Retirement, Health Plan Recoveries Show Shifting DOL Priorities

The federal government’s workforce benefits regulator recovered more than $1.4 billion in fiscal year 2023, reflecting a continued shift in focus from finding missing pension participants to enforcing parity in mental health coverage.

Since a fiscal year 2020 high of $3.1 billion in economic recoveries, the US Labor Department’s Employee Benefits Security Administration has returned fewer dollars to plans, participants, and beneficiaries for violations of federal benefits law. The latest numbers, which EBSA issued Tuesday, show total recoveries leveling off in 2022 and 2023.

Since 2021, EBSA has significantly amplified its oversight of private-sector health and welfare plans to ensure companies are adequately analyzing their insurance coverage treatment limitations for parity between mental health and other medical conditions. Meanwhile, investigators have been focusing less on citing employers for failing to find and pay terminated vested pension benefits.

“It’s a good thing for recoveries in that area to not be continuing at that level, because, hopefully, that’s telling us that we’re getting plans that are reading our guidance, seeing what’s happening, hearing about all of the enforcement that is happening by the Department of Labor, and taking action,” said Lisa M. Gomez, assistant secretary for employee benefits security, in an interview with Bloomberg Law.

“Missing participants” is a catch-all term EBSA uses to describe when pension plans can’t locate workers or retirees to begin allocating their earned benefits. Highly mobile workers with small-dollar accounts often forget about their old job’s pensions, and companies that go out of business or are bought out make it difficult for former employees to update contact information with an old plan sponsor.

Federal law requires plans to do their best to keep track of terminated vested participants and to make a diligent effort to find them when they’ve gone missing.

In fiscal year 2023, EBSA helped 5,690 participants in defined-benefit pension plans collect more than $429.2 million, less than a third of the 29,600 participants who were reconnected with $1.48 billion in fiscal year 2020, at the height of EBSA’s missing participant enforcement effort.

Different Investigations

More awareness about missing participants likely means plans are doing the work of locating those former workers themselves and paying them the money they’re owed—totals that aren’t reflected in EBSA’s annual enforcement recoveries. Investigations regarding non-quantitative mental health treatment limitations aren’t likely to make up the difference in recoveries, said Gomez, who took the helm of EBSA in October 2022.

In 2021, EBSA issued guidance identifying key signs plans can look for and actions they can take in order to avoid a missing participant-related investigation and to facilitate more voluntary compliance with the rules.

Agency officials are now actively working on a project to establish a national database for missing participants, a key SECURE 2.0 Act (Pub. L. No. 117-328) provision lawmakers hope will significantly cut down on the number of workers who retire without claiming all of their vested benefits.

The shift in focus to mental health coverage is a product of a congressional mandate to compel companies and health insurers to comply with the Mental Health Parity and Addiction Equity Act of 2008 (Pub. L. No. 110-343).

MHPAEA investigations are complicated, take longer to complete, and don’t always result in major windfalls for participants, Gomez said. In some ways, the agency is still ramping up its enforcement initiative, she added.

In its latest report to Congress in 2023, EBSA ratcheted up its pressure on health insurers to work in lockstep with their clients to improve mental health coverage, identifying companies by name that were out of compliance. The agency has proposed a rule that would clarify insurers’ responsibilities under the law.

“One of the main aims of the proposed regulation is to make that more streamlined and more defined for everyone that’s involved,” Gomez said.

‘Miracle’ Recoveries

EBSA’s fiscal year 2023 enforcement numbers demonstrated a huge spike in voluntary plan correction recoveries, up nearly 1,000% over the prior year.

The agency’s voluntary fiduciary correction and delinquent filer voluntary compliance programs allow plans to identify certain errors they made over the course of the year and correct them without triggering an audit or paying a fine.

Although the total number of applications and filings for these programs in fiscal year 2023 were similar to prior years, the agency reported $84.5 million restored to participants and beneficiaries, compared to just $8 million in fiscal year 2022, $34 million in fiscal year 2021, and $12 million in fiscal year 2020.

Recoveries vary depending on the types of cases plans bring to the agency in different years, but the DOL didn’t cite a specific cause or enforcement initiative that explains the dollar-amount upswing. Gomez said that plans are becoming more aware of the voluntary correction programs, particularly in light of a new proposed rule that would expand eligible violations.

Although voluntary correction programs are initiated by plans themselves, they aren’t “made without EBSA’s involvement,” a department spokesperson said. Agency staff review applications to ensure eligibility, check for appropriate documentation, and confirm that the correction “fully and accurately corrected the violations,” the spokesperson said.

Gomez said she’s particularly proud of the fact that EBSA conducted far more outreach events, briefings, assistance activities, and public awareness seminars in fiscal year 2023 compared to the prior year. The agency identified a region that recovered more than $230,000 in contributions that hadn’t been paid due to language barriers. One beneficiary told an EBSA benefit expert the recovered funds were a “miracle,” the agency said in its fact sheet.

“Here’s an agency with a little north of 800 people total in the agency responsible for protecting 153 million workers and their families,” Gomez said. “These recoveries are going straight into workers’ pockets and straight into plans to reimburse and recover for plans. They’re not penalties that are going into some government fund somewhere.”