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Last week we noted that the DOL said that ESOPs are a priority in a recent speech and referenced one of our most read posts on What a DOL Auditor is Looking For When Auditing an ESOP. New Guidance on Department of Labor Enforcement Priorities for Employee Benefits discusses another recent DOL speech that detailed the new criminal and civil enforcement priorities of the DOL. The criminal projects include embezzlement of plan assets and Filing a False IRS Form 5500. The article stressed four enforcement efforts:

  • fees of pension consultants and service providers. An existing project focused on the propriety and disclosure of these fees will be expanded to address situations in which the service providers use their fiduciary status to increase their compensation;

  • ESOPs (employee stock ownership plans). This initiative will include issues of valuation – whether ESOPs and their participants are being overcharged for the stock acquired by the plan – as well as fiduciary self-dealing and conflicts of interest;

  • bankrupt and financially distressed plan sponsors. Through its "REACT" project, the Labor Department will focus on taking legal action on to protect the interests of these participants; and

  • multiple employer welfare arrangements (MEWAs). These arrangements sometimes involve health care fraud and are often put together by individuals not qualified to establish them.

The DOL also said they are working on the revised final investment advice regulations, a review of two plan expense disclosure regulations, and a review of target date funds.

The DOL's ERISA enforcement page provides more guidance on ESOP priorities:

The Employee Stock Ownership Plan (ESOP) project is designed to identify and correct violations of ERISA in connection with ESOPs. ESOPs are designed to invest primarily in employer securities. Due to their unique nature, ESOPs can have distinct violations, as well as violations that might occur in any employee benefit plan. One of the most common violations found is the incorrect valuation of employer securities. This can occur when purchasing, selling, distributing, or otherwise valuing stock. Other issues involve the failure to provide participants with the specific benefits required or allowed under ESOPs, such as voting rights, ability to diversify their account balances at certain times, and the right to sell their shares of stock when received. EBSA will also review the refinancing of ESOP loans following EBSA's issuance of FAB 2002-1.

An ESOP by definition is "designed to invest primarily in qualifying employer securities". The DOL provided guidance on the fiduciary considerations of refinancing an ESOP Loan in Field Assistance Bulletin 2002-01 - ESOP Refinancing Transactions.

The IRS has also put together a team to look at ESOP-specific plan document including Rebalancing and/or Segregation Plan Provisions.

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