Employee Benefits

H.R. 2290 would amend the Employee Retirement Income Security Act of 1974 (ERISA) by eliminating the limited scope audit exemption, requiring more timely reporting of ERISA and other violations of the law to the Secretary of Labor or plan administrators, and requiring auditors of plans to participate in a peer review program that would include the examination of at lease one audit plan. GAO supports the proposed amendments, which are consistent with earlier GAO recommendations. The reporting and auditing provisions in H.R. 2290 should bring about important changes in the audits of employee benefit plans and in the information available to plan participants. These changes should help participants to better monitor their plans and achieve ERISA's intended accountability objective.

GAO noted that: (1) H.R. 2290 would require the plan administrator or auditor to notify the Secretary of Labor or the plan administrator within 5 business days of the date they determine that there is evidence that certain violations of law may have occured; (2) audits help to provide discipline by evaluating whether plan administrators have fulfilled their fiduciary duties and complied with laws and regulations; (3) according to the Department of Labor, annual reports provided by plans--including audit reports--are its most valuable source of information for targeting investigations because they may contain information indicative of Employee Retirement Income Security Act (ERISA) or other legal violations; (4) while both plan participants and Labor have significant interest in violations of the law, there is no requirement in ERISA or Labor's implementing regulations that either party be promptly and directly informed by the auditor when fraud or serious fiduciary breaches are discovered; (5) GAO believes that the interests of plan participants and the government would be better served by plan administrators and auditors promptly reporting serious ERISA or other violations of the law directly to the Secretary of Labor or the plan administrator, if the auditor identified the violation; (6) this would require that such violations be reported significantly sooner than under the current annual reporting process; (7) GAO previously reported that neither ERISA nor its implementing regulations require audit firms to participate in peer review programs; and (8) H.R. 2290 would require all firms that audit employee benefit plans to participate in a peer review program and that the review include at least one plan audit.