During the 2013 ASPPA Mid-Atlantic Benefits Conference held in Philadelphia May 16-17, Marc I. Machiz, Director of the Philadelphia Region of the DOL’s Employee Benefits Security Administration, highlighted one potential ERISA violation that the Philadelphia Region plans to focus on in the coming months.
According to Machiz, his region is now making a concerted effort to focus on “excessive fee cases,” where it appears to the EBSA that participants in the retirement plans being investigated are paying higher aggregate fees than participants in other plans.
Machiz stated that he expects the investigations will attempt to determine who is at fault for excessive fees and why the excessive fees were incurred. During his presentation, Machiz proffered six questions that the Philadelphia Region believes are important in relation to this project:
• What do the disclosures look like?
• What do the fiduciaries look at?
• Is there something that justifies the high fees?
• Is it the fault of the disclosures?
• Is it the fault of the service provider?
• Is it the fault of the named fiduciary plan sponsor?
He also noted that disclosures regarding fees being paid by 401(k) plans that must be made under the new DOL regulations will make it easier to complete this project.
Finally, Machiz stated that, “in all of our cases where we have 401(k) plans as part of our investigations, we’re asking to see those disclosures.”
ASPPA and NAPA have recently become aware of at least one 401(k) plan that has received a letter from a DOL investigator from the Philadelphia Region which informs the plan that it is being investigated by the EBSA. The letter includes a list of 23 separate requests for documentation (several with multiple sub-requests) regarding the 401(k) plan. In the letter, the EBSA expects the documentation to be provided within 10 working days of its receipt!
As proof that the Philadelphia Region is focusing on “excessive fees,” several of the requests specifically focus on the fees that are being paid by the 401(k) plan — one of which has 12 sub-requests. The list of requested information includes (just to name a few) documentation showing:
• all investment-related fees
• indirect compensation paid to service providers
• compensation paid between a service provider and its affiliates and subcontractors
• any recordkeeping charges
• direct and indirect administrative costs of the plan
• fees received by or from an insurance company
To view the complete list of requested items, click here.
As far as we know, no other EBSA Region is currently engaging in this sort of “excessive fees” project. If you are aware (or become aware) of another Region following the Philadelphia Region’s lead, please let us know, or start a discussion using the comment box below.
Ronald J. Triche, Esq., APM, is ASPPA’s Assistant General Counsel and Director of Government Affairs.
