2002 Annual Performance and Accountability Report

Employee Benefits Security Programs

The goals and measures contained in EBSA’s Annual Performance Plan for FY 2002 supported those contained in the EBSA FY 1999 - 2004 Strategic Plan and fall under the Department’s 2^nd strategic goal-- A Secure Workforce. EBSA’s primary mission is to protect the pension, health and other employee benefits of the over 150 million participants and beneficiaries in excess of 6 million private sector employee benefit plans and $4.8 trillion in assets. Through its program, EBSA safeguards and promotes the economic security of workers and families. To accomplish this, EBSA has established the following agency goals:

Deter and correct violations of the relevant statutes - EBSA deters and corrects violations of the relevant statutes by identifying civil violations and achieving appropriate correction in a cost-effective manner (i.e. voluntary compliance, administrative proceedings or federal court action); detecting, investigating and referring criminal violations to prosecutorial authorities; ensuring that annual reports are filed timely and accurately; and ensuring that audits of employee benefit plans comply with professional standards.

Facilitate compliance by plan sponsors, plan officials, service providers and other members of the regulated community - EBSA facilitates compliance through the timely issuance of advisory opinions, exemptions, regulations, compliance guides and other issuances designed to assist the regulated community in understanding and complying with its responsibilities under the law, while removing unnecessary impediments and protecting the rights and benefits of participants and beneficiaries. These efforts are supplemented by EBSA participation in conferences, symposia, and programs designed to expand an understanding of ERISA’s compliance requirements.

Assist workers in understanding their rights and protecting their benefits - EBSA assists workers in understanding their rights and protecting their benefits by disclosing plan documents; develops publications, news releases, and other educational materials which inform participants of their rights under Federal law; assists in the development of amicus curiae briefs to further participant rights and benefits; and maintains a nationwide participant assistance program which provides written and telephone responses to participant problems and inquiries.

Provide For Secure Pension Plans

Increase by 5% per year (to 1,993) the number of closed fiduciary investigations of employee pension plans where assets are restored, prohibited transactions are corrected, participant benefits are restored, or plan assets are protected from mismanagement and risk of future loss is reduced.

Results - The Department substantially achieved this goal, increasing by 4.5 percent (to 1,985) the number of closed fiduciary investigations where assets were restored, prohibited transactions were corrected, participant benefits were restored, or plan assets were protected from mismanagement and the risk of future loss was reduced.

Program Description - When a fiduciary’s mismanagement of assets or imprudent administration places pension benefits at risk, the Department's Employee Benefits Security Administration (EBSA) acts on behalf of plan beneficiaries to minimize potential loss or to restore loses to the plan. Increasing the number of cases with fiduciary results demonstrates the Department's success in protecting plan assets. EBSA oversees the benefit security of a universe of 6 million plans, 150 million participants and beneficiaries, and approximately $4.8 trillion in assets.

Analysis of Results - During the past year, the Department continued to improve the quality of cases selected for investigation as demonstrated by the continuing increases in the number of cases closed with fiduciary results, a primary strategy for achieving the goal. In FY 2002, the Department restored approximately $690 million to pension plans as a result of its investigative efforts — assets that might otherwise have been lost to participants and beneficiaries. While monetary recoveries may fluctuate significantly and past performance cannot predict future performance in any given year, recoveries have followed a generally upward trend over the past several years. During FY 2002, the Department opened a number of high profile, resource intensive, pension investigations with far reaching effects on the participant benefits community. These high profile cases resulted in numerous staff being dedicated to a single case. In addition, FY 2002 results were impacted by the Health Disclosure and Claims Initiative (HDCI) which began in FY 2001 and concluded in early FY 2002. More details on the HDCI may be found in Goal 2.1D and Appendix 4. The HDCI was a major program emphasis in FY 2001 and ultimately continued to impact pension case results into FY 2002.

EBSA’s Enforcement Management System (EMS) provides the data used to measure the achievement of this goal, and the Department has confidence in the accuracy and reliability of the data. OIG conducts regular reviews of the EMS system and EBSA has continually received high marks for its system of checks and balances to ensure high quality data. In addition, individuals not involved directly with the data input or the investigation must approve case openings. Cases with monetary results ultimately receive scrutiny throughout the management hierarchy including national office oversight and review.

Strategies - During FY 2002, regional offices continued to employ more effective targeting techniques to increase the number of cases converted from limited reviews to investigations which identify possible fiduciary or criminal violations. These techniques included: using special computer-generated targeting reports to aid the analysis of specific types of plans or investment/asset categories; working directly with financial institutions to identify plans which may have a delinquent contribution problem or which may have been abandoned by responsible plan officials; targeting issues that were prevalent in specific jurisdictions, then sharing successful strategies nationally for consideration by other regions; and leveraging limited investigative resources through continued use of the Case Opening and Results Analysis (CORA) initiative to refine our efforts at identifying quality cases and their sources.

EBSA also strives to ensure that stakeholders — plan professionals and participants — are empowered with knowledge to comply with the law and/or to make personal choices.

Program Evaluation - The General Accounting Office conducted an evaluation of the enforcement program and found, in general, that the Employee Benefits Security Administration is a well-managed program. Further details of the evaluation and specific recommendations may be found in the Department’s Annual Performance and Accountability Report, Appendix 3.

Goal Assessment and Future Plans - Developing a quantifiable outcome goal to measure EBSA’s success is extremely challenging. The Department has developed a combination of new performance indices for FY 2003 which, considered collectively, will better communicate EBSA’s performance. In developing these indices, EBSA intends to: (1) maintain maximum flexibility for the Secretary to make policy judgments regarding enforcement, compliance assistance, outreach and education; (2) reflect effectiveness in achieving these policy choices; (3) avoid unintended incentives (i.e. complex v. easy, monetary v. non-monetary recovery, big v. small plans, health v. pension); and (4) measure a multitude of diverse strategies (e.g. education/outreach, technical assistance, enforcement). These indices, coupled with additional statistical and underlying management information, will measure the effectiveness of DOL’s program in enhancing benefit and retirement security.

Provide For Secure Health And Welfare Plans

Increase by 5% per year (to 620) the number of closed fiduciary investigations of employee health and welfare plans where assets are restored, prohibited transactions are corrected, participant benefits are restored, plan assets are protected from mismanagement and risk of future loss is reduced.

Results - This goal was exceeded. The Department increased by 51 percent the number of closed fiduciary investigations where assets were restored, prohibited actions were corrected, participant benefits were restored, or plan assets were protected from mismanagement, and risk of future loss was reduced.

Program Description - The Department’s role in the health care arena has expanded as a result of the enactment of legislation that includes regulatory and enforcement requirements to be implemented by the Employee Benefits Security Administration (EBSA). The Department exercises leadership and oversight to protect the interests of in excess of 150 million participants and beneficiaries by ensuring the financial solvency and prudent operations of approximately 6 million health and welfare plans. When a fiduciary’s mismanagement of assets or imprudent administration places health and welfare benefits at risk, the Department acts on behalf of the plan’s beneficiaries to minimize potential loss of benefits or to restore losses to the plan.

Analysis of Results - The Department’s Health Disclosure and Claims Initiative (HDCI) introduced during FY 2001 continued to play a role in the increase in health plan investigations closed with positive results. In recent years, DOL has dedicated substantial enforcement resources to the targeting and investigation of both civil and criminal violations relating to health benefit plans, and the Health Disclosure and Claims Initiative expanded the Department’s sources of information about plans that merit attention. As was indicated in the FY 2001 Annual Report on Performance and Accountability, the Department anticipated that the Health Disclosure and Claims Initiative would continue to have positive impact into FY 2002.

In FY 2002, the Department restored approximately $140 million, or an increase of 112 percent over FY 2001, to benefit plans or directly to participants as a result of its investigative efforts — assets that, in the absence of investigative efforts, may have been lost. Monetary recoveries may fluctuate significantly and past performance cannot predict future performance in any given year, but recoveries have followed a generally upward trend over the past several years.

EBSA's Enforcement Management System (EMS) provides the data used to measure the achievement of this goal, and the Department has confidence in the accuracy and reliability of the data. The system checks described in the previous goal also apply to the data used to measure this goal.

Program Evaluation - The General Accounting Office program evaluation in Goal 2.1C and further detailed in the Department’s Annual Performance and Accountability Report, Appendix 3 also relate to this goal. In addition, the HDCI evaluation and further details may be found in Appendix 3.

Goal Assessment and Future Plans - See discussion under Goal for providing secure pension plans.

Ensure Individuals Receive Promised Benefits

Increase by 2% (to $67 million) benefit recoveries achieved through the assistance of Pension Benefit Advisors.

Results - This goal was not met. With the assistance of Benefit Advisors, the Department recovered approximately $49 million on behalf of more than 12,000 plan participants in FY 2002 — below the target of $67 million.

Program Description - The Department directly assists plan participants and beneficiaries in understanding their rights and protecting their benefits via the Employee Benefits Security Administration’s (EBSA) participant assistance program. The direct restoration or payment of benefits to participants without the need for protracted or costly litigation is a primary objective of the Department.

Analysis of Results - Three external factors beyond the Department’s control contributed to failing to achieve the goal. First, benefit recoveries, by their very nature, are volatile from year to year. Second, in FY 2000, the Department experienced several large recoveries (in excess of $500,000) that cannot be expected every year. The results from FY 2000 inflated the rolling average base used to establish targets for FYs 2001 and 2002. Despite the inflated base, the Department maintained this ambitious target. Third, due to less robust economic conditions, employees entitled to benefit payments may be unable to collect because their employer is bankrupt or has insufficient funds. Additionally, difficult economic times may hamper a health plan’s ability to pay medical claims. Notwithstanding these external factors, $49 million is a worthy achievement. Between FY 1999 and FY 2002, the Department recovered in total over $243 million on behalf of plan participants as a result of its customer assistance program - an indication that the public is realizing the increased benefits of DOL’s additional resources, such as customer assistance staff, and the efficiencies of improved technologies, including a toll-free telephone number system that increases accessibility to EBSA.

Leads from Benefit Advisors rank among the best sources for new enforcement cases. In FY 2002, approximately 1,300 referrals from Benefit Advisors directly resulted in an estimated 44 percent ($33.5 million) of the participant benefit recoveries achieved via formal investigations. Benefit recoveries from investigations as a result of referrals continue to increase steadily, further demonstrating that a stable and more fully experienced Benefit Advisor staff achieves positive results for participants in the Nation’s pension and health plans.

More importantly, while monetary benefit recoveries are a significant performance indicator, they understate DOL’s total customer assistance impact because important outcomes, such as the restoration of health benefits or enhancing an individual’s understanding of the law, do not result in a monetary benefit recovery, and therefore cannot be readily quantified. The Department has experienced an increasing call volume related to health benefits and, while much of the assistance does not result in a monetary benefit recovery, DOL nevertheless provides the same high level of service to resolving these matters.

The Technical Assistance and Inquiry System produces the data used to measure the achievement of this goal. During FY 2000, the Department implemented a new policy to further ensure consistency and accuracy of the data across regional components. The new policy and enhanced national office oversight provide increased confidence in the reliability of these data.

Strategies - DOL combines an aggressive outreach and education program to create a knowledgeable consumer who may assist in "policing" his or her own benefit rights with a highly motivated and trained staff of customer assistance experts in the field of pension and health laws. Moreover, the customer assistance staff has access to a wide array of technical experts throughout the Department.

Goal Assessment and Future Plans - The Department maintained this goal in FY 2002 as a partial indicator of its progress toward improving the security of pension and health plans, but will eliminate it in FY 2003 because the goal fails to adequately measure the total impact of the education and outreach and technical assistance programs. The level of benefit recoveries is only a partial indicator of plan security, and does not measure the impact of answering inquiries, educating the consumer, or responding to the increase in health related questions. Therefore, the Department will incorporate a broader customer assistance component into its overall revised performance goal in FY 2003 via the American Customer Satisfaction Index or comparable measure. DOL will continue to explore improved ways of measuring the impact of its outreach and education and technical assistance programs on the security of the pension and health plans vital to the Nation’s workers and retirees.

Other Significant Accomplishments

In addition to our results based goals, EBSA demonstrates its success through the measurement of other activities that contribute to the accomplishment of our mission. These activities-- enforcement, compliance assistance and regulations, stakeholder education and outreach, and exemption processing—all contribute to ensuring the security of employee benefits. Below are noteworthy indicators of our accomplishments in FY 2002.

Compliance Assistance/Enforcement - In FY 2002, EBSA corrected civil violations, either through voluntary compliance or litigation, resulting in monetary recoveries to employee benefit plans or their participants of over $832 million. In addition, enforcement actions in criminal cases resulted in the indictment of 134 individuals for fraudulent behavior related to employee benefit plans. During this period, EBSA continued to focus a significant portion of its investigative resources on the Employer Contribution Project (ECP), the Orphan Plan project, and the Rapid ERISA Action Team (REACT) initiative.

The ECP Project, which is ongoing, curbs and prevents abuse in 401(k) and health plans (both self-funded and insured). During FY 2002, EBSA closed 1,350 cases and restored $44.2 million in plan assets. In addition, 18 individuals were criminally indicted.

The Orphan Plan project assists participants who are in danger of losing their retirement savings where fiduciaries have deserted their plan and abdicated their responsibilities. As a result, participants are unable to exercise any rights they may have under the plan; plan assets are not being actively managed; individual accounts may not be credited properly; and required reports may not be prepared or filed. During FY 2002, EBSA closed 203 Orphan Plan cases. Of these, 167 were closed with results, including the protection or restoration of $59.8 million in plan assets, $7.5 million provided directly to plan participants.

The REACT initiative protects the rights and benefits of plan participants in an expedited manner when the plan sponsor faces severe financial hardship or bankruptcy and the assets of the employee benefit plan are in jeopardy. Through REACT, EBSA responds to the plan sponsor’s bankruptcy by ensuring that all available legal actions have been taken to preserve pension plan assets. During FY 2002, the agency continued its outreach program to educate bankruptcy trustees on ERISA and their responsibilities to the plans of the bankrupt sponsor. In FY 2002, the REACT initiative opened over 400 investigations, resulting in the protection of over $76.7 million in plan assets.

In addition to the enforcement initiatives described above, EBSA continued its successful compliance assistance through the Voluntary Fiduciary Correction Program (VFCP). The VFCP encourages employers to voluntarily comply with ERISA by self-correcting certain violations of the law. Many workers benefit from the program through the restoration of plan assets and payment of additional benefits. In addition, the department is giving applicants immediate relief from payment of excise taxes under a proposed class exemption. Since implementing the VFCP on April 14, 2000, EBSA has received 124 applications and has verified that approximately $6 million has been restored to plans through September 30, 2002. The transactions have affected over 64,000 participants.

National Summit on Retirement Savings - In FY 2002, Secretary of Labor Elaine L. Chao hosted the 2002 National Summit on Retirement Savings Education in February, pursuant to the Savings Are Vital to Everyone’s Retirement Act (SAVER) of 1997. The purpose of the Summit is to increase public awareness of the value of personal savings for retirement and to develop specific recommendations for action. To read more about the Summit and to view the final report, you may visit http://www.saversummit.dol.gov. The Summit report, which details recommendations made at the Summit, is being relied on by other government agencies and non-profit groups in planning their future retirement savings education activities. The next National Summit on Retirement Savings will take place late in calendar year 2004.

Compliance Assistance - Working with State Insurance Commissioners, EBSA conducted four Compliance Assistance workshops in FY 2002 for health plan sponsors and practitioners focusing on HIPAA, COBRA, & other new health laws. The states with which we worked in FY 2002 were Florida, Kansas, Arizona and Vermont. These workshops target small to mid-size employers who offer health insurance to their employees as well as third party administrators and insurers. The workshops outlined the most frequent errors made by plans and ways to prevent these common errors. EBSA worked with state officials and representatives from HHS giving the attendees a complete overview of both federal and state requirements.

In conjunction with these outreach conferences, EBSA created new compliance assistance tools to assist plan officials in identifying common mistakes, providing tips on how to comply, and responding to the most often asked questions about HIPAA and COBRA rules and requirements.

EBSA worked with the IRS to expand the “Easy Retirement Solutions” brochure to include tax related information that small employers requested consistently during outreach events intended to educate small employers about their retirement plan options. The new brochure “Choosing a Retirement Plan for your Business” has been in demand. The National Federation of Independent Businesses (NFIB) alone requested 600,000 copies. These tools were also made available on EBSA’s Web site and through EBSA’s toll free publication fulfillment center.

Participant Assistance - EBSA’s participant assistance and outreach program continued to educate and assist participants, beneficiaries and other consumers about their rights under the law and where to go for assistance, and in helping them obtain benefits that had been improperly denied. In March 2002, EBSA launched a toll free participant assistance line, 1.866.ASK-EBSA, that transfers calls to the appropriate field office based on the area code of the caller. This new hotline complements the Agency’s Web site which accepts electronic inquiries, www.askebsa.dol.gov. EBSA has contracted with a translation service that enables the Benefits Advisors to assist participants who speak other languages. The contractor can provide services for over 150 languages.

In FY 2002, EBSA’s Benefits Advisors responded to over 184,000 inquiries from participants and beneficiaries who had questions about their benefits or needed assistance in obtaining them. This is an increase of approximately 20,000 inquiries from FY 2001. During this same period, approximately $49 million in benefit payments were recovered informally by the Benefits Advisors for participants who had not been able to resolve their benefits disputes with their plan administrators.

Benefits complaints that involve possible fiduciary violations that cannot be resolved informally are referred by the Benefits Advisors to our investigators. In FY 2002, nearly 1,500 investigations were opened as a result of referrals from Benefits Advisors. These referrals are the single most productive source of successful investigations. There was an increase in the number of cases opened from Benefits Advisor leads of 19% from FY 2001.

Outreach and Education - In addition to the participant assistance activities, EBSA’s Benefits Advisors participated in outreach activities that include Compliance Assistance seminars, Congressional briefings, Rapid Response Sessions for workers facing job loss as a result of plant closings and other Dislocated Worker and Participant Assistance activities such as job fairs and one stop center presentations. The Benefit Advisors provide helpful information to these workers to assist them in preventing the loss of their health benefits and retirement savings. Workers assisted through these Rapid Response activities include those from Enron, WorldCom, K-Mart, LTV, American Airlines, Polaroid and Bank of America. During FY 2002, Benefits Advisors participated in over 1,600 outreach events throughout the nation. These included 858 Rapid Response sessions that reached over 39,000 dislocated workers, 257 compliance assistance events, 298 participant outreach activities, 78 Congressional briefings reaching 121 Representatives and many other outreach activities.

In addition, EBSA has 31 publications that provide useful information to participants and beneficiaries about their pension and health benefits. Seven of these publications have been translated into Spanish and one into Mandarin Chinese. Over 1.4 million publications were distributed during FY 2002, more than 173,000 of these were in Spanish. The publications are available through the EBSA toll free line, the Federal Consumer Information Center, or via the Web site.

Special Outreach Activities - In response to the events of September 11^th, EBSA developed and distributed fact sheets and a poster on bankruptcy and job loss in multiple languages. In addition, EBSA anticipated benefit issues that might arise as a result of the event and developed Q&As for use by the Benefits Advisors in responding to inquiries and for placement on EBSA’s Web site. EBSA also coordinated outreach with the New York City Mayor’s Office and the Virginia Employment Commission to distribute information and materials to victims.

With respect to several corporate bankruptcies, EBSA developed flyers in multiple languages for field offices to distribute to dislocated workers related to their health and pension benefits.

Exemption Processing - The exemption program facilitates meritorious investment transactions for pension plans that would otherwise be prohibited under ERISA. During FY 2002, 153 cases were closed compared to 158 in FY 2001. Many of these were highly complex, requiring careful attention to develop appropriate safeguards and conditions to address potential conflicts of interest or other issues which may increase the risk of loss to plans. Often, delays in processing are caused by an applicant’s inability to submit information in a timely fashion or to implement appropriate safeguards. EBSA has implemented measures designed to decrease the overall processing time for complex, as well as non-complex, cases.

For example, EBSA has increased its guidance and technical assistance to the public and potential applicants by posting more information about past exemptions on the Agency’s website, outlining types of exemptions that may be useful as precedent for other applications, and listing substantially similar exemptions for expediting authorizations made pursuant to PTE 96-62 (the class exemption known as “EXPRO”). The average processing time for all exemption cases was significantly reduced in FY 2002 in comparison to the prior year. EBSA continues to dedicate resources to eliminating aged cases from the inventory that will, over time, further reduce the average processing time for exemptions.

OED published several class exemption proposals and grants in the Federal Register during the fiscal year. These included:

Cross-Trades of Securities by Index and Model Driven Funds - This exemption permits cross-trades of securities among index and model driven funds (i.e., funds for which the trading decisions are “passive” or “process-driven”), and among such funds and certain large accounts which are undergoing a portfolio-restructuring program. The exemption enables funds to save on certain transaction costs associated with purchases made on the open market.

Permit Certain Transactions Identified in the Voluntary Fiduciary Correction Program - The class exemption provides relief from excise taxes imposed under the Internal Revenue Code for certain prohibited transactions corrected as part of the Voluntary Fiduciary Correction Program. The transactions include: untimely transmittal of employee contributions and participant loan repayments to plans; loans between plans and related parties at fair market interest rates; purchases or sales of assets between the plan and related parties at fair market value; and the sale and leaseback of property between a plan and the employer for fair market value and fair market rental value.

A proposed and final amendment to the existing class exemption, “EXPRO.” The EXPRO, as amended, expands the available cases on which a party may base its transactions to obtain a final authorization to engage in an otherwise prohibited transaction. In addition to allowing a party to cite two or more individual exemptions granted by the Department within the last five years (i.e., 60-month period), EXPRO now allows a party the option of citing a transaction previously authorized under EXPRO during the last five years as well as one individual exemption granted within the last 120 months.

A proposed and final amendment to PTE 86-128 that permits a discretionary plan trustee (or an affiliate thereof) to use its authority to cause the plan to pay a fee to such trustee for effectuating or executing securities transactions as agent for the plan.

An amendment that applies to certain class exemption and defines the term "employee benefit plan", as such term was used therein, to include plans described in 4975(e)(1) of the Code.

An amendment that temporarily broadened the availability of PTE 80-26 to include certain interest free loans from a party in interest to an employee benefit plan for the purpose of maintaining plan operations in light of the difficulties plans encountered as a result of the September 11, 2001 disruption to the financial markets.

A proposed amendment to PTE 97-11 to permit broker-dealers to count a customer’s balance in his individual retirement annuity in determining eligibility to receive lower cost brokerage services.

Future Adjustments

The development of a quantifiable outcome goal to measure EBSA’s success is extremely challenging. EBSA has developed a combination of new performance indices for FY 2003 which, considered collectively, will better communicate EBSA’s performance. In developing these indices, EBSA intends to: (1) maintain maximum flexibility for the Secretary to make policy judgments regarding enforcement, compliance assistance, outreach and education; (2) reflect effectiveness in achieving these policy choices; (3) avoid unintended incentives (i.e. complex v. easy, monetary v. non-monetary recovery, big v. small plans, health v. pension); and (4) measure a multitude of diverse strategies (e.g. education/outreach, technical assistance, enforcement). These indices, coupled with additional statistical and underlying management information, will measure the effectiveness of DOL’s program in enhancing benefit and retirement security.

In FY 2003, EBSA, in partnership with the department, is evaluating its education and outreach, customer service, and enforcement strategies. These three interrelated activities provide the backbone to many of EBSA’s performance measures and provide valuable intelligence to EBSA’s compliance assistance efforts. This work will provide valuable insight as to which strategies are producing the most positive impact. As a result, EBSA will be positioned to leverage its limited resources in the most effective and meaningful way. In addition, as described throughout this document, EBSA has initiated several activities to better describe it results and is continuing to strive to develop more outcome oriented goals to the extent that they exist and can be reasonably measured and tracked.

Appendix⁽¹⁾

Footnotes

1. As described in the goal assessment and future plans, EBSA is replacing these performance measures with a new performance goal, Enhancing Benefit Security, which will be measured by a series of indices that are reasonable surrogates to measuring success. In addition, EBSA continues to strive to conduct compliance studies in discreet areas where they make sense and where they can be performed within existing resources. The most recent Health Disclosure and Claims Initiative is an example of the success EBSA has had in this area. EBSA is currently exploring similar discreet studies in the pension arena.

2. To establish this baseline, OCA needed to compare the error rates in the 1999 Form 5500 filing cycle with the error rates in the 2000 Form 5500 filing cycle. However, we have not been able to make that comparison for the following reasons:

   1. The filing extension granted by EBSA and the IRS (to help ease filers’ confusion with dealing with a new processing system), delayed completion of the processing of 1999 Form 5500 filings;

   2. The acceptance of “non-standard” filings (those not on approved government forms or software) impaired our ability to determine the true error rates for the 1999 Form 5500 filing cycle;

   3. The special “disaster” filing relief granted to plan filers as a result of the September 11, 2001 terrorist attacks has further delayed the processing of the plan year 2000 Form 5500s; and

   4. The processing of the 2000 Form 5500 filing cycle is not yet complete (and will probably not be completed before June 2003). Processing needs to be complete in order for us to determine what the relative error rates are.

Once the 2000 Form 5500 filing cycle is complete, we will begin our comparison of the relative error rates for the 1999 and 2000 Form 5500 processing cycles. Based on the results of our analysis, we will adjust our baseline measurements accordingly.

3. EBSA is unable to establish a baseline because the processing of the 2000 Plan Year Forms 5500 is not yet complete. Though we have yet to assess the impact of the substantial filing relief granted by the agencies to Form 5500 filers as a result of the 9/11/01 terrorist attacks, we plan to nevertheless use the 2000 Plan Year filing database to establish our late filer baseline when processing of these filings is more complete.

Finally, both the DOL and IRS provided significant filing relief for the 1999 Plan Year as it was a transition year for the new form. As a result, we do not believe that the 1999 Plan Year Form 5500 database is sufficient to be used to establish a late filer baseline.

4. During FY 1999, EBSA implemented the Enforcement Management System (EMS) a new, sophisticated information management system that replaced an old, antiquated Case Management System (CMS). EMS provides a much higher level of data integrity which was confirmed by MRJ in FY 2000, a leading expert in data and results based-management. Beginning in FY 2002, EBSA began calculating the criminal ratio using the EMS in combination with Discover, a powerful data management tool that allows EBSA to more rapidly and accurately calculate the criminal ratio. In order to compare FY 2002’s results, EBSA has recalculated FY 2002’s target and FY 2001 results for comparable purposes utilizing the new software. Both the original target and newly revised target are presented. Commencing in FY 2003, only the revised and more accurate scoring will be utilized.

5. This assessment will be made during FY 2003 utilizing the Department’s cross cut program evaluation initiative.

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