ERISA Tips: ERISA Violations

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The Department of Labor’s Employee Benefits Security Administration (EBSA) exists to serve benefit plans and participants — a function that includes enforcing ERISA and the regulations that implement it, which can entail investigating criminal violations regarding employee benefit plans.

Following is a brief outline of civil and criminal violations that can take place.

ERISA Civil Violations

Civil violations of ERISA applicable to both pension and welfare plans include:

• failing to operate the plan prudently and for the exclusive benefit of participants;

• using plan assets to benefit certain related parties to the plan, including the plan administrator, the plan sponsor, and parties related to these individuals;

• failing to properly value plan assets at their current fair market value, or to hold plan assets in trust;

• failing to follow the terms of the plan, unless inconsistent with ERISA;

• failing to properly select and monitor service providers;

• taking any adverse action against an individual for exercising his or her rights under the plan (e.g., being fired, fined or otherwise being discriminated against); and

• failure to comply with ERISA Part 7 and the Affordable Care Act (welfare plans only).

ERISA Criminal Violations

ERISA sections that concern criminal violations include:

• Section 411, Prohibition Against Certain Persons Holding Certain Positions;

• Section 501, Willful Violation of Title I, Part 1;

• Section 511, Coercive Interference. Persons convicted of violations enumerated in section 411 are subject to a bar from holding plan positions or providing services to plans for up to 13 years;

• Section 519, Prohibition on False Statements and Representations. Persons shall not make false statements in connection with the marketing or sale of a Multiple Employer Welfare Arrangements (MEWA).

Decisions to seek criminal action turn on a number of factors, including:

• the egregiousness and magnitude of the violation;

• the desirability and likelihood of incarceration both as a deterrent and as a punishment; and

• whether the case involves a prior ERISA violator.

More information about EBSA enforcement activities is available here.