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Release Date: 12/01/1999
Release Number:
00-04
Contact Name: Gloria Della
Phone Number:
202.219.8921 |
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The Labor Department’s Pension and Welfare
Benefits Administration today published a notice of proposed rulemaking to
improve the security of more than $300 billion in assets held in private-sector
pension plans maintained by small businesses. |
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In recent years, considerable public attention has
focused on the potential vulnerability of small plans to fraud and abuse. A
widely publicized case involved theft of more than $1 million from the
Emergi-Lite, Inc. retirement plan by the plan’s third party
administrator. |
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Emergi-Lite reported the theft to the department,
which conducted civil and criminal investigations and expeditiously referred
its case for criminal prosecution to the U. S. Attorney’s Office in
Hartford. The investigation disclosed that Gary Moore, the plan’s third
party administrator, had embezzled over $1 million from the plan and concealed
the theft. Moore was convicted in June 1998 and is serving a prison term for
stealing the 401(k) assets. Approximately $2.5 million was recovered for the
former employees as a result of Labor Department investigations. |
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“Workers in small pension plans need even
stronger protections to assure that the money in their retirement plans
doesn’t become phantom investments,” said Secretary of Labor Alexis
M. Herman. “Our proposed rule will close up a security gap in federal law
by increasing supervision of small plans’ retirement money and giving
workers more information on the investment of that money.” |
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Herman thanked Congressman Sam Gejdenson for his
leadership. She said, “His dedication has helped restore retirement
security for the Emergi-Lite workers. He has championed efforts on behalf of
workers and helped to shape additional protections we are proposing for
millions of workers around the country." |
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Although such circumstances are rare, the
department decided it was appropriate to propose steps now to strengthen the
security of pension assets and the accountability of persons handling those
assets. |
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Currently, pension plans with less than 100
participants are exempt from the requirement to have an independent qualified
public accountant conduct an annual audit of the plan’s financial
statements. The proposed rule would add new conditions to the audit waiver.
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Under the proposal, small pension plans would not
be required to have an annual audit if they:
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hold at least 95% of plan assets with certain regulated
financial institutions -- such as banks, mutual funds, insurance companies or
registered broker-dealers -- or obtain additional fidelity bonding where 95% of
the assets are not held with regulated financial institutions;
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disclose in the summary annual report (SAR) furnished to
participants each year the names of the financial institutions holding plan
assets and the amounts held and the name of the surety companies issuing the
fidelity bonds; and,
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include in the SAR a notice informing participants and
beneficiaries of their right to review or receive free of charge copies of
asset statements of institutions holding plan assets and evidence of any
required bond as well as a notice of their right to contact the department if
the statements or evidence of bonding are not made available.
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Written comments on the proposal should be
submitted to the Office of Regulations and Interpretations, Room N5669, Pension
and Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution
Avenue, N.W., Washington, D.C. 20210, Attention: Small Pension Plan Security
Proposal. Public comments will be available for inspection in Room N5638 at the
same street address. |
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U.S. Department of
Labor news releases are accessible on the Internet. The information in this
news release will be made available in alternate format upon request (large
print, Braille, audio tape or disc) from the Central Office for Assistive
Services and Technology. Please specify which news release when placing your
request. Call 202.693.7773 or TTY 202.693.7775. |
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