The Department of Labor has added to its enforcement manual a new section providing guidelines to its investigators with respect to gifts and entertainment provided to fiduciaries of plans regulated by ERISA. The new text is paragraph 12 of the Fiduciary Investigations Program section of the manual.

The guidelines contemplate that a plan fiduciary’s acceptance, from a party dealing with the plan, of meals, gifts, entertainment or expenses associated with educational conferences is a possible fiduciary violation. The manual instructs the DOL investigator to determine, in such cases:

  • Whether the facts support an allegation that the receipt of gifts, gratuities, or other consideration were for the fiduciary’s personal account and received in connection with a transaction or transactions involving the assets of the plan in violation of ERISA § 406(b)(3). That section – one of the prohibited transaction rules – prohibits a plan fiduciary from “receiv[ing] any consideration for his personal account from any party dealing with such plan in connection with a transaction involving the assets of the plan”; and
  • Whether the fiduciary or the plan maintained a reasonable written policy or plan provision governing the receipt of items or services from parties dealing with the plan and whether the fiduciary adhered to that policy. This suggests that, for ERISA enforcement purposes, DOL finds acceptable written plan policies akin to corporate ethics policies.

There is no further elaboration of the circumstances that would meet all of the elements of and thus possibly violate § 406(b)(3). The manual does provide, however, that for enforcement purposes only (i.e., not necessarily as a matter of substantive law), investigators should generally not treat the following as § 406(b)(3) violations:

  • The receipt by a fiduciary (including his or her relatives) from any one individual or entity (including any employee, affiliate, or other related party) of (a) gifts, gratuities, meals, entertainment, or other consideration (other than cash or cash equivalents); and (b) reimbursement of expenses associated with educational conferences, provided that the aggregate annual value of the items in (a) and (b) is less than $250 and their receipt does not violate any plan policy or provision. (Logically, the type of plan policy provision or policy contemplated by this limitation would be more specific than a general obligation for plan fiduciaries to observe applicable law.) The receipt of such items is deemed “insubstantial”; and
  • The reimbursement to a plan of expenses associated with a plan representative’s attendance at an educational conference, if a plan fiduciary (presumably, other than the attendee) reasonably determined, in advance and without regard to whether such expenses will be reimbursed, that (a) the plan’s payment of educational expenses in the first instance was prudent, (b) the expenses were consistent with a written plan policy or provision designed to prevent abuse (and which, by extension, was in existence in advance), (c) the conference had a reasonable relationship to the duties of the attending plan representative, and (d) the expenses for attendance were reasonable in light of the benefits afforded to the plan by such attendance and unlikely to compromise the plan representative’s ability to carry out his or her duties faithfully in accordance with ERISA. The guideline states that the fiduciary’s determination “should” be in writing.

This latter guideline, while a welcome and sensible enforcement policy, seems narrower in statement than its internal logic would support. For example, if the conference expenses are reasonable plan expenses and the reimbursement runs to the plan, or if the plan representative attending the conference is not a fiduciary, there would be no apparent § 406(b)(3) violation even in the absence of the specified advance written policy and determination by a plan fiduciary.

For plans that have not yet adopted such a policy, the new enforcement guidelines provide an additional reason to consider that action.