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What to Do When You Think the Rules Have Been Broken

    

Three federal government agencies have authority to investigate possible violations of the rules for private pension plans and to bring lawsuits or assess penalties against individuals engaged in illegal actions: the Department of Labor, the Internal Revenue Service and the Justice Department.

Department of Labor

If you think the plan trustees or others responsible for investing your pension money have been violating the rules, you should call or write the nearest field office of the U.S. Department of Labor's Employee Benefits Security Administration (EBSA). The Labor Department has authority to investigate complaints of fund mismanagement. If an investigation reveals wrongdoing, the Department can take action to correct the violation, including asking a court to compel plan trustees and others to put money back in the plan. Courts can also impose penalties of up to 20 percent of the recovered amount and bar individuals from serving as trustees and plan money managers.

Internal Revenue Service

If you suspect that individuals providing services to the plans have gotten loans or otherwise taken advantage of their relationship to the plan, the Employee Plans Division of the Internal Revenue Service may want to take a closer look. The Internal Revenue Service is authorized to impose tax penalties on people involved in unlawful "party in interest" transactions.

NOTE: If you are planning to provide information to the Internal Revenue Service about an unlawful party in interest transaction, you should consider filing a written claim for an Informants' Reward with the Intelligence Division of the IRS at the same time. If the IRS collects a penalty tax as the result of your information, there is a possibility that you could receive up to 10 percent of the amount collected.

Department of Justice

Cases of embezzlement or stealing of pension money, kickbacks or extortion should be referred to the Federal Bureau of Investigation or the Labor Department field office in your area. If illegal activities are found, the case can be referred to the U.S. Department of Justice for prosecution. Criminal penalties can include fines and prison sentences, or both.

Federal pension law makes it unlawful for employers to fire or otherwise retaliate against employees who provide the government with information about their pension funds' investment practices.

The most effective way to present your concerns to government investigators is to provide them with a short summary of the problems you have found and supporting documents.

Collecting information

You have a legal right to ask the plan administrator for the plan's latest Form 5500 or Form 5500-C/R. You also have the right to ask for a copy of:

  • the summary plan description,
  • the plan document,
  • the trust agreement setting up the plan, if separate from the plan,
  • any collective bargaining contract, if appropriate, and
  • any other instrument under which the plan was established or is operated.

Make all requests for plan documents in writing. You may have to pay reasonable copying costs. If you have trouble getting the documents from your plan, contact EBSA's Division of Technical Assistance and Inquiries in Washington, D.C. or the EBSA field office nearest you.

If the administrator fails to give you information you are entitled to within 30 days of your written request, and the reasons for the delay are within the administrator's control, you also have the right to bring a lawsuit against the plan administrator, and ask the court to make the plan administrator pay you a fine of up to $100 a day for every day the administrator goes over the 30-day deadline. It is a good idea to send your request by certified mail return receipt requested so that you will have a record of when you made the request.

If you would rather not ask your plan for the information, you can obtain Form 5500s and Form 5500-C/Rs after they have been filed with the government and processed from EBSA's Public Disclosure Facility.

If you find that your pension plan has not filed the Form 5500s or Form 5500-C/Rs, the forms are incomplete or contain false or misleading information, you should immediately notify the nearest EBSA field office. The Labor Department has authority to assess civil penalties against plan administrators who fail or refuse to comply with annual reporting requirements.

Government agencies have limited resources and are unable to investigate all claims of fund mismanagement. You may also want to contact a lawyer.

Even if you think you cannot afford the cost, you may still be able to find a lawyer to take your case. This is because the law provides that a court has the power to award attorney's fees if you win a pension case.

To find a lawyer, you should check with the lawyer referral service of your state, city or county "bar association." Ask for a lawyer experienced in pension law who is willing to represent workers and retirees.

This is for educational purposes only. The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.


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