The ERISA Industry Committee (ERIC) has called for an immediate investigation into apparent leaks to a U.S. congressman of the names of pension plans targeted in a recent report by the Department of Labor's Office of Inspector General.
The company names were given to Rep. Bernie Sanders, an independent from Vermont who subsequently demanded that the Labor Department reprimand all 13 of the companies involved, which include three in New England.
The audit revealed that the employers had converted traditional retirement plans to cash-balance plans, resulting in a shortfall of $17 million in lump-sum payouts to hundreds of workers who left the firms early.
The shortfalls aside, ERIC contends that someone in the government breached a promise of confidentiality made by the OIG to the pension plan sponsors. If the leaks came from the OIG, they violate "Quality Standards for Federal Offices of Inspector General," standards adopted for IG's in 1986 by a Presidential commission, according to ERIC.
In a letter to Department of Labor Secretary Elaine Chao, ERIC President Mark Ugoretz said that "the release of the information to Representative Sanders is a clear and egregious violation of the confidentiality promise made by the OIG to each company from which it requested information."
Ugoretz urged the department to initiate an investigation of the OIG to determine the source of leaked information and "take corrective steps to ensure the integrity of the OIG and the department."
The OIG undertook an investigation of a "judgmental sample" of 60 cash balance plans between September 2000 and January 2002. In order to induce the targeted cash balance plans to participate in the study, the OIG specifically promised in a letter obtained by ERIC that "...the information you will provide is considered confidential."
ERIC says it also has strong objections to the substance of the report, challenging the legal theory upon which the report is based, and calling for its immediate withdrawal.
In ERIC's view, the report erroneously suggested that many cash balance plans underpay participants by failing to follow informal Internal Revenue Service guidance on calculation of pre-retirement age lump sum benefits. The informal guidance, which does not have the force of law, suggests plan sponsors use a complicated calculation to convert the cash balance account to a lump sum which often results in benefits amounts that are higher than the benefits provided by the plan. The OIG criticized 13 of the 60 targeted cash balance plans for failing to pay this "whipsaw" windfall benefit.
To view an earlier news story on Congressman Sanders' call for reprimands, click here.
