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March 20, 2007
I would like to thank Chairman Obey, Ranking Member Walsh, and the Members of the Subcommittee for the opportunity to present the Department of Labor's Fiscal Year 2008 budget request for the Employee Benefits Security Administration
(EBSA).
EBSA is responsible for the administration and enforcement of Title I of the Employee Retirement Income Security Act of 1974
(ERISA). ERISA governs private employer-provided employee benefit plans, including more than 700,000 retirement plans, approximately 2.5 million health plans, and similar numbers of life, disability and other welfare benefit plans. These plans hold more than $5 trillion in assets, and cover approximately 150 million Americans. The President's budget request for EBSA in FY 2008 is 855 full-time equivalent (FTE) employees and $147.4 million.
EBSA's primary mission is to protect worker benefits, a key component of the Department's goal to strengthen economic protections for workers and their families. EBSA and its employees around the country work diligently to protect the interests of American workers, retirees and their families, and to support the growth of our private employee benefits system. EBSA's top priority is to ensure that
ERISA-covered pension, health, and other welfare benefit plans are operated in accordance with the law. We employ a comprehensive, integrated approach encompassing programs for enforcement, participant and compliance assistance, education and outreach, interpretive guidance, and research to protect and advance the health and retirement security of our nation's workers and retirees.
I am very proud of our success in protecting workers' benefits. Total monetary results for FY 2006 were more than $1.4 billion, an increase of 94 percent compared to FY 2001. In fact, EBSA's total monetary results for the last four fiscal years, $7.6 billion, are nearly triple the total results from the preceding four years, $2.8 billion. Because of improved targeting, the proportion of investigations closed "with results" has increased 30 percent since FY 2001. Last year, EBSA's criminal investigations led to the indictment of 106 individuals - including plan officials, union and corporate officers, and service providers - for offenses related to employee benefit plans. Furthermore, the number of criminal investigations closed by the agency in FY 2006 with either a guilty plea or with a criminal conviction was more than 50 percent higher than in FY 2001. We have also continued to expand our voluntary compliance initiatives. EBSA's Voluntary Fiduciary Correction Program
(VFCP) and Delinquent Filer Voluntary Compliance Program (DFVCP) encourage the correction of violations of ERISA by providing significant incentives for fiduciaries and plan administrators to self correct. The VFCP allows plan officials who have identified certain violations of ERISA to take corrective action to remedy the breaches and voluntarily report the violations to
EBSA. In FY 2006, EBSA received 1,468 applications for the VFCP, and approved applicants restored $24.2 million to employee benefit plans. The DFVCP encourages plan administrators to bring their plans into compliance with ERISA's filing requirements. Since a major program revision in 2002, the program receives an average of over 1,000 previously un-filed or late annual reports each month.
EBSA is committed to helping workers with concerns about their employee benefit plans. In FY 2006, EBSA's Benefits Advisors handled nearly 165,000 inquiries and recovered $87.1 million in benefits on behalf of workers and their families through informal resolution of individual complaints. EBSA also conducts education and outreach events for workers, employers, plan officials, state officials and Congressional staffs. These nationwide activities include assisting dislocated workers who are facing job loss by providing information about their employee benefits rights and options; educating employers of their obligations under
ERISA, using a train-the-trainer format to inform state officials and congressional staff of EBSA programs for their use in constituent services; and providing employees with information concerning their rights under the law. In FY 2006, EBSA conducted 2,134 outreach events.
The President's FY 2008 budget request is $147.4 million and 855 FTE for
EBSA. EBSA will use its requested FY 2008 funds to continue to safeguard workers' retirement savings, health coverage, and other employee benefits. We will also continue to focus on the development of interpretive, regulatory and other guidance necessary to the efficient and effective implementation of the provisions of the Pension Protection Act of 2006
(PPA). EBSA will protect participants' benefits and plan assets through a strong, balanced and consistent enforcement program. We will also prevent violations through compliance assistance, and education and outreach. The budget request demonstrates this Administration's strong commitment to protecting the employment-based benefits of American workers and their families.
The President's request includes a program increase of $5.5 million for the development costs of EFAST2, a publicly available electronic replacement for the outmoded EFAST system. The EFAST2 system will be used to more efficiently collect, process, and disclose financial and operational data filed by more than one million pension, health and other employee benefit plans on Form 5500 series reports.
EFAST is the only source of comprehensive data relating to private employee benefit plans and the trillions of dollars they hold. The data is used by regulators, Congress, and the public, and guides the regulatory and enforcement programs of
EBSA, IRS and PBGC. The existing EFAST system receives and processes about 1.4 million filings annually, only about 1 percent of which are filed electronically while the rest - containing approximately 25 million paper pages every year-are filed in hard copy. The inefficiencies inherent in the outdated paper filing system result in increased costs to filers, the government and taxpayers generally; quadruple the amount of erroneous information compared with electronic filing; and pose increased risks to the benefit security of American workers and their families.
Development of the EFAST2 system will better protect benefits security by reducing processing time for Form 5500 filings from over 45 days to just 1 day, improving the quality of filings data from 82 percent to 99 percent, reducing public disclosure response and fulfillment time from over 20 days to 1 day through initiation of web-based public disclosure of Form 5500, and producing an estimated annual savings of more than $7.8 million in operational costs. EFAST2 will reduce the costs of compliance for employers, and it will fulfill the new disclosure requirements of the
PPA. I note that the amount of the FY 2008 EFAST2 funding request may be reduced pending the final resolution of EFAST2 funding in FY07, and we appreciate the opportunity to continue working with the Committee on this important project.
The FY 2008 Budget includes a discussion of major policy issues that the President believes are necessary to improve workers' retirement and health security.
Private sector defined benefit pension plans cover 20 percent of the nation's private workforce, or about 44 million Americans. To strengthen the retirement system for America's workers, retirees and their families, the President signed into law the Pension Protection Act of 2006
(PPA). The new law tightens minimum pension plan funding standards, measuring assets and liabilities more accurately; improves disclosures to workers, investors and regulators about pension plan funding status; and improves the solvency of the pension insurance system.
The new law also includes important reforms to help more American workers save for retirement through defined contribution plans. The legislation removes barriers to automatic enrollment in 401(k) plans; ensures workers receive regular benefits statements; increases worker access to professional investment advice; and makes permanent the higher contribution limits for IRAs and 401(k)s that were passed in 2001, enabling more workers to build larger retirement nest eggs.
With primary responsibility for developing approximately 25 regulatory initiatives to implement provisions of the
PPA, EBSA is working hard to ensure the new law will serve the retirement needs of America's workers, retirees and their families. We will reallocate resources as necessary within existing budget levels to ensure this important duty is fulfilled. The FY 2008 Budget builds on the PPA reforms by proposing adjustments to insurance premiums paid by underfunded pension plans to address the nearly $19 billion gap between the liabilities and assets of the Pension Benefit Guaranty Corporation
(PBGC). The proposed reforms would improve PBGC's financial condition and safeguard the future benefits of workers and retirees.
The President is deeply committed to expanding access to quality, affordable health benefits for all Americans. He has proposed a number of initiatives to reduce the cost and increase the accessibility of health coverage, including reforming the Tax Code to level the playing field between employer-provided and individually-purchased health benefits.
EBSA, which oversees health benefit plans offered by private employers, plays a key role in several of these initiatives, most notably Association Health Plan
(AHP) legislation.
The vast majority of uninsured Americans, nearly 87 percent, are in working families, with most working at firms with fewer than 100 employees. Small businesses are only half as likely as large employers to offer health benefits, and pay more than 20-30 percent higher premiums than large employers or labor unions for similar health coverage. AHPs are aimed squarely at closing this gap by providing a level playing field for small businesses. AHP legislation allows small employers and others to join together through their bona fide trade and professional associations to purchase health benefits, allowing them to take advantage of the same economies of scale and uniform regulation enjoyed by large employer and union health plans.
Mr. Chairman and Members of the Committee, this budget reflects the strong commitment of the Bush Administration 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. Thank you for the opportunity to appear before you today to discuss EBSA's program and FY 2008 Budget. I would be happy to answer any questions you might have. |
