2008 Spring Meeting learned that DOL's enforcement new strategy is pursuing many more investigations & prosecutions as criminal (jail time) transgressions.  ERISA is unusual, because the law allows a transgression to be investigated as either a civil or criminal offense.  It can start out as civil and be bumped up to criminal if DOL feels it warrants it.

This insider insight from DOL's Chief of ERISA enforcement is very important, because some less-than-perfect practices which many sponsors & TPAs have fallen into will now lead to jail, not just a slap on the hand and fine.  Some examples are the timing of when amounts withheld from participant paychecks or contributed are actually placed into the plan assets trustÉÉ.and being sure that the requirements for having a trust are being met.  (A joint discussion by Fred & Anne on the trust issue is in this UPDATE.  Be sure to read It and apply it in a very forthright manner (not wishful thinking), because it has jumped from being an interesting detail to whether you & client go to jail.)

The other insider tip was that ERISA has exceptionally strong powers to demand and get information, and several case scenarios were given in which the TPA or sponsor was stalling.  Don't go there.  The next stop is jail.

Good news:  One purpose of the SPBA session was that DOL was interested to hear from the SPBA audience about areas & perpetrators of fraud, waste & abuse of plan assets.  Many stories of medical provider and pricing rip-offs were mentioned.  Traditionally, DOL enforcement has been aimed at the whole-employer or whole-TPA level, feeling that it did not have enough investigators to go after individual situations (such as per-doctor or per-bill).   The evidence from SPBA was compelling, so we are starting on a program to help DOL find and prosecute some sample cases.  If, doctors, medical facilities, PPOs, PBMs, etc hear about some of their friends having striped jumped suits with a stenciled number, pricing hanky-panky should abate.

What is DOL looking for in ERISA enforcement?  In a nutshell, they want to see if everyone who has any degree of fiduciary duty (anyone who has any discretionary powers, which almost all TPAs do) is doing everything with full disclosure of fees & favors being received that might conceivably be seen as being a conflict of interest or impacting the actions of the persons with fiduciary duty.  Anyone with fiduciary duty should always act in a way that would be judged prudent in each circumstance.

People often call and ask for "the list of what you can and can't do".  There is no such list.  Everything is judged in hindsight on the facts & circumstances of each situation.

However, there is a handy self-test.   If you are considering a situation or practice, imagine that some aggressive TV investigation show bursts into the door of your firm and looks at every document and shred of evidenceÉ.and interprets everything in the most guilty-seeming context.   If there is anything that you think would be exposed on that TV show that would be embarrassing...theb that is a great hint that it probably has ERISA fiduciary concerns.    Most people get into ERISA enforcement trouble when they rationalize some goofy reason why they are allowed to do something (a.k.a. wishful thinking), or TPAs get into trouble because they don't want to stand up to a client's "idea".  Don't become jailbait.