Reporting Compliance Enforcement Manual Chapter 5: Enforcement Programs Procedures

Initial Assignment of Cases

Cases are assigned periodically using various methods for targeting as well as from Field Office referrals and other agencies. As described in the Case File Maintenance Section, generally a proper color coded case folder must be created for each case. Before beginning work on a new reporting compliance case, the analyst must check the Global Search System (located on the LAN menu) to see if the Office of Enforcement or any other EBSA office has a pending enforcement action against the plan or a recently completed action. The search will also identify any previous OCA cases regarding the plan. If it is determined that there are any open investigations or if there is a recently completed case on the subject plan, the analyst should discuss the case with the Division Chief or team leader before taking any further enforcement action. If the case is the result of a referral, the analyst will contact the the contact person to confirm the information provide and obtain further background information. This procedure is necessary to avoid undertaking enforcement actions on plans that are under active investigation or that have recently concluded an enforcement action.

After the case is assigned, the analyst shall print a hard copy of the filing from the ERISA Public Disclosure system or EFAST end user system and perform the first action of processing. The procedures to be followed will be dependent upon what form of enforcement action is to be taken. See the appropriate section of this guide for procedures related to the following enforcement programs:

  • Audit Quality Inspection Program procedures
  • Augmented Workpaper Reviews procedures
  • On-Site Workpaper Reviews procedures
  • Deficient Filer Enforcement Program
  • Referrals to the Office of Enforcement procedures
  • DFE Enforcement Program procedures
  • Multiple Employer Welfare Arrangements Program procedures
  • 502(c)(6) Compliance Program procedures
  • Blackout Notice – 502(c)(7) Program procedures
  • Non-Filer Enforcement Program procedures
  • Late Filer Enforcement Program procedures
  • Case Closing procedures
  • Delinquent Filer Voluntary Compliance Program procedures

Document all conversations with plan administrators or other representatives in the case file with sufficient detail. The call log should include the name of the person with whom you spoke, telephone number, relationship to the plan, date of conversation, time of conversation, and the matters discussed.

All enforcement guidance may be found in separate folders, titled by enforcement program, in the OCA Enforcement Manual Folder on the "L" drive. OCA personnel should use the formatted letters, guides, checklists, memorandum, etc., contained on the "L" drive for all enforcement cases. If changes need to be made to these documents, the analyst shall discuss the changes with the supervisor or team leader. The documents contained on the "L" drive must be used as they will ensure consistency in documentation and may also be subject to change. In addition, for DRC Staff, the review copy of letters must have a Signature Block stamp in the top right portion of the first page, opposite the address. The analyst shall initial and date the first line. The date used is the date the case is placed in the review area.

Audit Quality "On-Site and Mini" Inspection Program Enforcement Procedures

The Audit Quality Inspection Program represents an expanded inspection of IQPAs over OCA's former traditional on-site audit workpaper reviews and "mini" inspections conducted from OCA's office. The program consists of two main parts: 1) inspections of IQPAs' Employee Benefit Plan Audit Practices; and 2) on-site reviews of a sample of the IQPAs' employee benefit plan audit workpapers. IQPA firms selected for the Audit Quality Inspection Program are made by the Chief Accountant and the Chief of the Division of Accounting Services.

Assignment of plan(s) and establishment of case files

Upon assignment of plan(s) selected for review as part of the Audit Quality Inspection Program, the analyst shall set up a case file in accordance with the requirements discussed in the Case File Maintenance section of this guide. The analyst shall include in each case file the write-up of the firm's employee benefit plan practice. The analyst shall also include a complete copy of the workpaper review guide that is to be completed during the on-site workpaper review of the plan selected. The analyst shall update the OCA Case Tracking System to indicate that the workpaper review status is "pending". The analyst shall also update the OCA Case Tracking System with the IQPA's name and IQPA's EIN. Once the analyst has been advised of the workpaper review date, the analyst shall update the OCA Case Tracking System to indicate the workpaper review status as "scheduled" and shall also input the date for the on-site workpaper review.

On-site workpaper review

For each on-site workpaper review, the analyst shall complete the on-site workpaper review checklist for each set of plan workpapers reviewed. The analyst shall sign and date each "conclusion" portion of the checklist to evidence the date the work was performed. The analyst shall also complete the workpaper review audit deficiency chart indicating whether or not audit deficiencies were identified in a particular area of audit.

Audit Quality Inspection Program- On-Site Audit Workpaper Review Memo

For each on-site workpaper review, the analyst shall prepare an on-site audit workpaper review memo. The summary memorandum of the workpaper review shall be in the format prescribed in the Audit Quality Inspection Program manual.

The analyst shall complete each area of the workpaper review memo. Because the memorandum constitutes the primary summary of the on-site review, each area must be well documented. For the "Conclusion" and "Recommendation" sections the analyst shall document the conclusion(s) and recommendation(s) and shall also document the basis for the conclusion(s) and recommendation(s) reached. No other memo formats are acceptable.

No Further Action Necessary

If after the preliminary review, the analyst recommends that the case be closed with no further action, the analyst shall prepare a letter to the plan administrator communicating the results of the review. There are two formats, a letter where no deficiencies were identified and a letter where only minor deficiencies were identified. The analyst shall complete the OCA Case Transmittal Form.

In addition, the analyst shall update the OCA Case Tracking System (OCATS) to indicate the date of the workpaper review, shall update the workpaper review status to "complete", and shall indicate the results of the workpaper review (i.e., either acceptable with no deficiencies or acceptable with minor deficiencies requiring no further action). Finally, the analyst shall verify that the name of the audit firm, IQPA's EIN, and workpaper review date fields are correct, making any changes if necessary.

Further Action Required

If, after the preliminary review, findings are identified that require follow-up action, the analyst shall prepare a "Statement of Preliminary Findings" letter. The Statement of Preliminary Findings letter shall be sent to the IQPA. The IQPA shall have 10 days from the date of the letter to provide written comments on the findings.

Failure to Respond to Statement of Preliminary Findings

If the IQPA fails to respond to the Statement of Preliminary Findings, the analyst shall proceed with an enforcement action through the issuance of a Notice of Rejection. If the deficiencies warrant referral of the IQPA to the AICPA or State Licensing Board, the analyst shall prepare the referral letter. The analyst shall follow the 502c-2 enforcement procedures detailed in this guide.

The analyst shall complete the OCA/DAS Case Transmittal Form. In addition, the analyst shall update the OCA Case Tracking System (OCATS) to indicate that the workpaper review is "complete" and shall indicate that the workpaper review disclosed deficiencies requiring further action. Finally, the analyst shall verify that the name of the audit firm, IQPA's EIN, and workpaper review date fields are correct, making any changes if necessary.

IQPA Response to Statement of Preliminary Findings

If the IQPA responds to the Statement of Preliminary Findings, the analyst shall review the IQPA's response. The analyst shall also prepare a memorandum documenting the IQPA's response to the Statement of Preliminary Findings and whether or not the preliminary findings have been satisfactorily resolved. The memorandum shall document any recommendations for further enforcement action and whether referral to the AICPA or State Licensing Board is necessary. Because the memorandum constitutes the final summary of the review, each area must be well documented. No other memo formats are acceptable.

If in response to the Statement of Preliminary Findings, the IQPA submits additional workpaper documentation, the analyst shall also determine whether or not the workpapers were created at the time of the audit or whether the workpapers were completed in response to the Statement of Preliminary Findings. While workpapers created after issuance of the audit report and submitted in response to the Statement of Preliminary Findings may correct the deficiency(ies) cited, a violation of GAAS may still have existed at the time of issuance of the audit report and may warrant referral of the AICPA or State Licensing Board.

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If further enforcement action is necessary, the analyst shall follow the 502c-2 enforcement procedures found in this guide. The analyst should also contact the IQPA and advise the IQPA of the enforcement action and, if applicable, that a referral to the AICPA or State Licensing Board will be made. Contact with the IQPA shall be documented in the case file.

The analyst shall complete the OCA Case Transmittal Form. In addition, the analyst shall update the OCA Case Tracking System (OCATS) to indicate that the workpaper review is "complete" and shall indicate that the workpaper review disclosed deficiencies requiring further action. Finally, the analyst shall verify that the name of the audit firm, IQPA's EIN, and workpaper review date fields are correct, making any changes if necessary.

On-Site Workpaper Review Program Enforcement Procedures

The On-Site Workpaper Review Program is a traditional workpaper review program established by OCA. Based on certain targeting criteria and/or a review of the Form 5500 and related audit report, OCA randomly selects employee benefit plans for an on-site review of the IQPA's workpapers. The on-site workpaper review is typically conducted at the IQPA's office.

Assignment of plan(s) and establishment of case files

Upon assignment of plan(s) selected for review as part of the On-Site Workpaper Review Program, the analyst shall set up a case file in accordance with the requirements discussed in the Case File Maintenance section of this guide. The analyst shall include a complete copy of the workpaper review guide that is to be completed during the on-site workpaper review of the plan selected. The analyst shall update the OCA Case Tracking System to indicate that the workpaper review status is "pending". The analyst shall also update the OCA Case Tracking System with the IQPA's name and IQPA's EIN.

Request for Access to Workpapers

The analyst shall prepare a letter to the plan administrator requesting access to the IQPA's audit workpapers for the plan.

Generally, the plan administrator will have the plan's IQPA contact the analyst to set a date for the on-site workpaper review. When the on-site review date has been established, the analyst shall update the OCA Case Tracking System to indicate the workpaper review status as "scheduled" and shall also input the date for the on-site workpaper review.

Confirmation of On-Site Workpaper Review Date

Once the on-site workpaper review date has been agreed to, the analyst shall send written confirmation of the agreed upon date to the IQPA.

On-site Workpaper Review

For each on-site workpaper review, the analyst shall complete the on-site workpaper review checklist for each set of plan workpapers reviewed. The analyst shall sign and date each "conclusion" portion of the checklist to evidence the date the work was performed. The analyst shall also complete the workpaper review deficiency chart indicating whether or not audit deficiencies were identified in a particular area of audit.

On-Site Audit Workpaper Review Memo

For each on-site workpaper review, the analyst shall prepare an on-site audit workpaper review memo. The summary memorandum of the workpaper review shall be in the format prescribed.

The analyst shall complete each area of the workpaper review memo. Because the memorandum constitutes the primary summary of the on-site review, each area must be well documented. For the "Conclusion" and "Recommendation" sections the analyst shall document the conclusion(s) and recommendation(s) and shall also document the basis for the conclusion(s) and recommendation(s) reached. No other memo formats are acceptable.

No Further Enforcement Action Necessary

If the analyst recommends that the case be closed with no further enforcement action, the analyst shall complete the OCA Case Transmittal Form. In addition, the analyst shall update the OCA Case Tracking System (OCATS) to indicate the workpaper review is "complete" and shall indicate the results of the workpaper review (i.e., either acceptable with no deficiencies or acceptable with minor deficiencies requiring no further action). Finally, the analyst shall verify that the name of the audit firm, IQPA's EIN, and workpaper review date fields are correct, making any changes if necessary.

Further Enforcement Action

If further enforcement action is warranted, the analyst shall follow the 502c-2 enforcement procedures found in this guide. The analyst shall complete the OCA Case Transmittal Form. In addition, the analyst shall update the OCA Case Tracking System (OCATS) to indicate that the workpaper review is "complete" and shall indicate that the workpaper review disclosed deficiencies requiring further action. Finally, the analyst shall verify that the name of the audit firm, IQPA's EIN, and workpaper review date fields are correct, making any changes if necessary.

Deficient Filer Enforcement Procedures

The Form 5500 Deficient Filer Enforcement Program is OCA's original enforcement program. As part of OCA's Form 5500 Deficient Filer Enforcement Program, OCA selects a number of employee benefit plans to review. The Form 5500 and related auditor's report is reviewed for compliance with ERISA, GAAS, and GAAP and Department of Labor reporting and disclosure requirements.

These enforcement procedures are official enforcement actions taken by the Department of Labor. The objective of these enforcement actions is to attain compliance with ERISA and Department of Labor's reporting and disclosure requirements. Where it is determined that action is required, the first step is the issuance of a Notice of Rejection.

Issuance of a Notice of Rejection

If deficiencies are identified, the analyst shall prepare a Notice of Rejection (NOR) using the Deficient Filer NOR template. The approved NOR template can be found on the OCA common drive ("L" drive). The analyst shall use the format of the NOR located on the common drive as the NOR is subject to change.

The analyst shall sign the NOR. The NOR is time sensitive, requiring a response from the plan administrator within 45 days of the date of the NOR. The analyst should not date the NOR. The NOR will be dated by the office support staff at the time that it is mailed. The analyst shall prepare an envelope and a return receipt green card and submit the NOR and case file to the team leader or Division Chief for clearance. (See page 61 for OCA's "General Letter Policy".)

Note: All enforcement letters are mailed certified mail, return receipt requested. It is the analysts' responsibility to prepare the envelope for mailing on all cases. This includes preparing the return receipt green card.

The 45-day period is statutorily established pursuant to Section 104(a)(5) of ERISA. ERISA Section 104(a)(5) provides the plan administrator 45 days to electronically submit a revised filing satisfactory to the Department of Labor before any further enforcement action and penalty can be undertaken to enforce the filing requirements. The 45-day period may not be extended.(1) If a filer has legitimate reasons for not being able to respond to a NOR within the 45-day period, then the reasons can be considered in the Reasonable Cause Analysis. Each analyst shall be responsible for tracking their enforcement cases to ensure that responses are timely reviewed and that appropriate follow-up actions are taken.

Response to Notice of Rejection

The plan administrator has 45 days in which to respond to the NOR by providing a filing satisfactory to the DOL. Upon receipt of a response to the NOR, the analyst shall review the response to the NOR to determine whether:

  • the plan administrator has corrected all of the deficiencies cited in the NOR, and
  • the response was received timely, within 45 days of the date of the NOR. OCA policy is to use the postmark date of the response to the NOR as the receipt date.

Response to Notice of Rejection is Timely & Acceptable

If all of the deficiencies cited in the NOR have been satisfactorily corrected and the correction of the deficiencies did not result in new deficiencies and if the response to the NOR was timely received, the analyst shall close the case.

The analyst shall prepare a memo to the file documenting the results of the review and the conclusion for no further action.

The analyst shall also complete the appropriate checklist documenting the review of the response to the NOR.

If the deficiencies cited in the NOR pertained to a review of the IQPA's audit workpapers, the analyst shall include in the memo to the file sections on the findings cited, the plan administrator's response to the NOR, the analyst's evaluation of the response, and the basis for concluding that the response to the NOR corrects the audit deficiency(ies). However, if the plan administrator provides an audit report from a new auditor, before closing the case, the analyst shall review the workpapers of the new auditor. The analyst shall follow the procedures for the augmented workpaper review program beginning at page 30 of this guide for documentation of the review of the workpapers.

Finally, the analyst shall also prepare a Notice of Satisfactory Filing to be sent to the plan administrator, unless an augmented workpaper review is required to follow-up on a "new" plan auditor (see paragraph above).

No Response to Notice of Rejection, Late Response to Notice of Rejection or Unacceptable Response to Notice of Rejection

If the plan administrator fails to respond to the Notice of Rejection, the analyst shall verify that the plan has received the correspondence. If a signed, certified mail, return receipt card was returned, the analyst shall proceed with the issuance of a Notice of Intent to Assess a Penalty (NOI). If the certified mail, return receipt card has not been returned, the analyst should verify receipt of the certified mail by using the U.S. Postal Service Website at www.usps.gov. If the Website indicates that the certified mail was delivered, the analyst shall print confirmation of the delivery for inclusion in the case file. The analyst shall then proceed with the issuance of a NOI.

If there is no confirmation that the NOR was delivered, the analyst will verify the correctness of the address. These attempts (which should include calling the plan and searching for the sponsor on the internet) must be documented in the case file. If the address is correct, the analyst shall consult with the Division Chief for the next appropriate action.

If the plan administrator fails to respond timely to the Notice of Rejection or if the plan administrator does not submit an acceptable response, the analyst shall prepare a Notice of Intent to Assess a Penalty (NOI). If warranted, the analyst shall prepare a memo to the file documenting the results of the review of the information submitted in response to the Notice of Rejection, including the basis for further enforcement action. If the deficiencies cited in the NOR pertained to a review of the IQPA's audit workpapers, the analyst shall include in the memo to the file sections on the findings cited, the plan administrator's response to the NOR, the analyst's evaluation of the response, and the basis for concluding that the response did not correct the audit deficiency(ies).

Issuance of a Notice of Intent to Assess a Penalty

The analyst shall use the Deficient Filer NOI template. The approved NOI template can be found on the OCA's common drive ("L" drive). The analyst shall use the format of the NOI located on the common drive as the NOI is subject to change.

The analyst should date the NOI (unless it is for a non-filer, in which case the NOI is undated) since the penalty amount is calculated from the original due date, without regard to extension of time, until the date of issuance of the NOI. NOIs should only be dated for Mondays.(2) The analyst shall ensure that the date of the NOI allows for sufficient time for the case to clear review and for signature by Ian Dingwall, the Chief Accountant on Thursdays. Failure to allow for sufficient time may result in the analyst having to recalculate the penalty amount and re-date the NOI. As with all letters, the analyst shall prepare an envelope and a return receipt green card and submit the NOI and case file to the team leaders or Division Chief for clearance and signature.

The analyst shall also include in the case file a memo that documents the penalty calculation amount.

Types of Penalties

  • The penalty for a missing or deficient IQPA reports is $150/day capped at $50,000.
  • The penalty for significant reporting errors such as financial reporting items (e.g., errors on Schedule H, missing Schedule of Assets) is $100/day capped at $36,500.
  • The penalty for non-critical missing or deficient reporting items is $10/day capped at $3,650.
  • Given a case's facts and circumstances, these penalties rates may be higher.

Note: "Per day" calculations are based on the number of days from the original due date of the filing, without regard to any extension of time, up to the date of the NOI. For example, if the plan year ended on December 31, the Plan has an un-extended filing date of July 31 of the following year. Therefore, the analyst shall use the date of August 1, the day after the original due date, to determine the daily calculation up to, but not including, the date of the NOI. It is possible that the plan administrator may be assessed both types of penalties depending upon the facts and circumstances of the case.

The plan administrator has 35 days(3) in which to respond to the NOI by providing a filing satisfactory to the DOL along with a statement of reasonable cause, made under the penalty of perjury, as to why the penalty should not be assessed. There is no extension of time to the 35 day(4) period. The analyst shall track the due dates for cases with NOIs outstanding.

If the plan administrator has not filed its written response by the 25th day, the analyst may contact the plan administrator at the telephone number reported in the Form 5500 Annual Report to confirm that the NOI was received and to remind the plan administrator of the deadline for submitting a statement of reasonable cause. Analysts should document the telephone contact information in the case file. Failure to timely file a statement of reasonable cause results in the penalty becoming a final penalty subject to collection proceedings. In addition, failure to respond timely to the NOI results in the plan administrator waiving his/her administrative to contest the penalty before an Administrative Law Judge.

Failure to Respond or Failure to Respond Timely to the Notice of Intent to Assess a Penalty

If the plan administrator fails to respond to the Notice of Intent to Assess a Penalty, By the 45th day following the date of the NOI, the analyst shall complete the Final Order Checklist. This checklist summarizes the file documentation demonstrating the plan administrator was properly served with the Notice of Intent to Assess a Penalty. If any procedures appear insufficient, the analyst must prepare a memo to the file describing the issues and deliver the case file to the Division Chief for consideration of next action.

The case file must be reviewed by a division supervisor who then submits the file for closure and referral to OPPEM for collection.

ERISA Section 502(c)-2(i)(3) states that a statement of reasonable cause shall be considered filed:

  • upon mailing, if accomplished using United States Postal Service certified mail or Express Mail;
  • upon receipt by delivery service, if accomplished using a "designated private delivery service" within the meaning of 26 U.S.C. 7502(f);
  • upon transmittal, if transmitted in a manner specified in the notice of intent to assess a penalty as a method of transmittal to be accorded such special treatment; or
  • in the case of any other method of filing, upon receipt by the Department at the address provided in the notice of intent to assess a penalty.

The analyst shall consult with the Division Chief on any questions of timeliness of filing a statement of reasonable cause or any questions of interpretation to ERISA Section 502c-2(i)(3).

Where a plan administrator fails to respond or fails to timely provide a proper statement of reasonable cause, the case will then be deemed closed. The analyst shall prepare a closing memo for the file and the final order checklist.

Timely Response to Notice of Intent to Assess a Penalty

Upon a timely receipt of a response to the NOI, the analyst shall review the response to determine whether or not the plan administrator has submitted a satisfactory filing. Analysts should search the EFAST2 database to confirm a satisfactory amended filing was filed. In addition, the analyst shall review the statement of reasonable cause to ensure that it includes the penalty of perjury statement.

If the deficiencies cited in the NOI pertained to a review of the IQPA's audit workpapers, the analyst shall include in the memo: to the file sections on the findings cited; the plan administrator's response to the NOI; the analyst's evaluation of the response; and an explanation for concluding that the response to the NOI corrects the audit deficiency(ies). However, if the plan administrator provides an audit report from a new auditor before closing the case, the analyst shall review the workpapers of the new auditor. The analyst shall follow the procedures for the augmented workpaper review program found in this guide for documentation of the review of the workpapers.

Statement of Reasonable Cause Not Signed by Plan Administrator or Statement of Reasonable Cause Not Made Under Penalty of Perjury

The plan administrator, or an individual who has duly authorized power of attorney, must sign the statement of reasonable cause. The statement of reasonable cause must be accompanied by a declaration that the statement of reasonable cause is made under penalties of perjury as required under 29 CFR § 2560.502c-2(e). If an individual is signing on behalf of the plan administrator under power of attorney, the plan administrator must provide a power of attorney form (e.g. IRS Form 2848) executed by the plan administrator.

If the statement of reasonable cause is not signed by the plan administrator or duly authorized power of attorney or if the statement of reasonable cause does not contain the required penalty of perjury declaration, the analyst shall immediately issue a 10-Day Penalty of Perjury letter addressed to the plan administrator. This notice provides the plan administrator with a final opportunity to provide the DOL with a proper statement of reasonable cause.

If the plan administrator fails to "respond" (i.e., postmarked by the 10th day) to penalty of perjury letter, the NOI becomes a final penalty and the intended penalty amount becomes the civil penalty assessment subject to collection proceedings. In addition, this failure results in the plan administrator waiving his/her administrative rights to contest the penalty or the facts alleged before an Administrative Law Judge. In these cases, the analyst shall prepare a closing file memo and final order checklist. The case will then be deemed closed and will be remitted to the EBSA's Office of Program Planning, Evaluation and Management for collection.

Properly Filed Statement of Reasonable Cause- Reasonable Cause Analysis

If a proper and timely filed statement of reasonable cause is received, the analyst shall prepare a reasonable cause analysis chart. The reasonable cause analysis shall include a summary the deficiencies noted, the plan administrator's argument(s) for abating the penalty, whether the filing is in compliance at the date of the reasonable cause analysis, the plan's past and subsequent reporting compliance history, and recommendation(s) as to whether or not the penalty should be abated and in what amount. The Reasonable Cause Committee analysis chart is located on the "L" drive.

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After completion of the reasonable cause committee chart, the analyst shall present his or her analysis to the Reasonable Cause Committee (Committee).

Reasonable Cause Committee

The analyst shall complete the Reasonable Cause Committee Analysis chart and transmit it to the RCC coordinator. The analyst shall then arrange to present the case to the Committee and note the Committee's recommended action in the appropriate areas of the RCC Chart. The Chart shall then include be part of the case file. Analysts can discuss the case with his or her supervisor if the analyst disagrees with the Committee's recommendation to determine an appropriate resolution. After the case has been presented to the Committee, the analyst shall prepare a Notice of Determination on Statement of Reasonable Cause (NOD).

Notice of Determination on Statement of Reasonable Cause

The analyst shall prepare the NOD using the Deficient Filer NOD template. The approved NOD templates(5) can be found on the OCA's common drive ("L" drive). The analyst shall use the format of the NODs located on the common drive as the NODs are subject to change.

The analyst should not date the NOD. The NOD will be dated by the office support staff at the time that it is mailed. The analyst shall prepare an envelope and a return receipt green card and submit the NOD and case file to the Division Chief for clearance and signature.

The issuance of the NOD concludes the divisional enforcement process. After the NOD is mailed by the office support staff, the file will be returned to the analyst. The analyst shall maintain the case file until the signed, return receipt green card is received. Upon receipt of the return receipt green card, the analyst shall return the case file to the office support staff for filing in the OCA file room. Under no circumstances shall a case file with an NOD be filed in the file room until such time as the analyst has confirmed that the plan administrator has received the NOD.

Withdrawal Notice for Notice of Rejection, Notice of Intent to Assess a Penalty, Notice of Determination Issued in Error (Procedural Error)

A withdrawal Notice for Notices of Rejection, Intent to Assess a Penalty, and/or Determination should be only used in instances where a procedural error occurred. You must receive your team leader or supervisor's approval before issuing a withdrawal notice for Notices of Rejection, Intent to Assess a Penalty and/or Determination. In addition, you must document in the case file the procedural error that occurred and the basis for issuance of the withdrawal notice. In all other cases where a satisfactory filing has been received in response to a Notice of Rejection, a Notice of Satisfactory Filing must be used.

The issuance of the withdrawal notice will generally conclude the enforcement process. After the notice is mailed by the office support staff, the file will be filed in the OCA file room.

Procedures for Undeliverable Letters

Undeliverable Letter – Should a letter be returned due to bad address, the analyst will make every effort to locate a current address. Some common methods are using internet search engines, calling the Plan by using the last known telephone number indicated on the Form 5500, and checking subsequent plan year filings. Once all resources have been exhausted, if no forwarding or corrected address can be obtained, the analyst shall prepare a closing memo with the reason for closure as "Undeliverable/Bad Address".

Procedures to Verify Receipt in Absence of Return Receipt Card

If the certified mail, return receipt card has not been returned, the analyst should first attempt to verify that the notice was received. The analyst can verify receipt of the certified mail by accessing the U.S. Postal Service Website at www.usps.gov. If the Website indicates that the certified mail was delivered, the analyst shall print confirmation of the delivery for inclusion in the case file. Upon verification of receipt of the notice, the case is considered closed.

If there is no confirmation that the notice was delivered, the analyst verify the correctness of the address being used as it may be necessary to reissue the notice using the correct address. If the address is correct, the analyst shall consult with the Division Chief or team leader for the next appropriate action.

Referrals to the Office of Enforcement Procedures

Where it is determined that issues exist warranting referral of a case to the Office of Enforcement, the analyst shall prepare a memo referring the case and shall include in the memo the basis for the referral. The analyst shall also prepare the OE Transmittal Form. The format of the OE referral memo and the OE transmittal Form are maintained on the OCA "L" drive. The referral of a case to OE does not automatically result in the closing of the case. The analyst should consult with their team leader or supervisor.

Multiple Employer Welfare Arrangements Program Procedures

When a case is assigned, the analyst should review the ERISA Public Disclosure System.

An inquiry letter is sent to MEWA administrator when it's determined that they failed to file the Form M-1 or they filed it late.

If no response is received a Notice of Intent to Assess a Penalty is mailed to the MEWA administrator. The letter process is the same as the 502c-2 enforcement programs letter process.

502(c)(6) Compliance Program Procedures

Upon assignment, the analyst shall review the referral for completeness and shall contact the referring investigator to determine if compliance has since been achieved. Depending on the circumstances of the referral (e.g. the plan sponsor is bankrupt), the case may be closed.

If the case is to be pursued, the analyst shall prepare a Notice to Furnish Documents (NFD). Once a response is received, the analyst shall review the response to ensure accordance with 29 CFR Section 2520.102-3 (contents of summary plan description). If the information is in compliance and timely received, the analyst shall prepare a closure memorandum as well as an EBSA Cover Memorandum to accompany document(s). These documents, after review, are forwarded to the requesting regional office or participant/beneficiary in the case of a direct request.

If the requested documents are not provided within 35 days from the date of the NFD, or the documents are deficient, the analyst shall prepare a Notice of Intent to Assess a Penalty. If a timely response is received, the analyst shall review the response to ensure accordance with 29 CFR Section 2520.102-3 (contents of summary plan description). After review, the analyst shall prepare a Notice of Determination and present the case before the Reasonable Cause Committee in the same manner as other cases.

If, after this process, the information has not been provided, the analyst shall consider a referral to the field for investigation after consultation with the supervisor or team leader.

Blackout Notice – 502(c)(7) Procedures

OCA targets, assigns and receives blackout notice cases from various sources such as:

Referrals from field: Blackout notice cases may be opened based on a referral from the field offices following the discovery of a possible blackout notice violation during a field investigation.

502(c)(2) case in OCA: During the course of a 502(c)(2) case in OCA, the analyst may become aware of a blackout that occurred or a situation that would give rise to a possible blackout such as a change in third party service providers for the plan. The case is then referred for possible opening of a blackout notice case.

Form 5500: OCA can use the blackout notice questions on the Form 5500, Schedule I and Schedule H and Form 5500 S/F to target plans that indicated they experienced a blackout and did not provide the noitce.

Blackout Notice cases are assigned a case number ending in "N", placed in a black file folder and assigned to an analyst.

For cases opened based on referral from field

The analyst shall review the information provided by the field, if a copy of the notice provided to participants has been supplied, the analyst shall complete the blackout notice review checklist and determine if the alleged violations appear valid and if any exceptions may apply. The analyst may contact the EBSA investigator to discuss the case, the circumstances of the blackout, any possible violations and general information regarding the plan fiduciaries.

If a violation is apparent, the Plan Administrator is issued a 15-day blackout notice inquiry letter. This letter requests the plan administrator provide the Department all the related information and documents regarding the blackout and to explain the circumstances surrounding any possible violations.

For cases opened based on OCA target

For cases generated by Form 5500 targeting, the analyst shall review and note the areas of the Form 5500 and the IQPA report that are indicators that a blackout period occurred.

The Plan Administrator is issued a 15-day blackout notice inquiry letter. This letter states that the Department believes a blackout period has occurred based on the information in the Form 5500 filing. The Plan Administrator is requested to submit a copy of the notice provided to participants, explain the circumstances surrounding the blackout or to affirm that a blackout period did not occur.

For all blackout cases

The response to the inquiry letter shall be reviewed by the analyst. If the blackout notice is provided, the blackout notice checklist shall be prepared. (If the blackout notice was provided in the field referral and the checklist has already been prepared, do not complete a second checklist.)

If it appears there was no violation, the case shall then be submitted for closing.

If the analyst determines a violation does exist, the penalty shall be calculated and a notice of intent to assess a penalty (NOI) shall be issued to the plan administrator. Also, if a response to the 15-day inquiry letter is not received, the analyst should prepare an NOI.

The plan administrator must respond to the NOI with a reasonable cause statement. When received, the reasonable cause statement and all supporting documents shall be reviewed by the analyst.

The analyst shall prepare a reasonable cause analysis with recommendations and present the analysis and the case to the supervisor and the Division Chief. Following the presentation to the reasonable case analyst, a notice of determination (NOD) will be issue to the plan administrator. The case shall be held for a response to the NOD or confirmation of the payment of the penalty assessed. If there is no response to the NOD the case shall be referred to OPPEM for collection of the penalty. If the plan administrator responds contesting the penalty and requests an ALJ hearing, the case follows the normal ALJ case progression.

Proposed 502(c)(7) Penalty Structure(6)

Note: The following structure has been created with the assumption that a preliminary Request for Explanation has been sent to the Plan Administrator.

Non–Provider

  • Base per-day per-participant penalty rate of $25.
  • The base rate is increased by $50 if there is evidence that the violation was willful or egregious (The degree of willfulness can be determined by the degree of sophistication of the plan sponsor or its service provider. For example, where senior corporate staff imposed a blackout for their own, unlawful financial benefit. These matters will be flushed out in the investigation and our follow-up to the sponsor's response to our show-cause letter).
  • The base rate is increased by $25 if there is evidence that the violation caused substantial loss to Ps & Bs. This is predicated on a participant's compliant to the field and demonstration of a resultant large financial loss.
  • Abatements from these amounts, including the $25 base rate, will be made in the reasonable cause phase based on facts and circumstances.
  • Days applied to penalty calculations span from 30 days prior to the last day Ps and Bs can exercise their rights through the end of the blackout period.
  • NOI penalty for non-provided is capped at $250,000 and for a late provider is capped at $100,000

Late–Provider

  • Base rate is determined using a sliding scale depending on the degree of lateness:

Days in advance of the last day participants & beneficiaries can exercise their affected rights

  • 29 to 25 days. . . . . . . . . . . . . .$ 1
  • 24 to 20 days . . . . . . . . . . . . . $ 5
  • 19 to 15 days . . . . . . . . . . . . . $10
  • 14 to 10 days . . . . . . . . . . . . . $15
  • 9 to 5 days . . . . . . . . . . . . . . . $20
  • 4 to 1 days . . . . . . . . . . . . . . . $25 (equivalent to non-provider base rate)
  • If there is evidence that the lateness was willful, egregious or caused losses to Ps and Bs, these base rates will be increased by $50 or $25, respectively.
  • The above rates are multiplied by the number of affected Ps & Bs and the number of days defined in "Non-Provider" above.
  • Generally where less than 30-day advance notice appears warranted, the notice will not be treated as having been provided late UNLESS the fiduciary fails to properly certify in writing the reason(s) why 30 day advance notice could not be provided.

Deficient Notices

  • Deficient notice penalties can be in addition to the late provider penalties. Total penalties for deficient notices provided late will be capped at $25 per participant per day providing there are no indications that the violations were willful, egregious or caused losses to Ps and Bs. Not withstanding a willful or egregious failure and/or harm to participants, a sponsor who provided Ps and Bs with a notice both deficient and late will not be penalized more than a sponsor who failed to provide a notice.
  • Penalties are calculated using the table of penalties below. The rates are multiplied by the number of affected Ps & Bs and the number of days elapsed since notice was provided to participants (this is different than late and non-provider penalties because it takes into recognition that some form of notice was provided).
  • No deficient penalties are calculated if the notice was 26 or more days late. This is consistent with the penalty structure above that deems a notice this late to effectively not having been provided at all.
  • The proposed deficient penalty schedule (reflecting the egregiousness of the violations) is as follows:
Failure Penalty(7)
 
No statement of beginning and ending dates $7.00
Name, address, and telephone number of contact for answering questions about the blackout period was not provided or inadequate $2.00
No description of affected rights $5.00
No description of affected investments $5.00
Failure to instruct participants on how to learn about the actual beginning and ending dates of the blackout period when period is stated as calendar weeks $1.00
The statement "evaluate appropriateness of current investment in light of blackout" is either not provided or is inadequate $3.00
Updated notice (issued after the length of blackout period is changed from the length indicated in the initial notice) did not adequately explain the reasons for the change $1.00
Updated notice (issued after the length of blackout period is changed from the length indicated in the initial notice) did not adequately identify all material changes in the information in the prior notice $2.00
If less than 30 days notice was provided:  
Failure to indicate why 30 day notice could not be provided $2.00
Failure to include a statement that federal law requires 30 days notice $2.00

Non-Filer Program Enforcement Procedures

Non-filer cases generally start with the issuance of the NOI. However, depending on the method used to identify the case, there are varying levels of research that must be completed prior to issuance of the letter.

If the case was identified through a referral from the Office of Enforcement (OE), the analyst shall thoroughly review the referral and the attachments to ensure there is a failure to file and enough information was provided to open a case (EIN, plan administrator's address, etc).

Additionally, the analyst will contact the contact person listed on the OE referral to discuss the case and to determine whether OE has closed its case. If the case is closed, the analyst shall determine how cooperative the plan administrator was and whether the plan was made whole. If the case is open, the analyst shall explain OCA's process to the investigator to determine if OCA should proceed with the case at this time or wait until OE has resolved their case.

For all cases, the analyst shall complete the Non-Filer Review Form, which includes checking the End User (EFAST), ERISA Public Disclosure (EPDS), the Delinquent Filer Voluntary Compliance (DFVC), and the Interactive Voice Response (IVR) systems to ensure the filing has not yet been received. The Non-Filer Review Form can be found on OCA's "L" drive. After the research is complete, the analyst shall prepare a Notice of Intent to Assess a Penalty, if warranted. Unlike others, the NOI for a non-filer is dated at the time of mailing by the support staff.

NOI Penalty Calculation

Penalties are calculated at $300 per day up to a maximum of $30,000 per year for each year the plan has not filed an annual report. The penalties are cumulative but in most cases are capped at $180,000. Penalties are generally only assessed for the last three plan years that were not filed.

For Example: XYZ Company has a pension benefit plan that begun on January 1, 2001. It is now January 15, 2005 and there is no record of the plan ever filing. The penalty calculation would be:

Plan Year End Filing Due Date Number of Years Late Penalty Due
 
Dec. 31, 2001 July 31, 2002 $120,000
Dec. 31, 2002 July 31, 2003 $90,000
Dec. 31, 2003 July 31, 2004 $60,000
Dec. 31, 2004 July 31, 2005 168 days @ $300 per day (capped at $30,000) $30,000
    Total $300,000
Penalty to be assessed for 2002, 2003, and 2004 $180,000

After issuing the NOI, the analyst shall follow the procedures in the same manner as a 502c-2 deficient filer case found in this manual.

When reviewing the reasonable cause statement to determine the amount of abatement, if any, the analyst shall ensure that all requested filings (not just the years penalized) were submitted. The penalty guidelines for abatement are "DFVC x 2". This means that the abatement amount is the difference between the calculated NOI penalty amount less what would have been paid under the DFVC program, doubled. This amount can be adjusted up or down depending on facts and circumstances.

The DFVC penalties are: Per Filing Per Plan
 
Large Form 5500 Filers $10/day up to $2000 $4,000
Small Form 5500 Filers $10/day up to $750 $1,500
Top Hat Plans $750 regardless of the number of plans  
Apprenticeship & Training Plans $750 regardless of the number of plans  
Small 501(c)3 Plans $10/day up to $750 $750

Late Filer Program Enforcement Procedures

Upon assignment, the analyst shall print the Form 5500 and establish a case. The analyst shall complete the Late Filer Review Checklist to ensure the filer has not already come into compliance and no other cases are opened on the plan. The Late Filer Review Checklist can be found at on OCA's "L" drive.

Late filers begin with the Notice of Intent to Assess a Penalty. The penalty is $50 per day from the day the filing was due until the day filed without regard to extensions.

For Example: Camelot Toys has a profit sharing plan on a calendar plan year. On July 15 Camelot Toys files a Form 5558- Application for Extension of Time, which gives the plan until October 15 to file. The filing is not made until November 1. This filing is NOT 16 days late (October 16-November 1) but 92 days late (August 1-November 1) and the late filer penalty is $4,600.

After issuance of the NOI, the analyst shall follow the procedures in the same manner as a502c-2 deficient filer case.

[Ex 7 (e), 5 two paragraphs redacted]

Case Closing Procedures

At each stage of the process, the analyst must review the OCA Case Tracking System (OCATS) to ensure that all relevant data fields have been entered and that the entered data is correct. For every case closed, the analyst shall complete the OCATS Checklist verifying that OCATS is complete and accurate prior to submitting the case file to the OCA File Room. Where data has not been properly entered, the analyst shall notify the office support staff so that correction is made. After all corrections to OCATS have been made, the case file shall be filed in the OCA file room.

In some cases, the analyst may be asked to assist in the case as it proceeds through the collection process or through the administrative law judge process. Every analyst is expected to follow these procedures, without exception, unless otherwise approved by the team leaders or Division Chief.

Delinquent Filer Voluntary Compliance Program (DFVC) Procedures

Incoming Mail and Information

The Department's lockbox agent is responsible for receiving the DFVC submissions and the depositing of the payments and data entry of the records. Once this is completed, the scanned images f the filings and payments are transmitted to the Department of Treasury for viewing. At the same time, the computer record is posted on their Website which is then uploaded by DRC on a daily basis. The hardcopies are mailed by the lockbox agent to OCA.

A new tracking system is being designed for the DFVC program which, along with the advent of the Electronic Check Processing (ECP) system for viewing submissions, will result in a complete overhaul of the DFVC program procedures. This section will be updated upon completion of the tracking system.

Document Types

The document type is used to identify the type of filing and is also used in the penalty calculations. It is vital that this field be correct. When the lockbox agent is entering the records, they only have access to document types A, B, and C. During the in-house review, all document type Cs must be changed to a more appropriate document type and all As and Bs must be confirmed.

Below is a detailed list of the document types and their uses.

Code Label Explanation
 
A Large Plan Any plan that has 100 or more participants on line 6 (beginning of the year participants) that is not using the 80-120 rule.
B Small Plan, normal Any plan that has less than 100 participants on line 6 (BOY participants) OR plans that have 120 or fewer BOY participants and may use the 80-120 rule.
C Bank, Other Any filings that are received by the bank that do not fall into one of the above categories. Filings should not remain in this category, but should be moved to an appropriate category upon review.
D Special Class Filer Small plan filings that are maintained by a non-profit organization, specifically a 501(c)3, including 403(b)s. If the plan has more than 100 participants at any point during it's delinquency, then it is not a special class filer. If you cannot immediately determine if it is a special class filer, review lines 8a and 8b. If the codes 2L or 2M appear, the plan would qualify provided there are less than 100 BOY participants.
E No DFVC Requirement Included in this document type would be EZ filers, small fringe plans, DFEs, and other filings that are not eligible for the DFVC program.
F Completion Filing The completion to a previous DFVC filing. Generally this is a check that completes a filing that under paid the penalty.
G ATP Apprenticeship and Training Plan, plan number 999
H Top Hat Top Hat plan, plan number 888
I OCA Reviewed, Close Included in this document type are all filings that do not fall under the above types, but have been reviewed and closed by OCA. A common example is duplicate filings.
J Further Review This is for any filings that cannot be assigned to one of the document types above and cannot be closed, such as checks without filings. Filings in this category should be kept to a minimum.

Refunds

When a filing overpays the penalty, the Department will make two attempts to contact the filer for a refund. Both attempts must be "provable", i.e. must have a fax confirmation or a certified mailing slip. In order to ensure these filings are not overlooked, there is a standard procedure that must be followed.

All refunds are paid electronically. In order to process the refund, the filer must complete the ACH form and mail it back with a cover letter requesting a refund and stating the amount of the refund and the reason for the request (usually overpayment). The ACH form and the refund letter must be mailed so that there is an original signature.

Written Correspondence

If the ACH form cannot be faxed to the filer, or the filer does not request a refund, correspondence must be sent by the analyst. If no fax was sent, a 1st refund letter must be sent. If the filer does not respond to the first letter or the fax, then a 2nd refund letter should be sent. All correspondence is tracked in the Access DFVC letter database, which also prepares the correspondence. Both the 1st and 2nd refund letters are mailed certified, return receipt.

Refunds

When the filer responds with a refund request letter and a completed ACH form, a refund can be processed. Correspondence is sent to the filer informing them that the refund is being prepared and should be deposited within two weeks. Additionally, information is sent to OPPEM directing them to refund the money. At this time the DFVC system must be updated to reflect the refunded amount.

Insufficient Payments

Periodically, filings that have underpaid the penalty are received. This is most common between August and November due to confusion over extensions. When this occurs, the Department must attempt to contact the filer via certified mail.

Identifying Filings Needing Additional Funds

When possible, the analyst shall contact the filer by telephone to inform them of the underpayment. The analyst shall confirm the plan information then explain the reason for the need for additional funds. The analyst shall note the day, phone number, and name of the person spoken to (or message left for). The analyst shall also include any relevant notes on the conversation.

If a completion filing (a DFVC submission that completes a previous submission) is not received within a few weeks, an Insufficient Amount letter must be prepared. This letter is prepared using the insufficient form in the Access DFVC Letter System. The Insufficient letter is sent to the plan administrator and gives the plan 15 days to respond with completion payment. If additional funds are not submitted, the submission is removed from the DFVC program and the plan administrator will receive a Notice of Intent as a late filer. Due to the importance of tracking receipt, this letter must be mailed certified.

Processing Completion Filings

When completing a submission, the filer should never resend the Form 5500. It is best if the filer only sends a check with a cover letter referencing the original filing's DFVC number. When a completion filing is received the funds are matched with the appropriate filing.

Removing Submissions from the DFVC Program

Should a plan not complete their filing, the submission is removed from the DFVC program and assigned as a Late Filer. Depending on the original submission, the entire submission or only parts of it may be removed.

Filings that are removed from DFVC must be entered into OCATS as a late filer and the case number should be noted in the comments field of the DFVC tracking system.

Miscellaneous

  • When using the DFVC program, the filer waives their right to protest the penalty, according to Section 5 of the DFVC Federal Register Notice. Should a statement be submitted, it be neither be read nor considered.
  • The DFVC program does not absolve the filer of other penalties, such as deficient filing penalties. The DFVC program is only for late and non-filer penalties. DFVC filings are entered into the ERISA database and are subject to the same checks that timely filings face.
  • In order for filings to apply to the "per plan" cap, they must all be submitted at the same time. Filings submitted separately will have to start the "per plan" cap over again. If all the filings cannot be submitted in one envelope, the submissions should include a letter explaining the situation and the filings in each envelope. The postmark dates for the envelopes must be within one day of each other.
  • There is no special penalty for large 501(c)3 organizations.

Footnotes

  1. The only exception to the 45 day time period is when the 45th day occurs on a weekend day or federal holiday, in which case the 45th day shall be the next business day. The postmark date on the filer's response shall be used to determine timeliness of the response to the NOR.
  2. If Monday is a holiday, date the notice for the Tuesday following the holiday.
  3. NOIs sent via certified mail have a 35 day response period. Generally, NOIs should be sent via certified mail unless an overnight delivery method has been approved by the Division Chief. NOIs sent via overnight mail have a 30 day response period. Analysts sending a NOI via overnight mail shall ensure that the NOI has been properly edited for this 30 day response time period.
  4. 30 days if NOI was sent via overnight mail or hand delivered.
  5. NOD Examples for "No Penalty", "Partial Waiver" and "No Waiver"
  6. Developed January 19, 2005, by an Intra-Agency Working Group. OCA reserves its right to enforce this civil penalty to the full extent authorized.
  7. Penalty – All penalty amounts are determined on a per day and per participant basis