Civil and Criminal Enforcement
The US Department of Labor (DOL) has published its Fiscal Year 2019 "Fact Sheet" documenting the criminal and civil enforcement activities of its Employee Benefits Security Administration (EBSA) under the Employee Retirement Income Security Act of 1974 as amended (ERISA). Total monetary recoveries increased for the fourth year in a row, due to another year of historically high recoveries from EBSA’s civil enforcement actions. Although civil enforcement recoveries reached a historic high—the second largest in over fifteen years—the trend of increased criminal investigations and decreased civil investigations continued in FY 2019.
Criminal Investigations Remain High
In FY 2019, DOL, working in conjunction with the Department of Justice, closed 275 total criminal investigations, maintaining course with the rolling 15-year average. Representing a minor increase from FY 2018, FY 2019 saw a continuation of heightened criminal investigation efforts since DOL’s 2009 announcement that it would emphasize enforcement of the criminal provisions applicable to ERISA plans.
The rate of criminal investigations closed with guilty pleas or convictions decreased from FY 2018. In FY 2019, 80 criminal investigations were closed with guilty pleas or convictions—down from FY 2018’s total of 87—representing a minor decrease in the rate of results when compared to the increased total number of investigations closed, which is slightly lower than the average annual fluctuation in the rate of results over the last 15 fiscal years.
Civil Investigations Continue to Decrease
In FY 2019, the total number of civil investigations closed, as well as the number of civil investigations closed with results, decreased for a fifth consecutive year. DOL closed a total of 1,146 civil investigations—the lowest number since FY 2001—and of those, 770 were closed with results.
Despite the continued decline in civil enforcement investigation activity since FY 2014, FY 2019 saw a slight increase in the rate of results in relation to the total number of civil investigations closed.
Monetary Results Increased
The total monetary results for all EBSA enforcement and compliance activities continued to increase since FY 2014’s historic low.
In FY 2019, EBSA reported total monetary recoveries of approximately $2.6 billion, an increase of $1 billion over FY 2018. That represents a 62% increase—well above the average annual fluctuation of approximately 6%. And for the second year in a row, that amount is higher than the rolling 15-year average for total monetary recoveries of $1.3 billion.
Sustained Impact of the Informal Complaint Resolution System
Recoveries from the Informal Complaint Resolution System increased over FY 2018—reaching the highest level in almost two decades. Recoveries from Prohibited Transactions Corrected and Plan Assets Protected similarly increased over FY 2018. While a significant increase in Prohibited Transactions Corrected and Plan Assets Protected of approximately $100 million was reported for the second year in a row, that figure is still dramatically lower than the rolling 15-year average for such recoveries.
In terms of total monetary results, recoveries from the Informal Complaint Resolution System represented approximately 20% of the total recoveries for FY 2019, which was a significant drop from 28% in FY 2018. This FY 2019 figure is less than the 15-year average of approximately 26%, and it represents a decreased share of total recoveries for the sixth year in a row. In addition, Recoveries from Prohibited Transactions Corrected and Plan Assets Protected decreased dramatically, to approximately 4% of the total monetary recoveries for FY 2019, which is the lowest amount in almost two decades, and is less than one fifth of the average for the past 15 years when accounting for the anomaly in FY 2009. In a continuing departure from the historically inverse relationship between the informal complaint resolution system and the investigation of prohibited transactions, the trend of recoveries from the informal complaint resolution system gradually replacing recoveries from the prohibited transaction investigations appears to have gone beyond merely reversing itself and instead taken a large stride in the opposite direction—whereby FY 2019 recoveries from the informal complaint resolution system substantially outweighed recoveries from prohibited transaction investigations in terms of the total monetary recoveries.
Increased Budget for Enforcement and Assistance
It is worth noting that while DOL’s budget for ERISA enforcement and assistance, as reported in supporting materials for its annual federal budget request, has been relatively level for the past several fiscal years, DOL’s current FY 2021 budget request is significantly larger than in past years. Compared to DOL’s total budget of approximately $181 million for EBSA in both FY 2019 and FY 2020, of which $147.4 million related to enforcement and assistance, DOL is currently requesting a total budget of almost $193 million, of which $156.7 million would relate to enforcement and assistance.
*Includes over $8 million from Economic Recovery Act.
After the program budget was reduced and then rebuilt in the three fiscal years following the economic downturn, it received a material increase in FY 2012 and, starting in FY 2014, has annually been in the $144 to $147 million range. (By way of comparison, in FY 2019 this budget was about 27% of the budget for the SEC’s Division of Enforcement.) In recent years, at least $3 million of this DOL budget has been rolled over annually to future fiscal years for expert witness fees in litigation.
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