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May 1, 2003
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I appreciate the opportunity to present the Department of Labor’s Fiscal
Year (FY) 2004 budget request for the Employee Benefits Security
Administration (EBSA), formerly the Pension and Welfare Benefits
Administration.
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EBSA is responsible for the administration and enforcement of Title I of the
Employee Retirement Income Security Act of 1974, as amended (ERISA). ERISA
currently governs approximately 730,000 private pension plans and six
million private health and welfare plans. EBSA oversees private sector
pension, health and other employee benefit plans that hold nearly $4.8
trillion in assets and cover 150 million Americans with a staff of 861 FTE
and an FY 2003 appropriation of $116 million.
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EBSA and its employees around the country work diligently to protect the
interests of American workers, retirees and their families, and support the
growth of our private benefits system. EBSA’s top priority is to ensure
that pension and health plans are operated in accordance with the law. EBSA
employs a comprehensive, integrated approach encompassing programs for
enforcement, compliance assistance, interpretive guidance, legislation, and
research to protect and advance the health and retirement security of our
nation’s workers and retirees.
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Protecting Americans’ health and retirement benefits has been brought to
the forefront of public policy by recent events. With the recent revelations
of corporate and union malfeasance combined with the challenging economy,
American workers and their families have heightened concerns about health
care and the security of their private pensions. The Bush Administration has
a comprehensive agenda of reform proposals to improve and strengthen our
retirement and health care systems.
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The President’s FY 2004 budget request of $128.6 million and 930 FTE for
EBSA includes an increase of $12.3 million and 69 FTE to implement
initiatives to enhance employee retirement security and protect health
insurance coverage. Increasing the EBSA budget by 10 percent – at a time
when other national priorities such as the war on terrorism and homeland
security are so compelling – is a reflection of the Bush Administration’s
strong commitment to protecting workers’ and retirees’ employment-based
benefits.
The President has proposed the following budget enhancements for EBSA
that will strengthen the confidence of the American workforce that their
retirement savings are secure with these new pension protections:
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Employee Benefits and Retirement
Security through Enforcement - DOL is requesting a budget enhancement of $6.75 million and
60 FTE to establish six additional groups of investigators and auditors
throughout EBSA’s regional offices to conduct civil and criminal
investigations.
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Nationwide Enforcement Coordination and Targeting
Capability - DOL is requesting a budget enhancement of $478,000 and 4 FTE
to enhance nationwide enforcement coordination, technical assistance,
oversight, and guidance to the Agency’s ten regional and five district
offices. EBSA will also implement an enhanced enforcement targeting
capability and devote resources to those situations where participants
and beneficiaries are most vulnerable to loss of benefits. The agency’s
enhanced ability to share best enforcement practices will facilitate the
more effective use of resources and improved enforcement results.
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Compliance Assistance and
Interpretations - DOL is
requesting a budget enhancement of $565,000 and 5 FTE to expand its
compliance assistance programs designed to improve plan sponsors’ and
service providers’ understanding of the complex provisions of ERISA
governing their conduct. The program will enhance the frequency and
timeliness of interpretive guidance, including advisory opinions,
information letters, interpretive bulletins, and field advice bulletins
issued by EBSA. The legal environment in which pension and health plans
operate is becoming increasingly litigious, making the need for timely
guidance more pressing than ever.
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Pension and Retirement Security
Research - DOL is
requesting a budget enhancement of $818,000 to bolster EBSA research
programs to identify trends and new developments in ERISA plan
investment patterns and ensure the evaluation of potential policy and
program initiatives that may be required to effectively protect
participants.
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Congress made a down payment on a promise to protect
workers’ retirement benefits by passing a portion of the President’s
Retirement Security Plan last year. The Administration believes that it’s
time to pass the remainder of the plan, as described in the President’s FY
2004 budget. The President’s Retirement Security Plan will provide workers
with greater confidence, choice and control over their retirement savings.
The plan will strengthen workers’ ability to manage their retirement funds
by giving them more freedom to diversify their investments, provide better
information to workers through improved 401(k) and pension plan statements,
and encourage employers to provide their employees with access to
professional investment advice.
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As part of the Administration’s commitment to expanding
health insurance coverage, the Department strongly supports the enactment of
association health plan (AHP) legislation. More than 41 million Americans
lack health insurance, and fully 85 percent of the uninsured are in working
families – with most working at firms with fewer than 100 employees. The
difficulties that small businesses face in trying to offer quality,
affordable health insurance explain a significant part of America’s
problem in dealing with uninsured workers and their families. Small firms
employ 42 percent of all workers, yet these workers and their families
comprise 60 percent of the working uninsured. AHPs are aimed squarely at
assisting these workers and their families.
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An AHP is an arrangement where a group of small employers
join together through a bona fide association to purchase or provide health
insurance coverage for their employees, under the protective umbrella of
ERISA. AHPs would give small employers many of the economic and legal
advantages currently enjoyed by large employers. EBSA stands ready to work
with members of Congress to help pass and administer legislation that
expands access to affordable quality health insurance coverage for working
Americans and their families.
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Expanding evaluation efforts is an important response to
findings of last year’s Performance Assessment Rating Tool (PART). EBSA is
continuing to work on other PART findings that include the development of
outcome-oriented performance measures with appropriate annual targets.
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EBSA has a strong track record in protecting employee
benefits through the identification, correction, and deterrence of
violations. The 2004 request includes an enhancement of $7.2 million and 64
FTE to allow EBSA to enforce ERISA and its broad jurisdiction over health,
retirement and other employer-provided benefit plans, including expanded
responsibilities EBSA has taken on in recent years through legislative
initiatives. EBSA has effectively leveraged its enforcement resources by
emphasizing targeting and deterrence. Targeting allows EBSA to focus its
resources on issues and individuals where the most serious potential for
ERISA violations exist and on situations and at-risk populations that
present the greatest potential for harm. Deterrence is obtained through the
continuing effectiveness of EBSA’s enforcement program as well as our
compliance assistance programs described below.
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In FY 2002, EBSA opened 4,904 civil cases and closed
4,925 civil cases. This is an increase of 42 civil cases opened and 163
civil cases closed over FY 2001. Fifty-eight percent of civil cases closed
(or 2,877 civil cases) were closed with results during FY 2002. During FY
2002, EBSA made 241 referrals to the Solicitor of Labor for litigation.
After a referral for litigation is made, we are often successful in
obtaining voluntary compliance by the violating party, so many of these
referrals did not result in contested litigation. In FY 2002, litigation was
filed on 104 cases, an increase of 31 filings over the prior fiscal year.
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In FY 2002, there were 155 criminal cases opened, 154
criminal cases closed, and 134 individuals were indicted in connection with
EBSA’s criminal investigations. Forty-nine criminal cases were closed with
convictions/guilty pleas and an additional 20 criminal cases were closed
with other restitution or sentencing results during FY 2002.
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The financial impact of EBSA’s investigations on plans
and participants is impressive. Total monetary results for all
investigations in FY 2002 were $832 million, a record for the agency. These
results include the value of corrective actions that EBSA obtained to
correct prohibited transactions (nearly $398 million returned to plans),
money restored to the plan or plan participants to correct losses resulting
from a fiduciary breach (nearly $190 million), EBSA intervention that
resulted in securing appropriate safeguards to protect at-risk plan assets
and reduce the risk of future losses ($168 million), and benefits recovered
on behalf of individual plan participants (nearly $77 million). The new
resources requested for FY 2004 should result in an additional 19 percent of
civil and criminal cases being investigated and $69 million more being
restored, protected or recovered in pension and health plan assets compared
to FY 2003 estimates.
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Enforcement actions will always be a cornerstone of our
mission to assure benefit security. However, a cooperative approach that
encourages the regulated community to comply with the law in the first
instance is also a critical component of our program. Compliance assistance
is directed to the vast majority of the regulated community that is
law-abiding and wants to do the right thing, and the 2004 request includes
an enhancement of $1.4 million and 5 FTE to carry out compliance assistance
activities. With these resources, EBSA will continue to support a number of
assistance programs to foster compliance with the law and protect
participants and beneficiaries from losses.
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The Voluntary Fiduciary Correction Program (VFCP) is
designed to encourage employers to voluntarily comply with ERISA by
self-correcting certain violations of the law. This program was expanded and
improved on April 29, 2002, when EBSA expanded VFCP with significant
additional incentives for fiduciaries and others to correct certain ERISA
violations. VFCP now offers participating plan sponsors excise tax relief in
the form of a class exemption for certain transactions, as well as other
improvements. Since the program’s inception in early 2000, the Department
has received 218 applications affecting over 169,000 participants and
verified that approximately $9.8 million has been restored to plans.
Participation in the program has grown significantly since the program was
expanded on April 29, 2002. Since then, the Department has received 122
applications affecting over 114,700 participants. During this eleven-month
time period, monetary results verified for closed applications was $5
million. The expanded VFCP has accounted for over 55 percent of total
applications, and 67 percent of participants affected.
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The Delinquent Filer Voluntary Compliance Program (DFVC)
provides plan administrators the opportunity to file delinquent Form 5500
filings at greatly reduced civil penalty amounts. In March 2002, the DFVC
program was revised, further reducing the penalties with the introduction of
a per plan cap. The revisions capped the maximum per plan penalty at $4,000
for large plans and at $1,500 for small plans. Penalties for small plans
sponsored by non-profit 501(c)(3) organizations are capped at $750. The
former penalty structure had no maximum amount. Since revision of the
program, over 9,500 filings have been received, compared to just 1,400
during the same period in 2001. The response to these changes has been
overwhelmingly positive and has directly enhanced reporting and disclosure
compliance, allowing EBSA to better carry out its enforcement and compliance
assistance responsibilities.
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EBSA has unveiled a new compliance assistance program to
help employers and health plans fulfill their obligations under the various
health laws. The Health Insurance Portability and Accountability Act (HIPAA)
Compliance Assistance Program (H-CAP), launched on March 25, 2003, will help
the benefits community address specific compliance issues. EBSA developed
H-CAP to improve compliance by partnering with the regulated community to
address problem areas. The H-CAP initiative is a three-pronged program that
includes new publications targeted to assist group health plans and health
insurers comply with these health laws, a new section of the EBSA Website
dedicated to health law material, and sponsorship of compliance assistance
workshops around the country.
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For FY 2004, the President requests $106.7 million and
800 FTE for the EBSA Enforcement and Participant Assistance budget activity.
Resources from this activity also support 108 dedicated staff who serve as
Benefits Advisors to assist participants and beneficiaries who are
experiencing a problem with an employee benefit plan. This program has
proven to be very effective in resolving individual participant benefit
disputes. In FY 2002, our Benefits Advisors recovered $49 million in
benefits on behalf of participants and beneficiaries through informal
resolution of individual complaints and responded to 184,000 inquiries for
participants who had not been able to resolve their benefits disputes.
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Our Benefits Advisors recover benefits on behalf of
participants and beneficiaries as part of an informal resolution process.
They are often able to resolve disputes and obtain promised benefits on
behalf of a participant or beneficiary by explaining the requirements of
ERISA to a plan administrator or other responsible party. Other times they
serve as an independent source of reliable information about ERISA by
answering questions posed by plan sponsors, plan administrators, and service
providers to plans. Further, consumers have greater access to EBSA services
through the efficiencies of improved technologies, including a toll-free
telephone number system.
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While Benefit Advisors seek the informal resolution of
benefit disputes, if they become aware that repeated complaints have been
made with respect to a particular plan, or when there is information
indicating a suspected fiduciary breach, the matter is referred to the
Office of Enforcement for investigation. In FY 2002, 1,300 investigations
were opened as a result of referrals from Benefits Advisors, which accounts
for 27 percent of EBSA’s 4,904 enforcement cases.
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Close coordination between Benefits Advisors and
investigative staff enhances EBSA’s ability to resolve benefit disputes.
Direct benefit recoveries from investigations continue to increase steadily,
further demonstrating that an experienced, professional Benefits Advisor
staff achieves positive results for participants in the nation’s pension
and health plans.
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Mr. Chairman and members of the Committee, this budget reflects the strong
commitment of the Bush Administration and this Congress to improving the
lives of America’s working families by protecting their employee benefits
and retirement security. This committee’s support for our program has been
and will continue to be essential in that effort.
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