Summary: Pursuant to a congressional request, GAO evaluated the effectiveness of the Internal Revenue Service's (IRS) Employee Retirement Income Security Act of 1974 (ERISA) enforcement program, focusing on recent changes that shifted resources from reviewing plan designs to examining plan activities.
GAO found that: (1) in recent years, IRS spent most ERISA enforcement resources on reviewing and approving plan designs, rather than examining plan operations, due to frequent changes in ERISA which required companies to repeatedly amend their pension plans; (2) increasing the emphasis on examinations, working on new approaches for targeting potential violators, and initiating a new quality assurance program should improve the security of participants' benefits and ensure compliance with ERISA; (3) results of examinations by the IRS taxpayer compliance measurement program (TCMP) to evaluate the effectiveness of enforcement efforts and develop criteria for targeting plans showed that of the plans examined, 32 percent required some change in their design or operation to comply with ERISA; (4) the IRS program for identifying plans with ERISA violations has not been as effective as expected, due to outdated TCMP selection criteria and the large number of plans examined by inexperienced staff for training purposes; (5) IRS was testing an alternative examination selection system which would enable it to select plans with multiple characteristics that suggest a high potential for ERISA violations, and periodically revise new criteria without waiting for TCMP results; (6) IRS initiated a new quality assurance program in February 1990 to review each district office's employee plan operations every 2 years, but it lacked a sufficient sample size to statistically evaluate the quality of such examinations; and (7) if IRS expectations for high participation in its volume submitter program are not realized, it will have to either shift enforcement resources from conducting examinations or approve many design changes without a detailed review, which could result in the approval of plans that do not comply with ERISA.
