[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
RESTORING TRUST: ENHANCING
TRANSPARENCY AND OVERSIGHT AT EBSA
=======================================================================
HEARING
Before The
SUBCOMMITTEE ON HEALTH,
EMPLOYMENT, LABOR, AND PENSIONS
of the
COMMITTEE ON EDUCATION AND
WORKFORCE
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, JULY 22, 2025
__________
Serial No. 119-24
__________
Printed for the use of the Committee on Education and Workforce
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via: edworkforce.house.gov or www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
63-267PDF WASHINGTON : 2026
COMMITTEE ON EDUCATION AND WORKFORCE
TIM WALBERG, Michigan, Chairman
JOE WILSON, South Carolina ROBERT C. ``BOBBY'' SCOTT,
VIRGINIA FOXX, North Carolina Virginia,
GLENN THOMPSON, Pennsylvania Ranking Member
GLENN GROTHMAN, Wisconsin JOE COURTNEY, Connecticut
ELISE M. STEFANIK, New York FREDERICA S. WILSON, Florida
RICK W. ALLEN, Georgia SUZANNE BONAMICI, Oregon
JAMES COMER, Kentucky MARK TAKANO, California
BURGESS OWENS, Utah ALMA S. ADAMS, North Carolina
LISA C. McCLAIN, Michigan MARK DeSAULNIER, California
MARY E. MILLER, Illinois DONALD NORCROSS, New Jersey
JULIA LETLOW, Louisiana LUCY McBATH, Georgia
KEVIN KILEY, California JAHANA HAYES, Connecticut
MICHAEL A. RULLI, Ohio ILHAN OMAR, Minnesota
JAMES C. MOYLAN, Guam HALEY M. STEVENS, Michigan
ROBERT F. ONDER, Jr., Missouri GREG CASAR, Texas
RYAN MACKENZIE, Pennsylvania SUMMER L. LEE, Pennsylvania
MICHAEL BAUMGARTNER, Washington JOHN W. MANNION, New York
MARK HARRIS, North Carolina YASSAMIN ANSARI, Arizona
MARK B. MESSMER, Indiana
RANDY FINE, Florida
R.J. Laukitis, Staff Director
Veronique Pluviose, Minority Staff Director
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SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS
RICK ALLEN, Georgia, Chairman
ROBERT F. ONDER, Jr., Missouri MARK DeSAULNIER, California,
JOE WILSON, South Carolina Ranking Member
VIRGINIA FOXX, North Carolina JOE COURTNEY, Connecticut
JAMES COMER, Kentucky DONALD NORCROSS, New Jersey
BURGESS OWENS, Utah LUCY McBATH, Georgia
LISA C. McCLAIN, Michigan JAHANA HAYES, Connecticut
MICHAEL A. RULLI, Ohio GREG CASAR, Texas
RYAN MACKENZIE, Pennsylvania SUMMER L. LEE, Pennsylvania
MICHAEL BAUMGARTNER, Washington JOHN W. MANNION, New York
RANDY FINE, Florida MARK TAKANO, California
C O N T E N T S
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Page
Hearing held on July 22, 2025.................................... 1
OPENING STATEMENTS
Allen, Hon. Rick, Chairman, Subcommittee on Health,
Employment, Labor, and Pensions............................ 1
Prepared statement of.................................... 3
DeSaulnier, Hon. Mark, Ranking Member, Subcommittee on
Health, Employment, Labor, and Pensions.................... 4
Prepared statement of.................................... 7
WITNESSES
Golumbic, Lars, Principal, Groom Law Group................... 9
Prepared statement of.................................... 11
Banducci, Andy, Senior Vice President, Retirement and
Compensation Policy, the ERISA Industry Committee (ERIC)... 17
Prepared statement of.................................... 19
Khawar, Ali, Founder and President, FCP, LLC................. 24
Prepared statement of.................................... 26
Bonham, Jim, President and CEO, the ESOP Association......... 31
Prepared statement of.................................... 33
ADDITIONAL SUBMISSIONS
Chairman Allen:
Letter dated July 22, 2025, from the U.S. Chamber of
Commerce............................................... 62
Letter dated July 22, 2025, from the U.S. Chamber of
Commerce............................................... 63
Letter dated July 21, 2025, from The SPARK Institute,
Inc.................................................... 64
McClain, Hon. Lisa C., a Representative in Congress from the
State of Michigan:
Letter dated July 21, 2025, from the Business Group on
Health................................................. 65
Letter dated April 7, 2025, from the American Benefits
Council................................................ 66
Letter dated July 17, 2025, from the American Benefits
Council................................................ 68
Letter dated April 10, 2025, from The ERISA Industry
Committee (ERIC)....................................... 70
Letter dated May 5, 2025, from the ESOP Association...... 71
Letter dated August 8, 2025, from the Investment Company
Institute (ICI)........................................ 73
Rulli, Hon. Michael A., a Representative in Congress from the
State of Ohio:
Letter dated July 21, 2025, from the Business Group on
Health................................................. 75
Letter dated April 4, 2025, from the American Benefits
Council................................................ 76
Letter dated July 17, 2025, from the American Benefits
Council................................................ 78
Letter dated April 9, 2025, from The ERISA Industry
Committee (ERIC)....................................... 80
Letter dated May 5, 2025, from the ESOP Association...... 81
Letter dated August 8, 2025, from the Investment Company
Institute (ICI)........................................ 83
Letter dated July 22, 2025, from the National
Coordinating Committee for Multiemployer Plans (NCCMP). 85
QUESTIONS FOR THE RECORD
Responses to questions submitted for the record by:
Mr. Ali Khawar........................................... 87
RESTORING TRUST: ENHANCING
TRANSPARENCY AND OVERSIGHT AT EBSA
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Tuesday, July 22, 2025
House of Representatives,
Subcommittee on Health, Employment, Labor, and
Pensions,
Committee on Education and Workforce,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:15 a.m., in
Room 2175, Rayburn House Office Building, Hon. Rick Allen
(Chairman of the Subcommittee) presiding.
Present: Representatives Allen, Onder, Foxx, Walberg,
McClain, Rulli, Mackenzie, Fine, DeSaulnier, Courtney,
Norcross, McBath, Hayes, Lee, Mannion, Takano, and Scott.
Staff present: Vlad Cerga, Director of Information
Technology; Maren Emmerson, Staff Assistant; Libby Kearns,
Press Assistant; Katerina Kerska, Legislative Assistant; Trey
Kovacs, Director of Workforce Policy; Campbell Ladd, Clerk;
R.J. Laukitis, Staff Director; Danny Marca, Director of
Information Technology; Brad Mannion, Professional Staff
Member; John Martin, Deputy Director of Workforce Policy/
Counsel; Audra McGeorge, Communications Director; Alexis
Morgan, Intern; Daniel Nadel, Legislative Assistant; Ethan
Pann, Deputy Press Secretary and Digital Director; Ellison
Powell, Intern; Kane Riddell, Staff Assistant; Carl Rifino,
Intern; Sara Robertson, Press Secretary; Heidi Schneider,
Professional Staff Member; Ambrose Tierney, Intern; Ann Vogel,
Director of Operations; Ali Watson, Director of Member
Services; Joe Wheeler, Professional Staff Member; James
Whittaker, General Counsel; Jeanne Klinefelter Wilson, ERISA
Counsel; Samantha Wright, Intern; Sayda Bir, Minority Intern;
Ilana Brunner, Minority General Counsel; Daniel Foster,
Minority Senior Health and Labor Counsel; Caroline Guo,
Minority Intern; Patrick Jo, Minority Intern; Alexandra Walker,
Minority Intern; Vivian Wiggins, Minority Intern; Jessica
Schieder, Minority Economic Policy Advisor; Raiyana Malone,
Minority Press Secretary; Brian Marshall, Minority Legal
Intern; Kevin McDermott, Minority Director of Labor Policy;
Marie McGrew, Minority Press Assistant; Eleazer Padilla,
Minority Staff Assistant; Veronique Pluviose, Minority Staff
Director; Banyon Vassar, Minority Director of IT.
Chairman Allen. The Subcommittee on Health, Employment,
Labor and Pensions will come to order. I note that a quorum is
present. Without objection, the Chair is authorized to call a
recess at any time.
Today's hearing is about protecting the retirement savings
of American workers and shielding the employers who voluntarily
maintain retirement savings plans from abusive governmental
overreach. Employers sponsored retirement plans are the
backbone of the American retirement.
Private employers voluntarily sponsor more than 800,000
ERISA covered retirement plans holding more than 9 trillion in
assets. More than 70 million workers and millions of former
employees and retirees are covered by these plans. Savings
rolled over from employer sponsored retirement plans also total
more than half of the 15 trillion in IRAs.
Employers should be encouraged to maintain these plans. Due
to the Biden-Harris policies, inflation and the cost of living
rose dramatically, throwing many Americans into financial
jeopardy. Few people are more vulnerable to this kind of
financial instability than retirees.
Americans are working later in life without a chance to
enjoy retirement. The Biden-Harris administration punished
employers for maintaining these plans, specifically the
Employee Benefit Security Administration, also known as EBSA,
ran burdensome and inefficient employee benefit plan
investigations that lasted for years with repetitive document
requests, staff turnover, and delayed findings.
The Biden-Harris playbook wasted the taxpayer's money and
the money of the employers under investigation. Endless and
aimless investigations conducted by EBSA wasted precious time
and resources and ultimately hurt the American savers. We will
hear testimony today that EBSA has also abused the legal
system, and aided Plaintiff's attorneys.
The Department of Labor's Office of Inspector General
announced in June that it will investigate EBSA's secret
sharing agreements with lawyers, such as class action
Plaintiff's law firms. EBSA's mission is to ensure the security
of retirement, health and other workplace benefits of America's
workforce, and their families.
Instead of upholding this mission, the Biden-Harris
administration used EBSA to deliberately attack the voluntary
employee benefit system with endless and aimless
investigations. Today, we will learn more about those
practices, and their efforts on workers and the employers to
provide benefits to those workers.
Members of our Committee have proposed legislative
solutions for the problems we will hear about today.
Representative Lisa McClain has introduced the EBSA
Investigations Transparency Act, and Representative Mike Rulli
has introduced the Balance the Scales Act.
I look forward to discussing these bills and other efforts
to protect ERISA plan participants, and their benefit plan.
With that, I yield to the Ranking Member for an opening
statement.
[The statement of Chairman Allen follows:]
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Mr. DeSaulnier. Thank you, Mr. Chairman, and thank you to
the witnesses for being here. I also want to welcome one of the
witnesses, Mr. Banducci, for coming back to the Committee. I
know he served for many years on the Republican Committee
staff, so I will be interested to see what it is like on the
other side.
The Department of Labor's Employee Benefits Security
Administration, or EBSA for short, is a vital agency charged
with protecting workers' hard-earned health and retirement
benefits. EBSA oversees approximately 800,000 private
retirement plans covering over 153 million people, 2.6 million
health plans, and 514,000 other benefit plans.
Many significant laws are within EBSA's jurisdiction, and
several more have been added in recent years. Despite EBSA's
critical mission and growing responsibilities, its funding and
staffing have not kept pace. EBSA has been essentially flat
funded for years, and the Trump administration's Fiscal Year
2026 budget only makes things worse by requesting $10 million
less than last year's level.
The administration is effectively proposing a further cut
of $20 million by failing to extend bipartisan No Surprises
funding. Inadequate funding has resulted in steep declines in
full-time employees at EBSA.
We are incredibly fortunate to have Mr. Ali Khawar as one
of our witnesses, welcome Mr. Khawar this morning. He has
worked at EBSA in various capacities for nearly 20 years. His
testimony details how EBSA's budget once supported over 960
employees, and how the Trump administration's recent budget
would support just over 600.
Clearly, EBSA is being asked to do far more with much less,
but it is still delivering for workers and their families,
protecting their benefits, and putting money back in their
pockets, and is a good return on investment to high road
employers, and the taxpayers.
In fact, in Fiscal Year 2024, EBSA recovered almost 1 and a
half billion dollars in payments. In a time when Federal
workers are being unfairly targeted and fired by the Trump
administration, it is even more important to recognize the
value they provide to American taxpayers and our constituents.
Everyday Americans get assistance from EBSA's Benefit
Advisors, who help workers navigate the complex issues with
their plans. They, and all of EBSA's staff in D.C. and its
regional and field offices, deserve our respect and
appreciation during what I am sure has been an incredibly
challenging year for them and their families.
I understand that today's hearing will focus on two bills
that harm EBSA's ability to do its job. Last year Committee
Republicans opposed the Department of Labor's legally
permissible, yet, rarely used common interest agreements in
litigation. I say rare, because as Mr. Khawar notes in his
testimony over the past 15 years there were only 12 such
agreements. Let me repeat that. Over 15 years, 12 such
agreements out of over 31,000 investigations.
Nevertheless, Committee Republicans demanded that the
Department's Inspector General look into these rare agreements
and the IG agreed. Rather than waiting for the results of the
IG investigation, they requested Committee Republicans, the
request today in this hearing is rushing to judgment, seemingly
intent on advancing a one-sided-bill that goes way beyond
common interest agreements and severely limits EBSA's ability
to communicate with attorneys representing participants.
We all believe in efficiency and would be happy to work
with the majority to look at objective analysis of how we make
the program more efficient for everyone, particularly
employees. The other bill relates to EBSA's enforcement
activities. We all share an interest in seeing the enforcement
by Federal agencies are completed in a timely, and as I said,
efficient manner.
That is in the best interest of all parties involved. It
should be nonpartisan, bipartisan. If that is our shared goal,
then the best way to achieve it is to ensure EBSA has the
funding resources and personnel necessary to do its job, and to
wait for the IG's investigation.
What does not accomplish that goal is a bill to add to EBSA
administration burden and require them to produce a biased
report that does not provide a complete picture of the agency's
work. These bills do not solve problems; they create new ones
and strike at the heart of EBSA's mission.
As we have seen from the devastating wrought in recent
months by the so-called Department of Government Efficiency,
DOGE, and the catastrophic One Big, Ugly Law, our language,
which will leave at least 10 million Americans without health
insurance and cut over a trillion from Medicaid. Undermining
core government functions does a disservice for the American
people.
We can and should do better, and are willing to work in a
bipartisan way if we really want to improve oversight. Thank
you, and I yield back.
[The statement of Ranking Member DeSaulnier follows:]
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Chairman Allen. I thank the Ranking Member. Pursuant to
Committee Rule 8(c), all members who wish to insert written
statements into the record may do so by submitting them to the
Committee Clerk electronically in Microsoft Word format by 5
p.m., 14 days after this hearing.
Without objection, the hearing record will remain open for
14 days to allow such statements and other extraneous material
noted during the hearing to be submitted for the official
record.
I will now turn to the introduction of our four
distinguished witnesses. Our first witness is Mr. Golumbic, a
Principal at Groom Law Group in Washington, DC. Our second
witness is Mr. Andy Banducci, a Senior Vice President for
Retirement and Compensation Policy at the ERISA Industry
Committee in Washington, DC.
Our third witness is Mr. Khawar, the Founder and President
of FCP, LLC in Washington, DC. Our last witness is Mr. Jim
Bonham, the President and CEO for the ESOP Association in
Washington, DC. We thank the witnesses for being here today,
and we look forward to your testimony.
Pursuant to Committee Rules, I would ask that you each
limit your oral presentation to a 3-minute summary of your
written statement, as Committee members have many questions for
you the clock will countdown from 3 minutes.
Pursuant to Committee Rule 8(d), and Committee practice,
however, we will not cutoff your testimony until you reach the
5-minute mark. I would also like to remind witnesses to be
aware of their responsibility to provide accurate information
to the Subcommittee. I will first recognize Mr. Golumbic for
your testimony. Mr. Golumbic.
STATEMENT OF MR. LARS GOLUMBIC, PRINCIPAL, GROOM LAW GROUP,
WASHINGTON, D.C.
Mr. Golumbic. Chairman Allen, Ranking Member DeSaulnier,
and members of the Subcommittee, thank you for the opportunity
to testify today about the Balance the Scales Act, which will
compel the U.S. Department of Labor to do what it should have
done for years, and for American citizens and businesses when
it shares their confidential information with others.
My name is Lars Golumbic, and I am a Principal at Groom Law
Group Chartered, a law firm specializing in employee benefits.
I am Cochair of our ERISA litigation group, and I have been
practicing in this area for nearly 25 years.
Last year in an ongoing lawsuit, my law firm uncovered
concrete proof, what many have all suspected, that the DOL uses
its authority to collect confidential information from American
businesses, and surreptitiously supplies it to private
Plaintiff's attorneys under the guise of so-called common
interest agreements.
The Federal District Court in that lawsuit rightfully
chastised the DOL, and the Plaintiff's firm were involved,
Cohen Milstein for their cozy relationship that enabled DOL to,
as the Court put it, litigate in the shadows. Unfortunately, we
have since learned that this was not just a one-time
occurrence.
Documents produced in response to at least one FOIA request
show that the DOL's secret arrangements have infected many of
the class section lawsuits over the years. These documents show
the DOL providing information to class action lawyers,
coordinating on discovery and legal strategy and much more.
The DOL's actions circumvent important legal protections,
including FOIA's confidentiality and notice provisions, the
rules governing litigation in Federal Court, and the
enforcement scheme Congress created within ERISA.
The DOL stomps on the scales of justice when it sidesteps
these protections, handicapping plan sponsors, fiduciaries, and
service providers trying to defend themselves in class actions,
while gifting lucrative information to favored Plaintiff's
attorneys.
It was not always this way. Earlier in my career, the DOL
was viewed as a welcome partner in a collaborative regulatory
process. Now, the sentiment that the DOL is on the same team as
the ERISA plaintiff's bar, with the regulated community on the
other side, seems to have metastasized within the DOL.
Common interest agreements are but one symptom of this
broader problem. The revolving door between the DOL and the
ERISA Plaintiff's bar is one driver of this unwelcome
development.
Frequently, attorneys in the Department of DOL slide
directly into private practice, with the very Plaintiffs' firms
to which the DOL back channeled information during their
tenures.
This incestuous relationship creates an alarming conflict.
The Balance the Scales Act represents a crucial step to
restoring public faith in the regulatory by bringing their
activities out in the light of the public eye, as they should
have been from the very beginning. Thank you, and I look
forward to your questions.
[The prepared statement of Mr. Golumbic follows:]
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Mr. Mackenzie [presiding]. Thank you. Next, I will
recognize Mr. Banducci for your testimony.
STATEMENT OF MR. ANDY BANDUCCI, SENIOR VICE PRESIDENT,
RETIREMENT AND COMPENSATION POLICY, THE ERISA INDUSTRY
COMMITTEE, WASHINGTON, D.C.
Mr. Banducci. Thank you, Mr. Chairman, Ranking Member
DeSaulnier, and members of the Subcommittee. Thank you for the
opportunity to testify today. My name is Andy Banducci. I am
the Senior Vice President for Retirement and Compensation
Policy at the ERISA Industry Committee, or ERIC.
We are a national organization, an advocacy organization,
representing the largest employee benefit plan sponsors in the
United States. More than 150 million Americans have employer
provided health coverage. Nearly 100 million private sector
workers have access to workplace retirement plans like 401K's.
To start, it is a real honor to be a witness today. I had
the privilege of staffing this Committee on benefits issues for
several years, ending in 2017. During that time, I saw serious
legislators advance creative, bipartisan solutions that have
helped the benefits community.
The Committee deserves credit for its leadership, and
similarly today's hearing is very important. Benefits are
protected by Federal, including the Employee Retirement Income
Security Act of 1974, and other laws and regulations overseen
by the Employee Benefits Security Administration at the DOL. At
its best, EBSA is an agency that protects workers and retirees
from bad actors, assists employers with legal compliance, helps
correct problems with benefit design and administration, and
reduces red tape.
Sadly, despite the key role that EBSA plays, ERIC members
have reported for years that enforcement has been unbalanced.
First, EBSA's investigations are taking too long. Among our
membership we have heard stories of plan audits taking five,
six, seven, even 8 years.
Second, internal DOL hand-offs, either between offices or
personnel, slow things down, resulting in years and thousands
of dollars wasted. Third, ERIC members also complain about a
double standard in these investigations. DOL expects the timely
production of requested documents in interviews with plan
officials. The DOL officials too often go radio silent for
months, or even in some cases years on end.
Fourth, too often the investigations appear to be fishing
expeditions without a detailed focus, and fifth, there is just
not enough transparency about DOL's coordination, and in some
cases even collusion with class action Plaintiff's attorneys.
EBSA does very important work. We are hopeful DOL leadership
will address these outstanding issues.
The recently announced emphasis on compliance assistance is
a positive first step. In the interim, policymakers should
consider reforms to ensure that EBSA officials act with
transparency and accountability. For example, ERIC supports the
EBSA Investigations Transparency Act, which would impose modest
annual reporting requirements, such as disclosure about the
nature and number of active investigations.
We see this as just good government 101. EBSA also supports
the Balance the Scales Act, which would bring transparency to
EBSA's coordination with the Plaintiff's bar. If EBSA is
determined to provide information to attorneys suing benefit
plans, then surely, it is reasonable that the scope of this
cooperation should be documented and transparent to the
employers and to Congress.
Members of the Committee, large plan sponsors provide
health and retirement benefits to tens of millions of their
employees and their families. On their behalf, we look forward
to working with members of this Committee on both sides to
improve the benefits landscape.
Again, thank you for the opportunity to testify, and I look
forward to your questions.
[The prepared statement of Mr. Banducci follows:]
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Mr. Mackenzie. Thank you. Next, I will recognize Mr. Khawar
for your testimony.
STATEMENT OF ALI KHAWAR, FOUNDER AND PRESIDENT, FCP, LLC,
WASHINGTON, D.C.
Mr. Khawar. Thank you, Mr. Chairman, Ranking Member
DeSaulnier, and Ranking Member Scott, thank you for the
invitation, along with members of the Subcommittee. I really
appreciate being here. I want to start with maybe a moment of
personal privilege. It is a pleasure to be here with Mr.
Banducci.
I always knew that 1 day we would end up on the same side,
I did not anticipate it would be here, but I am looking forward
to today's conversation with you.
I left EBSA in January after spending almost 20 years at
the agency. In my time, there I served in a variety of roles,
in the enforcement, policy and leadership capacities. I am
appearing in my personal capacity today. EBSA is an agency with
vast responsibilities. It is responsible for millions of
private sectors, employment-based retirement, health, welfare
and benefits plans.
Those plans cover over 153 million people and collectively
hold about 14 trillion in assets. In addition, EBSA has
responsibilities over the IRA market, which holds about 17
trillion dollars in assets, and for the Federal Thrift Savings
Plan, which is approaching a trillion dollars in and of itself.
In my testimony today I want to highlight several
significant challenges that EBSA faces. First, we have a base
budget that has not kept pace with increases in costs, things
like salary, travel, building maintenance, security, those
costs have all gone up as EBSA's budget at a base level has
remained relatively static.
Second, we have DOGE driven activity that has led to the
loss of about a third of EBSA investigative staff. Third, a
Trump budget request in the Fiscal Year 2026 that not only
drops the Biden administration's request to replenish the
bipartisan No Surprises Act fund but also cuts the base budget
by 10 million dollars.
Fourth, is the simple reality that you have an agency that
is very small relative to its responsibilities. This disparity
is even more stark when you compare it to peer agencies, the
SEC, the ratio of investigators or auditors to the regulated
entities is about--it varies, but you could say 1 to about a
dozen.
For EBSA, the number right now is 1 to 17,000.
You are going to hear a lot today about reported widespread
problems with EBSA's enforcement program, but the statistics
tell a very different story. Just last Fiscal Year the agency
recovered 1.4 billion dollars, that is direct payments to
participants and beneficiaries.
Almost 742 million dollars of that was from the civil
enforcement program. That program also got over 320 non-
monetary corrections. These are really important corrections,
things like removing bad fiduciaries, or improving plan
practices. In addition, in the criminal program there were 161
guilty pleas or convictions. The bottom line is simple, EBSA's
enforcement matters.
There are two specific topics of today's hearing that I
want to share some thoughts on. First, is the timeliness of
EBSA's investigations. As of November 11th, November 7th, 2023,
only about 3 percent of EBSA's investigations were still being
actively investigated 48 months later. Two thirds of those had
taken so long because in the intervening period, Congress had
passed a law in the No Surprises Act. There was another
provision related to Mental Health Parity that required a
written comparative analysis from a peer benefits, and so EBSA
began to request and analyze those written and comparative
analyses.
The primary driver of delay is underfunding. Second, are
the claims of widespread collusion between EBSA and the
plaintiff's bar. Congress, in passing ERISA, gave the
Department explicit authority to share information with a
variety of interested parties.
Again, the statistics tell a different story. Over a 15-
year span, there were only 12 investigations that had a common
interest agreement, out of over, as the Ranking Member
mentioned, 31,000 investigations, that is a ratio of .04
percent. Make no mistake, today's hearing is really a
conversation about whether participants and beneficiaries
across the country, workers, retirees, and their family members
should have any recourse at all when they're wronged.
In Fiscal Year 2022, EBSA's investigators recovered $16,776
per investigator per day. I should repeat that, that almost
$17,000 per investigator per day. I urge this Committee to
focus on the real issue at hand. Do not invest in red tape.
Invest in EBSA. Thank you again for the opportunity to testify
today, and I am happy to answer any of your questions.
[The prepared statement of Mr. Khawar follows:]
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Mr. Mackenzie. Thank you. Last, I will recognize Mr. Bonham
for your testimony.
STATEMENT OF MR. JIM BONHAM, PRESIDENT AND CEO, THE ESOP
ASSOCIATION, WASHINGTON, D.C.
Mr. Bonham. Thank you to Chairman Allen, Ranking Member
DeSaulnier, and the Subcommittee members for this hearing, and
the opportunity to testify on behalf of our membership. I am
Jim Bonham, the President and CEO of the ESOP Association. Our
Association is the largest employee owner organization in the
world.
We enjoy an active membership of over 3,400 ESOP companies
and professional service providers, such as lawyers,
accountants and plan fiduciaries. I have a reputation for being
very direct, and I'm going to serve you the courtesy of being
so today.
The enforcement and investigative actions by the Employee
Benefits Security Administration are broken, they are
misaligned and they are abusive and have been for decades.
Sadly, the chilling effect of this long-standing posture on
plan formation has denied potentially millions of workers the
chance for a better retirement, and a better workplace.
When people ask me why there are not more ESOPs, the answer
is this, the subject of this hearing. This is why. EBSA needs
substantial reforms. Our members have been investigated
arbitrarily and relentlessly by EBSA for decades. Indeed, it is
difficult to find an ESOP that has not been investigated by
EBSA in some form.
The environment EBSA has created is so bad that when a new
ESOP is formed, the professionals feel it is their obligation
to warn the ESOP founder to expect and budget for the near
inevitability that EBSA and the DOL will investigate them. It
is the expectation they will be investigated, not the
exception.
I want to share with you four specific areas of serious
concern, and in our view, abuse of EBSA's authorities. One,
never ending stop and start multiyear investigations that often
result in companies, directors and fiduciaries, agreeing to
tolling agreements under the threat of lawsuit or even criminal
penalty, which effectively waives ERISA's 6-year statute of
limitations.
These multi-year investigations regularly involve multiple
changes to EBSA personnel, who often just start over. The
result often is the plan and its insurers simply throwing in
the towel, and agreeing to some form of settlement, typically
the insured amount under their policy, just to finally bring an
end to the process.
Two, secret so-called common interest agreements where EBSA
investigators use taxpayer resources, and extra judicial
governmental investigatory powers to subsidize private law
firm's class action lawsuits. We have long suspected these
secret agreements existed, and that suspicion has recently been
confirmed through discovery in the ESOP case and litigation.
While we do not yet know the full extent of these secret
arrangements, both formal and informal arrangements, it is
clear that EBSA is using its investigatory authority to support
private law firms and their litigants, thereby violating plan
sponsored due process and fairness.
Three, taxpayer funded government expert witnesses who have
poor knowledge and little background in ESOP plan formation.
These so-called experts have been paid millions of dollars in
fees yet often fail to meet the very standards to which EBSA
desires to hold plan fiduciaries.
An excellent example lies in the failed and blatantly
incorrect valuation put forward as expert testimony in the
Bowers and Kubota consulting case where EBSA lost every single
point in its complaint against the plan sponsor, and the
solicitors were even fined and sanctioned by the Judge during
the proceedings for their behavior.
Four, indiscriminate fishing expedition style
investigations designed to dragnet the ESOP community and
impose EBSA's views. Notably, views that have never been
published as regulations, or subjected to notice and comment
public input as required by law.
Following heated criticism from the Congress for the volume
of direct plan investigations, EBSA changed tactics to create
the appearance of reduced plan investigations, rather than
looking at specific ESOP transactions, EBSA instead began
issuing dragnet style letters to professional fiduciary firms
that represent multiple ESOP plans. These investigatory letters
indiscriminately seek information on all plans under the
fiduciary's purview, thereby capturing information on multiple
plans simultaneously, all the while telling Congress that the
number of plan specific investigations are dropping.
I once again thank you for the opportunity for testifying
and would be pleased to elaborate on any or all of these main
points.
[The prepared statement of Mr. Bonham follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Allen. Thank you, sir, and thank you to all our
witnesses for your opening statements. Under Committee Rule 9,
we will now question witnesses under the 5-minute rule. I will
recognize myself for 5 minutes.
Mr. Golumbic, the Biden Harris administration's Assistant
Secretary for EBSA stated that information sharing in the form
of common interest agreements is a normal tool in litigation.
In December 2024, a DOL spokesperson said that EBSA had entered
into nine common interest agreements since 2022. What is a
common interest agreement, and how does a common interest
agreement differ from EBSA's assistance to Plaintiff's
attorneys that you have observed?
Mr. Golumbic. Thank you, Chairman Allen. A common interest
agreement is used in the legal proceedings. It involves two
parties who share a common interest in the outcome of the
litigation, or a proceeding, or a dispute or controversy. In
the case I was involved in, there was a common interest
agreement that had been entered into between the Department of
Labor and a Plaintiff's firm.
As we found out in the lawsuit, the Department had not yet
reached a decision about whether there was merits to the
underlying investigation, and whether it actually wanted to
bring an action against the target in question. There was not a
common interest in the outcome of the dispute, but the DOL
nevertheless had entered into that common interest agreement at
that time.
The Court found on that basis there was no common interest
between the Department and the Plaintiff's law firm.
Chairman Allen. I understand that you were the attorney who
first discovered that the Department of Labor was secretly
sharing investigation information with the Plaintiff's law firm
known for class action lawsuits against employee benefit plan
sponsors. Can you share how you learned this?
Mr. Golumbic. Yes. At one point in the proceeding we had
produced in discovery a copy of a findings letter from the
Department of Labor indicating their preliminary findings with
respect to an investigation of the transaction that was the
subject of that litigation.
The Department, in that same findings letter, issued
preliminary findings with respect to other unrelated
investigations, so we produced a copy to the Plaintiff's firm,
we produce a redacted copy, redacting the names of these other
investigations. The Plaintiff's firm pushed back for months,
said that they needed an unredacted copy.
On the eve of key depositions, the Plaintiff's firm
produced to us an unredacted copy of that findings letter. At
that point I went to the DOL government lawyer in charge of
underlying investigation. He confirmed he had provided an
unredacted copy of that letter to the Plaintiff's firm,
pursuant to a common interest agreement.
Chairman Allen. Yes, surprise, surprise. Were you surprised
to learn of the secret sharing arrangement, and if so, when did
it come as a surprise?
Mr. Golumbic. Well, we always had a suspicion, Chairman
Allen, that this practice was occurring because it was too
coincidental. There would be an opening of an investigation,
there would be documents exchanged, witness interviews, and
then a year or two later, a Plaintiff's firm is bringing a
lawsuit with respect to the underlying investigation.
This was an instance where we had concrete proof that this
type of sharing arrangement was occurring between the
government and a class action law firm.
Chairman Allen. When you found out about this, you brought
it to the Court's attention. As a result, the Magistrate Judge
stated the Plaintiff's arrangement with the DOL has given
Plaintiffs access to information they can leverage used to take
shortcuts and rely upon to circumvent discovery protocols. Can
you tell us more about how the Court viewed the arrangement?
Mr. Golumbic. Yes. I think the Court was very disturbed
that you had the litigation in the shadows, with the government
supplying information to the Plaintiff's bar, and it really can
create an uneven playing field. You have a Plaintiff's firm who
is getting information they otherwise could not get at the
outset of a lawsuit, and it maximizes their ability to get
beyond what we would call a motion to dismiss, an early stage
dismissal of a case.
As the Supreme Courts recognized, the decks then are
stacked against Defendants, regardless of the underlying merits
given the crushing burden and cost of discovery, and so it
creates an uneven playing field, and the magistrate was
concerned about that.
Chairman Allen. How could a Plaintiff's law firm circumvent
discovery rules by using a secret sharing arrangement with DOL
without consequences? I mean obviously lawyers have peer
reviews, and that sort of thing. I mean this sounds like it is
really outside the standard of practice. Could you comment on
that?
Mr. Golumbic. Yes. Well, it gets to the very heart of the
bill that we are talking about today, transparency. In the
lawsuit I was involved in we did not know that there was a
common interest agreement between the government and the
Plaintiff's firm. We did not know that the government was
sharing key information with the Plaintiff's firm.
In the absence of that, we had no way of utilizing our own
discovery tools to subpoena the government for emails, the
information that they shared, all the things that we did when
we found that out in the lawsuit that I was involved in.
Chairman Allen. All right. Thank you. All right. I will
call on Mr. Takano from California for his questioning.
Mr. Takano. Two gentlemen from California, I was not sure
which one. Thank you, Mr. Chairman. I want to thank the
witnesses for being here today, and to thank you for
scheduling--you, Mr. Chairman, for such an important hearing.
Mr. Khawar, would you like to respond to any of the earlier
statements that were made?
Mr. Khawar. Not so far. I mean there is a lot to unpack in
it. There is a lot of I think problematic statements that were
made, but I will probably reserve the right to do that.
Mr. Takano. Okay, thank you. In your testimony you spoke
about an individual who was denied a lifesaving heart
transplant by his employer-sponsored plan. EBSA intervened, and
successfully appealed the denial, something that even this
patient's doctors could not do. The doctors tried to get the
plan to do this.
If an insurance company refuses to cover an essential
treatment for one of the millions of people who have employer-
sponsored health plan, which happens far too often, how does
EBSA assist with like an appeal like this?
Mr. Khawar. Thank you for that question. I would love to
tell you that this was the only time in my career at EBSA that
we had a story like that. Unfortunately, that is not the truth.
It is too frequent that in the context of employment-based
health arrangements people's benefits are denied.
One of the things that they can do is contact the EBSA
Benefit Advisors. We have a toll-free number, it is 866-444-
3272, and when they contact that number what used to happen--I
should caveat all of this with this is only up until January
20th because with staffing cuts, I really cannot give you any
assurance about what kind of service people receive now.
What used to happen is that calls were answered live if
they were made during business hours, and you would get someone
that is very highly trained who would answer your questions if
you had basic questions, and then act as an advocate, and
trying to informally resolve that issue between you and your
plan, the service provider, the doctor, the insurance company,
and try to get them, if it was appropriate, to get that benefit
approved.
You made the example of a heart transplant. There ius
another example I am thinking of right now, the young mother
who had cancer and was being denied a liver transplant, and her
insurance company essentially gave her a death sentence, and
not but for EBSA's engagement, I am confident that she would
have died.
Mr. Takano. EBSA is like this government agency that can
help ordinary citizens who know about EBSA, to call that
number, to get help when they have a dispute with their health
plan. When that health plan may be refusing to pay on a claim.
Even their doctors say that health insurance company should be
looking at it. Is that right?
Mr. Khawar. That is correct. Unfortunately, not enough
people know about this. I think of the BA program as a hidden
jewel, frankly.
Mr. Takano. I did not know about this. I would have loved
to have known about it so I can tell my constituents, this is
where you can go when you have a problem with a claim with your
insurance company they are refusing to pay, or they are
refusing to cover a lifesaving, a vital, urgent lifesaving
procedure. This is where you can go.
You are saying that EBSA had reduced staffing, and that you
are not really sure that people can connect with a live
technically trained person to provide them.
Mr. Khawar: Yes. Yes. Yes, Representative. It is truly
unfortunate because you have situations like the one that you
are describing, and it used to be a point of pride in the
agency that calls were answered live, and then it was something
like 95 percent of calls were returned within one business day
if someone called after hours. That is not----
Mr. Takano. Okay. We just heard Mr. Golumbic describe this
situation where EBSA, you know, has colluded with these with
plaintiff's attorneys, and how unfair it is to these
Defendants. The Defendants in this case are mostly these huge
health plans, or huge pension plans. Go ahead.
Mr. Khawar. Well, in the health context it is very
frequently I believe the bad actor is the health insurance
company, even more than the health plan itself.
Mr. Takano. The health insurance company that is refusing
and stopping the claims. Do we think of the little American
citizens who is trying to get a heart transplant, or a liver,
or a liver transplant approved against the big insurance
company? Are they the ones that are such an unfair sort of
claimant against this big insurance company? I mean do we think
that--I mean I think of this EBSA as kind of a very important
advocate for the ordinary consumer.
Mr. Khawar. I agree, Representative, and I think when you
are talking about the people that are impacted, it is often in
the health context, individuals with pretty significant health
needs. I also believe that when we are talking about these
common interest agreements, and what this bill would do, it is
a bit more than transparency, but for example, there is a
requirement in the bill that before sharing any information
with an attorney, that that attorney might use in essentially
bringing a lawsuit under ERISA, you have to enter into this
agreement.
You have to share it with the relevant fiduciaries and all
that kind of stuff. The problem is if you think about these
benefit advisors, they are getting a phone call. They are
getting a question. Now, we are telling them that no, you need
to make sure that these things are done, here is some
additional paperwork you need to do, you cannot help this
individual.
Mr. Takano. Thank you, Mr. Khawar, I am sorry for going
over, but it just seems like this bill is going to weaken the
protections for the consumer, weaken the advocacy. That would
be so costly. Thank you. I yield back.
Chairman Allen. The gentleman from California yields. Now,
I recognize the gentleman from Ohio, Mr. Rulli, for 5 minutes
of questioning.
Mr. Rulli. Thank you, Chairman. Employer-sponsored
retirement plans are the backbone of American retirements. Over
70 million workers are covered by these very plans. Private
employers voluntarily sponsor more than 800,000 ERISA covered
plans holding more than 9 trillion dollars in assets. We are
not talking millions, we are not talking billions, we are
actually talking trillions, 9 trillion dollars in assets.
When I learned that the Biden Harris Department of Labor
shared confidential employee benefit information with
Plaintiff's law firms, I had to get involved immediately. It
was shocking to understand that this was being shared. The DOL
should never be sharing secret or sensitive information with
anyone, unless the employer's consent to do this.
The question would go to Mr. Bonham. Can you speak on how
the DOL's actions are hurting American workers and employers
right now?
Mr. Bonham. Where to start. The investigatory actions by
EBSA, I would put it into two categories of how it is hurting
American workers. First, are the millions of Americans who are
never even given the opportunity to benefit from a plan because
of the chilling effect that EBSA has on plan formation.
We did a survey about a year ago of businesses who were
looking at their succession plans, and whether or not they
would be interested in forming an ESOP. Close to 80 percent of
all business owners who were looking at retirement were highly
interested in forming an ESOP. Once we introduced the idea of
EBSA and their enforcement powers, it plummeted. They just do
not want to deal with the risk that the introduction of EBSA's
enforcement capabilities introduce.
The second, it introduces for plan sponsors significant
cost, and that cost can range from as little as 80 to $100,000
for a basic response to an investigatory letter, to literally
millions of dollars. I was speaking to a CEO just yesterday,
who was the subject of one of these investigations. Three years
of discovery, $3 million worth of legal fees, there were no
findings at all.
Immediately after they received the conclusory letter from
the Department of Labor, they were then slapped with a class
action lawsuit that cost them another $2 million. Was it a
coincidence? We do not know. We hope that some of the
investigations will find out.
Those are just a couple of examples of where the
investigatory abuses at EBSA have had a dramatically chilling
effect on plan formation, and that we should all remember that
offering retirement plans and offering benefits are voluntary
on the part of the employers. Unfortunately, employers are now
going to the least common denominator so they can offer just
the basic plan, but nothing more because it becomes too
complicated.
Mr. Rulli. I really appreciate that answer. We introduced
H.R. 2958, the Balance the Scales Act, requiring the DOL to
enter into written agreements detailing what type of assistance
will be given before sharing confidential information with the
attorneys, and to share those agreements with the employer, or
the plan sponsor, that could be negatively affected by this.
Could you perhaps speak on why this legislation is actually
needed in the industry?
Mr. Bonham. Thank you for that question as well. First, it
is a basic matter of due process and the rights of the accused.
You know, as the Magistrate Judge in Colorado said in the case
that Lars was working on, she said that in her decision in the
case exposing the practice, these secret, common interest
agreements would, ``allow a government agency to weaponize
private litigation against some target before confirming the
target should even be a target. Transparency helps build
trust.''
Second, EBSA has a history of ignoring both Congress and
the industry. The ESOP community knows this well from our
decadeslong struggle for proper regulation. Therefore,
legislation is needed to force these needed, long-lasting
reforms.
Mr. Rulli. Thank you very much for your work and your
support. I really appreciate it, and we need to stop the
madness and get back to protecting our American employers, and
more importantly, the American workers, and with that, Mr.
Chair, I yield back.
Chairman Allen. The gentleman from Ohio yields. Now I
recognize for questioning for 5 minutes, the gentlelady from
Georgia, Ms. McBath.
Mrs. McBath. Thank you, Chairman Allen, and Ranking Member
DeSaulnier. The Employee Benefits Security Administration has
the important responsibility of protecting the health benefits
of over 150 million hard-working Americans on employer-
sponsored health insurance, and unfortunately, a growing number
of Americans who have put in their time at work, and paid into
their health care plans are not receiving the health benefits
that they are entitled to under the Federal law.
With the increasing complexity of the health care system,
the Employee Benefits Security Administration's
responsibilities have grown significantly over the years, yet
the agency remains chronically underfunded and understaffed.
The lack of resources at this agency means that employees
continue to wait on their health care benefits, and
investigations are delayed when trying to stop bad actors who
take advantage of the patients.
Last session, Chairman Rick Allen and I, we sent a letter
to the Employee Benefits Security Administration about our
concern over alternative funding programs in health insurance.
Under the guise of saving money, alternative funding programs
are pushing health plans to exclude certain medications. They
abandon patients, leaving them to seek out assistance programs
that are already overloaded.
Ultimately, and far too often, these patients unexpectedly
have to shoulder the full cost of oftentimes their lifesaving
medications, or experience delays that can result in harmful
complications. No one should ever have to wait for a lifesaving
treatment. Trust me, I know. I am a two-time breast cancer
survivor.
The reality is not everyone can actually wait for a
lifesaving treatment. The cases that have been submitted to the
Employee Benefits Security Administration, they tell the
stories of people who are just basically at their wits end,
needing help to fight an insurance denial for their lifesaving
treatment, or begging for oversight to investigate alternative
funding programs that have cutoff access to the care the
patient thought that they had.
While the agency is tasked with this important role that
has financial and profoundly personal impacts, for all those in
our health care system, years of underfunding and budget cuts
have threatened to undermine its original intent and mission.
Just this year we have seen career Federal employees pushed out
of their jobs, and an additional 10 million dollars in cuts
that are still being proposed.
On behalf of the millions of Americans in this country who
rely on health insurance through their jobs, it is our duty to
support oversight, and to cut through the red tape, and to
protect those patient's lives.
Mr. Khawar, if you will, what impact would strong
investments in the Employee Benefits Security Administration
have on its ability to better protect health coverage for the
American people?
Mr. Khawar. Thank you for the question, and I agree with
everything that you have said. I mean investing in this agency
means investing in the Americans that are struggling with
insurance company red tape today. It is investing in Americans
who have done the right thing and saved through their job, in
their retirement, and want to make sure that that retirement is
there when they ultimately reach the right age.
Unfortunately, with the budget cuts it is hard to see how
the agency is going to be able to continue to successfully
achieve its mission. Things like the Benefit Advisor Program
are going to be really heavily impacted. Investigations are
going to be very heavily impacted. They are going to take
longer.
The agency is going to be able to do fewer of them, and
there are going to be people that are really in need of help,
who deserve the government's help, that are not going to be
able to get it. It is 100 percent going to be because of
resource constraints.
Mrs. McBath. Why has the workforce at EBSA declined so
dramatically, if you can tell us? What can just really be done
about it?
Mr. Khawar. Yes. I mean there is a long-term problem of
chronic underfunding. Costs increase, and when budgets do not
then that means you have to find somewhere. I think it is
something like 70-75 percent is about the percentage of EBSA's
budget that is kind of taken up by just personnel costs. As
very normal things and appropriate things, like increasing
salaries to account for inflation, that money needs to come
from somewhere.
When you do not have many other places to look, the place
you end up having to look is by reducing your headcount, so
there is a longer-term issue here. The proximate cause,
however, is you know, since January there has been a pretty
concerted effort to push Federal employees out of their jobs.
EBSA has not been immune to that, and so there has been, as
far as I can recall, pretty unprecedented attrition rate in the
last few months.
Mrs. McBath. Well, thank you so very much, and I am out of
time. Thank you each and every one of you for being with us
today as our witnesses, and I yield.
Chairman Allen. I thank the gentlelady for yielding. Now I
call on Mr. Mackenzie from Pennsylvania for 5 minutes of
questioning.
Mr. Mackenzie. Thank you, Mr. Chairman, and I want to thank
all of our testifiers here today. It is an important
conversation that we are having about EBSA, and the ability of
a government agency to help in the marketplace where
individuals are getting their health insurance all across the
country, making sure that the benefits they are owed are being
paid to them when necessary.
At the same time, also making sure that there is
transparency and oversight going on at this agency to make sure
that they are conducting themselves in a proper fashion. Pretty
concerning, some of the testimony that we are hearing today,
and my first question is going to be for Mr. Golumbic.
Regarding EBSA, and the secrecy of the information that was
being shared with Plaintiff's attorneys. Obviously,
confidentiality was breached there, and what does this do to
the willingness of different stakeholders to actually cooperate
in engage with the DOL.
If they have this concern as a Defendant or a potential
Defendant, why would they even come forward and cooperate or
engage with DOL. Ultimately, in the furtherance of benefits for
the individuals, why would they participate in something like
that if they are afraid their confidentiality might be
breached.
Mr. Golumbic. Thank you, that is a great question
Representative Mackenzie, and just to put a finer point on it,
in the matter that I was involved in that I testified to today,
my client in response to requests for information from the
government, designated documents as exempt under FOIA, meaning
they deserve confidentiality designations.
To the extent the government was going to furnish it to any
outside third parties, they need to give notice to my client,
so we had an opportunity to object to it, given the
confidential nature of the information.
That did not happen, so I think what we are finding as a
consequence in light of this disclosure that these common
interest agreements exist. I am finding that with my clients
who are involved in active Department of Labor investigations
were quite reluctant to turn over information because they are
worried about the government maintaining the confidentiality of
it, even if we designate it as exempt under FOIA.
The Department of Labor historically has been reluctant to
enter into normal, routine confidentiality agreements, ensuring
the safeguarding of information. It is a quandary, and we have
clients who feel like they are between a rock and a hard place,
trying to respond, you know, responsibly, you know, in
responding to government subpoenas, and request for
information.
Mr. Mackenzie. Yes, I think it could have a chilling effect
on the willingness of participants to participate and engage in
DOL, again ultimately that would be a problem for the whole
system. I would also ask this, are you aware, or do you know if
this practice is still occurring at DOL with maybe career
employees there.
Mr. Golumbic. I do not know the current State of the
practice of the government. I would though, add a note in
response to other testimony today, what we are aware of are
several instances, those type of agreements by the government
and class action firms being reduced to writing, but they are I
am sure, they are in the Office of Inspector General may get to
the bottom of this, countless examples of the government
picking up the phone, and contacting Plaintiff's counsel,
talking about legal strategy, talking about underlying case
supplying information that does not necessarily have to be
reduced to writing in a formal common interest agreement.
Mr. Mackenzie. As somebody who is not an attorney, I will
ask your legal opinion on this, and just an opinion, but could
this affect the outcomes of previous decisions that were
rendered? If somebody entered into an agreement where they were
not made aware of a confidential side deal with DOL and a
Plaintiff, could that be revisited?
Mr. Golumbic. I do not know. That is pretty speculative. I
do know just in terms of matters we are involved in, and
matters I know that other lawyers in this industry involved in,
they are taking a closer look in active lawsuits to see if
there is a connection between the government and the
Plaintiff's firm, and seeking discovery to find out if any such
agreements have existed.
Mr. Mackenzie. Thank you. Just with the remaining time that
I have, Mr. Banducci, can you elaborate on your statement about
providing suggestions for EBSA, and what they should do with
the limited resources they may have and how they can conduct
themselves more efficiently.
Mr. Banducci. Thanks very much for the question, and
Chairman Allen, I see I have got 8 seconds, so I will try to be
quick. It really starts with the foundational premise, large
employers in particular, are mostly doing the right thing. They
are providing benefits to tens of millions of workers and their
families, and EBSA ought to begin with that premise and that
understanding.
Mr. Mackenzie. Thank you, and I agree that should be the
premise and understanding, and I think we can both do that, and
make sure confidentiality is protected as well, thank you.
Chairman Allen. The gentleman yields. Now, I call on Mr.
Courtney from Connecticut for his 5 minutes of questioning.
Mr. Courtney. Thank you, Mr. Chairman, and you know, just
an observation before I get into the questions. Just that, you
know, clearly there is a serious situation that is being
described here, but I appreciate the fact that you know,
Attorney Golumbic, you know said that it is speculative right
now to determine whether that is a systemic phenomenon that is
happening.
We have an Inspector General's report that is looking into
this, and personally, I feel like this Committee should let
that process take place before we start going in and changing
statutes. I just think that, you know, that in my opinion,
would be the normal process before we make a systemic change to
find out whether there is a systemic problem.
On a more positive note, I would just say that you know my
experience with EBSA, you know, particularly in terms of ESOPs
has been pretty positive. We had Assistant Secretary Gomez in
my district about a year or so ago. We visited an ESOP
proponent, which is a great aerospace parts manufacturer, very
active in the ESOP association.
At that point again, we were working on the WORK Act, which
was legislation that I sponsored to again, get the Department
of Labor to finally sort of officially designate an office that
would really help promote, you know, the ESOP option that's out
there for a lot of really good companies that you know, maybe
again are hitting sort of generational sort of milestones, and
want to, you know, maybe consider it, but really do not have
the consultant bases, or the, you know, wherewithal to really
understand it.
Again, it was adopted as part of the Omnibus in 2023.
Again, very bipartisan effort, and something that, you know,
that certainly the private sector advocates worked with
Congress to get that through. I mean, so the authorities there
for that office, unfortunately the funding has not been there
to really sort of kicking in and get it into place.
Again, just to followup--Ms. McBath's question, Mr. Khawar,
I mean again, if we really are serious about trying to promote
ESOP ownership, and to expand it, which again, I think you have
got people like Bernie Sanders and you know, conservative
Republicans in agreement that that is really, you know, healthy
for our private sector.
We need to again, really get that office stood up, and
populated with people so that it can move forward, and maybe
you can just respond to that.
Mr. Khawar. Yes, thank you for your question. I mean I
completely agree that, and was very pleased when the Department
got the authority under the WORK Act to do employee ownership
promotion because I think it is incredibly important to have
programs that can highlight best practices in the private
sector, can really promote things like worker voice and the
benefits of employee ownership.
We were able to, and because we believed in the importance
of this program, divert money from other parts of our budget to
kind of do the basics of standing up the program. To be very
honest with you, it is not going to come close to achieving its
potential in the current budget situation.
We were, you know, in the Biden administration, the
leadership made a point of conducting visits to employee-owned
companies, talking about the program in speeches, and really
highlighting it. There are two really core functions of that
office that I am pretty worried about.
The first is that, well, the head of the office got fired
in the Trump administration and later rehired, but she is kind
of the staffing, and it is not going to be sufficiently
staffed. We are not going to really be able to do the level of
outreach and education that we want to.
The second part of the bill though that is still unfunded
was money that the Department could give to states to help them
do worker ownership programs within the states, and that has
never been funded, unfortunately.
Mr. Courtney. Thank you. Again, Mr. Bonham, another part of
that bill was to get the Adequate Consideration Rule finished
up, and again, that is obviously still an agency process.
Again, maybe you can just talk about that quickly, because I
know that was an important priority for your association.
Mr. Bonham. Thank you, Mr. Courtney, and again, thank you
for your questions. I want to answer in two parts. First, in
relation to the Office of Employee Ownership, and we are very,
very grateful for your work and others work to help create that
office and strongly support its continuation.
It is noteworthy that one of the reasons that the ESOP
community sought that office was so that there would be an
internal alternative voice to the career employees at EBSA, who
always had a very, very negative view of ESOPs, so we needed to
have somebody inside the Department of Labor who thought that
they were a good idea for a retirement plan for employees.
Second, in terms of the Adequate Consideration regulation,
this is an area that we have been seeking for almost 50 years
to have clarity on what rules a fiduciary should follow in
order to fulfill their good faith effort in valuing the
company's shares. The agency has steadfastly refused to issue
those regulations.
It needs to be done, and it needs to be done with
reasonable input from the community.
Chairman Allen. The gentleman yields, and now I call on Mr.
Fine from Florida for his 5 minutes of questioning.
Mr. Fine. Thank you, Mr. Chairman. For 22 years I was an
entrepreneur and started, built and grew companies, so I both
created these plans, and as well as was in them, and so it is
an important issue, and I think you have exposed a lot of real
serious problems with how they are administered.
Frankly, I did not ever have any of these, so I am
breathing a sigh of relief sitting over here. No one ever sued
me, but my question is for Mr. Bonham. The Department of Labor
investigated and then filed a lawsuit against an ESOP plan
sponsor, its Board of Directors, and its selling shareholders
in the Bowers case.
In 2021, the Court found no violations of ERISA for a
transaction that took place 9 years earlier in 2012. I know a
little bit about it, and it sounds like kind of a horror story,
and shows, you know, government gone wild. Can you describe
what happened in this case, and the costs of defending it?
Mr. Bonham. This is perhaps one of the best examples of the
abuse that we have been talking about in EBSA that one can
give, and I could go on for much longer time than we have
today.
Mr. Fine. We have 3 minutes and 56 seconds.
Mr. Bonham. You bet. In this case, literally during the
deposition the investigator was asked why did you go after
Bowers and Kubota? I quote, ``My supervisor, he gave me an
assignment to find some ESOP cases in Hawaii.'' Again later,
``My understanding is the Department needed to have some
exposure in Hawaii.''
Nine years later, and millions of dollars in legal fees,
there were no findings. In fact, the so-called expert that was
hired to provide the expert valuation on behalf of the
Department of Labor was completely discredited because he made
an arithmetic error, and had his error been corrected, and was
known during discovery, had it been corrected, his valuation
would have even been higher than what the ESOP actually paid
for the value of the company.
Since that time, the value of the company since it was sold
to the employees through an ESOP has gone up more than 1,700
percent. These employees have benefited greatly. During the
Judge's ruling on this case, the Judge said that this was not
decided against DOL for want of trying, it was decided because
of a lack of evidence.
The Department of Labor pursued this case relentlessly. The
trustee died, and rather than dropping the case against the
trustee, they replaced the trustee with the widow. That is how
relentless they were in pursuit of this case, and they lost on
every single case.
Mr. Fine. Do you mind if I ask, and if you have got more
context, you can share it, but does the government reimburse
the company that has to spend the millions of dollars defending
against what sounds like a spurious and kind of waste of time?
Mr. Bonham. The company has to sue in order to recover some
of those costs.
Mr. Fine. They have to go deeper into the hole, to pay more
lawyers, to try to get paid for the lawyers they already had to
pay for because the government came after them.
Mr. Bonham. In this case in particular, Mr. Bowers, who
is--was the wrong Army Ranger to pick a fight with, he tried
taking this all the way to the Supreme Court, and it is almost
impossible for a Defendant to recover their litigation
expenses.
Mr. Fine. The government can make stuff up, or actually
just sort of target you for no apparent reason it sounds like,
because someone's boss needed somebody to have something to do,
you can spend millions of dollars on lawyers. You win, you
get--your name gets cleared after 9 years, and then you still
lose.
Like he did not win. You know, if you have millions of
dollars of legal fees, you still lost because you lost money
that you had, and you had distractions from operating your
actual business. Any other thoughts on this case that you would
want to share?
Mr. Bonham. There are lots of other thoughts that I would
like to share, but unfortunately, we probably do not have the
time to do it. You know, it is interesting. I have spoken at
length with Mr. Bowers about this case, and when I asked him
why he chose to fight, and he is a very rare example of this
because in almost every example it is a more prudent decision
to just exercise your insurance policy, settle it out, and move
on with life.
He says, you know, EBSA made it so easy because they were
so unreasonable in their approach. You know, the treatment of
Bowers and Kubota in this case is no surprise to just about
anyone on the ESOP community who has been investigated. It is
the type of behavior that we saw from the EBSA attorneys and
their approach.
You know, go find a case in Hawaii, and like I said, 9
years later and millions of dollars in defense, and this is
where they are.
Mr. Fine. Thank you. Thanks for your context and thank you
Mr. Chairman.
Chairman Allen. I thank the gentleman from Florida
yielding. Now I call on Ms. Lee from Pennsylvania for your 5
minutes of questioning.
Ms. Lee. Thank you, Mr. Chair. Today's hearing is framed as
a conversation about restoring trust and enhancing transparency
at the Employee Benefits Security Administration, but what is
really in question here is whose trust is being restored, and
at whose expense?
Unfortunately, the majority seems to think that restoring
trust means making life easier for employers under
investigation. To them, balancing the scales means tipping them
further toward corporations and away from the workers. EBSA,
their core mission is to protect workers' retirement and health
benefits, not to cater to employers.
Imagine working your entire career. You make it to
retirement, but you find that all your savings are gone because
your employers, or your benefits manager lied, misused your
funds, or just outright stole from your plan. EBSA exists to
put rules in place to help prevent this from happening.
When those rules are broken, EBSA has the authority and the
responsibility to hold these employers or plan managers
accountable. Over the years, EBSA's workforce has steadily
declined, and its responsibilities have increased, all while
its funding has remained flat.
Even so, EBSA is still taking meaningful enforcement
actions to protect workers' benefits. Mr. Khawar, could you
just discuss, very briefly because I also want to make sure
that we can hit a couple things. Can you discuss some of the
complexities in investigating and concluding a case,
particularly what factors might slow things down?
Mr. Khawar. Yes, thank you for your question. I will try to
be brief, but it is--there is a lot.
Ms. Lee. I understand.
Mr. Khawar. The size and complexity of the entity being
investigated, the volume of evidence that they produce, what
that evidence shows, including, you know, there is not a
practice that if you ask a question about X, and then you have
evidence of wrongdoing somewhere else that we ignore it, so it
may lead to additional document requests for questions, how
cooperative the entity is.
It is not infrequent that EBSA starts with voluntary
production of documents and then does not get the documents
that it asked for, needs to move to a subpoena, needs to
enforce that subpoena in Court. All of that is leading to
delays between when the investigation opens, and when EBSA is
kind of done with just the very first stage, which is they have
a conclusion of what they think has happened.
They present that to the fiduciaries and say these are our
findings, can we talk about how we proceed.
Ms. Lee. If I can add, just what impact will the agency's
proposed budget cuts have on the Department's ability to close
those cases quickly then?
Mr. Khawar. I mean I think given the severity of the cuts
that we have seen just in this year, there is going to be a
pretty unfortunate choice between do you allow these cases to
drag on for longer because you need to reshuffle personnel, or
do you just close them even though you are convinced that there
is something there, and people have been harmed.
Ms. Lee. Instead of cutting funding, we should be
strengthening the agency?
Mr. Khawar. Absolutely.
Ms. Lee. What is being presented as a push for transparency
is in reality, just a set of proposals that risk bogging down
the enforcement with additional red tape, slowing
investigations, shielding employers, and draining resources
that should be used to protect those workers.
Mr. Khawar, in your testimony you stated for every dollar
that Congress invests in EBSA, the agency has consistently
returned many multiples of that amount in direct payments to
plans, participants, and beneficiaries, is that?
Mr. Khawar. Yes. I mean one figure is 17,000 approximately
dollars per investigator per day. Another figure for one
specific category of cases shifted to in light of budget cuts,
trying to find more impactful cases that were going to impact
more people. The number for that is about $150,000 per
investigator per day.
Ms. Lee. Mm-hmm. Thank you. In other words, cutting EBSA's
funding actually costs taxpayers and workers more money, so why
are we uplifting bills that would further drain EBSA's
resources through burdensome reporting requirements, while
doing nothing to help workers recover their stolen benefits?
I can speak to EBSA's importance firsthand. In my district,
a Pittsburgh area administrator overseeing 240 or so retirement
plans embezzled at least $5.5 million from worker's accounts.
EBSA stepped in, and took swift action, freezing the assets,
and securing Court orders, led to a 50-million-dollar
settlement, and likely saved my constituents millions more.
Instead of supporting EBSA's critical work, such as this,
the majority wants to undermine it. Today's bills do not
restore trust or improve transparency, they shift EBSA's focus
away from defending workers' benefits and toward easing the
burdens on employers.
They frame investigations as too long, without regard for
the complexity, or for the stakes, and they call for
transparency measures that actually make it harder for EBSA to
do its job, shielding employers from scrutiny while creating
new hurdles for enforcement.
If this Committee is serious about restoring, improving the
function of EBSA, the solution is clear, increasing the
agency's funding, that is how you build trust, not just with
employers, but with the workers whose futures are on the line.
I thank you all so much for your time, and I yield back.
Chairman Allen. The gentlelady yields. I now call on our
great Chairman Walberg from Michigan for his 5 minutes of
questioning.
Mr. Walberg. Thank you, Mr. Chairman, thanks for this
hearing, and thanks Committee. Andy, it is great to see you
back.
Mr. Banducci. Thank you, Mr. Chairman.
Mr. Walberg. It is always nice to know that people can be
elevated, and they are stolen from our committee, some of the
best people, so it is good to have you, back. Mr. Golumbic and
Mr. Banducci, Mr. Bonham, employers voluntarily sponsor
retirement plans and in doing so they employer commits to
comply with the laws governing those plans.
EBSA investigations also rely on the voluntary cooperation
of the employer, although voluntary cooperation is not
necessary. Now that the public has learned, and this is my
question, since the public has learned that EBSA has secretly
shared information with Plaintiff's attorneys, stacking the
deck, how will employer's willingness to cooperate with EBSA's
investigations change, Mr. Golumbic?
Mr. Golumbic. Thank you for that question. I think it is
had a chilling effect. In the cases that I am involved in where
we are representing plan sponsors and fiduciaries and active
Department of Labor investigations, there is a natural
reluctance to produce information and to cooperate, and in the
absence of any assurance that information that has been
produced, that is designated as exempt under FOIA, will be
treated that way. That did not happen in the lawsuit that I was
involved in.
Mr. Walberg. Mr. Banducci.
Mr. Banducci. I think from an employer's standpoint right,
when we are on the other ends of these audits or
investigations, there is a desire to get to a resolution. It is
really hard to get to a resolution if you don't know exactly
who is on the other side, right?
If it is a labor department that is one thing, but if it is
the labor department and then other attorneys in other law
firms, I think that is even more challenging.
Mr. Walberg. Okay.
Mr. Bonham.
Mr. Bonham. I hate to say this, but voluntary cooperation
is imaginary. If you receive a letter from EBSA, you hire a
lawyer and you respond. EBSA's breach of trust in these
agreements is actually increasing costs, not just for plan
sponsors, but it is actually increasing costs for EBSA, because
everybody lawyers up immediately. If there is no trust, there
is no voluntary cooperation.
Mr. Walberg. Okay, thank you. Mr. Golumbic, Banducci and
Bonham, a 2019 practical law publication titled, ``Guide to
Dealing with Department of Labor Investigations of Retirement
Plans,'' gives tips to reduce administrative burden, cost and
stress, associated with EBSA investigations.
In your experience, what is a ballpark range of the amount
an employer spends when responding to, and potentially
defending against an EBSA investigation? Mr. Bonham, we will
start with you.
Mr. Bonham. I would say the minimum expense is going to be
in six figures. The high end of expense is going to be in
multiple millions of dollars.
Mr. Walberg. Wow, Mr. Banducci, save us, give us better
news.
Mr. Banducci. I do not have better news, unfortunately.
Obviously, it depends on the complexity of the investigation,
how long it goes on. If you are dealing with a very complex
plan with very broad sort of fishing expedition type requests,
and scope, it is going to be very, very, very expensive.
Mr. Walberg. Mr. Golumbic.
Mr. Golumbic. Yes. I think the potential expenses and costs
can be astronomical. You are going to be producing documents to
the government, collecting those documents that could be in the
millions. Often you need to get an electronic or e-discovery
vendor to assist you.
There is then going to be often interviews of key
witnesses, as Mr. Bonham alluded to. Then often you are almost
invariably going to be hiring outside legal counsel to assist
you in preparing for those interviews, and then the Department
may issue a preliminary findings letter that would result in
putting together response back, negotiations over potential
resolution, so the costs are going to be--they can be
potentially catastrophic.
Mr. Walberg. It is apparent in looking at, at least from my
perspective, that something that is supposed to be a
partnership to make sure that good is rewarded, and bad is
disciplined through the process the government has in oversight
has become one sided in many ways, and ultimately cost and
distrust and automatic assumption of guilt, one sided, doesn't
work.
I think that is because I addressed the concerns of my
colleagues on the other side, that is our concern, that the
system works, and choice is given, and opportunity is given,
and ultimately costs are not escalating because of this
wrongheaded, one sided, suspicious approach. Thank you, I yield
back.
Chairman Allen. I thank the gentleman for yielding, and now
I will call on Ms. Hayes from Connecticut, for her 5 minutes of
questioning.
Mrs. Hayes. Thank you and thank you to the witnesses for
testifying today. The work of EBSA is critical to protecting
the health and retirement security of more than 156 million
workers, retirees, and their families. At its core, EBSA
provides protection, education and oversight of retirement,
health care, and other employee benefit plans.
In Fiscal Year 2024, EBSA Benefit Advisors helped recover
more than 540 million in health and retirement benefits owed to
workers and their families, after closing almost 200,000
inquiries. The 2024 figures represent an increase in inquiries
and money recovered by EBSA compared to previous years,
illustrating the importance of Benefit Advisors for workers and
retirees.
The Benefit Advisors who work from the regional field
office in Boston are invaluable to assisting constituents in my
district in Connecticut. In a recent case, Benefit Advisors
assisted a Connecticut retiree in assessing 2 million dollars
in retirement benefits from a former employer.
Despite the tremendous return on investment, the Trump
administration is proposing to cut the budget of EBSA by 10
million dollars in Fiscal Year 2026 and has laid off
probationary and other employees through DOGE. As mentioned in
the testimony by Mr. Khawar, the Trump administration
recognizes the impacts of its proposed cuts to EBSA, providing
lower enforcement targets in the 2026 annual performance plan
to ``reflect anticipated reductions in staffing.''
Today, my Republican colleagues are discussing bills that
focus on the ability of EBSA to conduct enforcement, while
ignoring the resources and staffing cuts that are the main
barrier to completing those investigations. Mr. Khawar, can you
share how the proposed budget cuts by the Trump administration
would impact the services and work provided by EBSA Benefit
Advisors?
Mr. Khawar. Thank you for your question. The benefits
advisors are truly amazing individuals. They are very highly
trained. You can call them on a variety of topics, anything
that is covered by ERISA, and they will do their best to answer
you, and the number of Benefit Advisors that the agency has,
has already shrunk, and it is going to continue to shrink.
The volume of calls that they receive is not going to
shrink, and so that is going to just mean delays. It is going
to mean unanswered calls, it is going to mean that an agency
that took pride, that we would get letters where constituents
remarked, ``I thought I was going to be calling the DMV, and I
never imagined a government agency would be responsive like
this.''
They are now going to get DMV level service, no offense to
anyone that works in the DMV.
Mrs. Hayes. I think that leads me to my next question
because I want to discuss the additional strain that may be
placed on Benefit Advisors if Congress does not act to extend
the Affordable Care Act to enhance subsidies before they expire
at the end of the year, throwing the health care Marketplace
into chaos.
Among its many important responsibilities, EBSA oversees
more than 500,000 benefit plans through the Affordable Care Act
and other legislation. Due to staffing and funding cuts, I am
worried there may not be Benefit Advisors available to answer
phones in regional field offices when people lose their ACA
coverage and are looking for help to navigate the options
available through their employer.
Do you anticipate any--Mr. Khawar, again for you, do you
anticipate any increase in demand for services of EBSA Benefit
Advisors to help employees navigate health care plans if
Congress does not extend ACA subsidies?
Mr. Khawar. Yes, absolutely. I mean it is pretty simple. If
your health care coverage is more expensive, then you are going
to look at other options. That is absolutely going to mean that
people are looking at their employer plans, they are thinking
about these questions during open enrollment, they are
contacting Benefit Advisors.
One of the ways in which in, I would say a normal budget
environment, EBSA might manage that, is by conducting more
outreach, going out into communities and doing events kind of
proactively educate people, so that you do not get the calls on
the back end.
I do not know what the status is of those, but I would
imagine that that is one of the areas that will face pretty
significant cuts because if you cannot afford people to just
answer the phone, sending them out into communities and doing
educational events on whether it is the ESOP-related stuff, or
health-related stuff, it is hard to find the money for that.
Mrs. Hayes. A normal budget environment. What a novel
concept. I yield back.
Chairman Allen. The gentlelady yields, and now I call on
our Chairman Emeritus, Mrs. Foxx, North Carolina, for her 5
minutes of questioning.
Mrs. Foxx. Thank you very much, Mr. Chairman, and I
appreciate that. Mr. Khawar, EBSA under the Biden Harris
administration engaged in burdensome and inefficient
investigations that lasted for years, and included repetitive
document requests, staff turnover and delayed findings.
Endless and aimless investigations conducted by EBSA wasted
precious time and resources, and they ultimately hurt American
savers. The Committee took note, Mr. Khawar. In September and
November 2023, the Committee requested a list of all open
investigations, the duration of the investigation, the specific
purpose of the investigation, and an explanation of all steps
taken to close out persisting investigations.
In response to these inquiries, DOL provided only general
explanations, but not underlying data. In response to the
November 2023 request, you provided a briefing to Committee
staff, but you did not provide any specific information on how
long EBSA's stale investigations have been allowed to remain
open. Your written testimony states there is a lack of
significant evidence of problems that need to be addressed,
which would justify the two EBSA reform bills that the
Committee is considering.
EBSA has withheld the information that would allow us to
gain a full picture of the problems that need to be addressed.
In addition, we have proof that EBSA secretly shared
information from an investigation under what you are calling a
``common interest agreement,'' but which a Court had condemned.
Can you assure us that no one in the Biden Harris DOL,
whether career or political appointee, has confidential
information, or provided assistance to outside attorneys when
there was not a common interest agreement in place?
Mr. Khawar. Thank you for your question, Representative. I
mean I believe this is exactly the subject of OIG inquiry right
now, and I think importantly what the IG is looking at is also
going to involve, hopefully the context of any information
sharing.
There are times when the Department has had conversations
with plaintiff's attorneys for example in the context of a
common interest agreement, it is typically where the Department
believes that it may be bringing a lawsuit itself, and wants to
protect any evidentiary privileges, unlike in FOIA, where
disclosure to one is disclosure to all.
The benefit of the common interest agreement is that it
allows the government to kind of maintain the privilege over
its materials.
Mrs. Foxx. Throughout my questioning you have appeared to
be very uninterested in the questioning, so I hope that what
you are saying to us is something you have carefully thought
out. We received information from EBSA over a year after our
initial inquiry that a total of 54 cases were still open,
almost 8 years after they were opened.
Worse, only three of these cases were being actively
investigated, meaning the rest were still being held open
without resolution. You are not in a position to tell this
Committee that there is no evidence to support additional
transparency and oversight at EBSA.
Sunlight is the best disinfectant. I yield back, Mr. Chair.
Chairman Allen. The gentlelady yields back. I now call on
Ranking Member Scott of Virginia, for his 5 minutes of
questioning.
Mr. Scott. Thank you. Thank you, Mr. Chairman. Mr. Khawar,
we have been talking generally about investigations. Exactly
what are you investigating? What violations or infractions are
you investigating?
Mr. Khawar. Thank you for that question. I might note at
the outset that I have yet to see anyone provide any evidence
when they are talking about timeliness and delays that the
agency is not actually trying to move these cases as quickly as
possible.
To answer your question more directly, when we are talking
about investigations, these are investigations into either
civil or criminal violations. In the criminal context, the easy
example I would give you because it tends to--you know, people
remember it as the Madoff incidents, where there was Ponzi
scheme, retirement savers, among others, lost a lot of money.
EBSA was one of the agencies that was investigating that.
In the civil context, it could be issues around your health
insurance premiums not getting paid. They were not transmitted
to the health insurance company, and your insurance was
canceled. It could be a claim that was denied.
In the retirement context, it could be something as simple
as money not making it to your 401(k), or as complicated as we
had issues for example, a number of years ago, where foreign
exchange transactions that employee benefit plans were asking
financial services industry to carry out were being carried out
on very, very poor terms, so the bank would take advantage of
whatever the best rate was of the day.
The customer would get the worst rate of the day, and that
was not disclosed in any contracts, it was just kind of pure
additional compensation that that financial entity was getting
for itself. EBSA put a stop to that practice.
Mr. Scott. How do you select targets for investigation?
Mr. Khawar. There are a variety of different ways. One
source, one very important source is actually the benefits
advisor program. A lot of referrals come from the benefits
advisors when they are not able to informally resolve a case,
they----
Mr. Scott. This is where somebody is complaining to the
benefit advisor?
Mr. Khawar. Exactly.
Mr. Scott. It is apparent that something is going wrong?
Mr. Khawar. Exactly. The benefits advisors will try to
resolve that, but they are not always able to. We, or the
agency has believed it is an important source because you have
kind of you have this person calling you. They are telling you
something, and so there is more than the level of suspicion or
belief that you would have otherwise.
It is not the only source. There are reports that are filed
with the government, and other data sources that the agency has
that it kind of mines to figure out where it can devote those
resources to get something that is more effective.
Mr. Scott. We have heard a lot about common interest
agreements and working with private lawyers secretly. What does
the EBSA law say about sharing information?
Mr. Khawar. There is a specific provision in ERISA that
allows the Department to share information essentially with
interested parties. Frequently, that is actually used to share
information with the people that you are investigating, right,
because you want to tell them information about the
investigation.
It is also used in the context of these common interest
agreements. I will point out that when we are talking about the
context, we should be I think, and I am hoping that the IG
report does this, is to not just look at kind of a numerical
there are this many conversations with, you know, these kinds
of parties, but to look at kind of broadly at what is going on,
and understand what EBSA's role was in these things.
I mean I will tell you in my own experience is that I
talked far more to people in the defense bar than people in the
plaintiff's bar in the entire time in my tenure at EBSA.
Mr. Scott. Is there anything that you supply that could not
be gotten by the other side through discovery?
Mr. Khawar. I think it is a question of when. My
understanding is that for private plaintiffs, they do not--I
have never brought a private litigation, but my understanding
is that it can sometimes be difficult for them to get their
hands on information, even when they are entitled to it by law.
I am thinking right now of some guidance that we put out
because an insurance company had denied someone's claim. The
attorney wrote to us and said I am not--they have tapes that
they are using as the basis of the denial. They are not turning
over those tapes to us.
We put out some guidance that said that no, that is
covered. That is one example where people would not be able to
get information.
Mr. Scott. Finally, we have heard that ESOPs are being
investigated. What problems can workers have with the ESOPs
that would require EBSA to intervene?
Mr. Khawar. The primary issue that EBSA looks at is really
around the acquisition of the ESOP, and the debt that the ESOP,
or the entity incurs. It is actually quite uncommon for EBSA to
investigate ESOPs kind of on an ongoing basis.
Mr. Scott. I yield back.
Chairman Allen. The gentleman yields. I now call on our
Conference Chair, Ms. McClain from Michigan, for your 5 minutes
of questioning.
Mrs. McClain. Thank you, Mr. Allen. Thank you all for being
here. Really important as a former business owner, to
understand the importance. Mr. Golumbic, Mr. Banducci and Mr.
Bonham, my legislation, EBSA Investigations Transparency Act
requires the EBSA to report annually to Congress on
investigations in enforcement status, right?
The report, which will not include the names of any private
parties, will include the office that opened the investigation,
and how long it has been open. I am curious as how you think
how this bill would help your organization's members determine
whether they are being treated fairly or not, right? We have
all these different regionals, and every--the sharing of
information is not actually there, and we all know some of
these cases are opened way longer than 36 months.
I would like to know whether--how you think this
legislation would help in terms of the employers? Mr.--you can
all answer if you like.
Mr. Golumbic. Yes, I think that level of transparency can
be immensely helpful. There was a number of questions today
about the timeliness of investigations. One issue, and I do not
represent a trade organization, I am just a private attorney,
but often in investigations that we are involved in, there is
no closing letter.
The Department makes a decision, we are not--we are going
to close the file, and my client never hears about it. You know
again, it is one level of transparency to make sure that
everyone understands that there is an investigation, and it is
closed, and closed with no results. That would certainly be
helpful.
Mrs. McClain. Why would anyone oppose that?
Mr. Golumbic. I personally do not know.
Mrs. McClain. Thank you.
Mr. Banducci. Thanks for introducing the legislation as
well. We support it for a number of reasons. From a
transparency standpoint, obviously our member companies would
benefit by being able to see, for instance, which regional
offices are pursuing what kinds of cases.
It helps us on the front end, our members on the front end,
sort of identify those areas where maybe we really need to be
looking. From, not to get out of my lane, but from an
appropriations perspective, I would think it would be
absolutely vital for you to have all that information as well.
In particular, to sort of address concerns about, you know,
budget cuts, you know, how if there were additional funds,
where those moneys would actually be spent.
I think that is--it is not obvious to me that they would
all go to benefits advisors.
Mrs. McClain. Right. It might help us too regionally, and
which regions are doing best practices, and maybe we could
learn from those regions, right? I mean if we were transparent,
we could say oh my goodness, this region is doing really good,
maybe we could learn instead of trying to get stuff done, we
could actually get stuff done, but I will let you respond.
Mr. Bonham. Thank you, if I might, I would say we have
heard a lot about how your bill would supposedly
disproportionately tax the resources of EBSA, but I would have
to say that, you know, issuing an annual report that
inventories the open cases does not seem overly burdensome to
me. You probably have on your own staff more open constituent
case work that you have your staff track for you than EBSA does
in the entire agency on an annual basis.
Just the issuance of that type of a report from a
management perspective, I would suspect our members would
benefit because it would cause a lot of those cases to be
closed when they otherwise would just linger on for years.
Mrs. McClain. I am also curious, is it safe to say that the
standards in which you hold your members to in terms of
compliance, right, and I had a business. We actually have more
people--had more people in our compliance department filling
out forms and filing, you know, to be in compliance, than we
did actually have in customer service.
If we hold your members to certain standards, do not you
think it would be safe to say to hold the government agencies
and all these agencies to the same standard?
Mr. Bonham. Yes.
Mrs. McClain. Oh, I do not know what a concept, right?
Anyone disagree with that, that----
Mr. Bonham. No. It is in fact, you know, part of the sort
of feedback that we have gotten from our members is that,
particularly the interviews investigations, for example the
turnaround in document requests.
Mrs. McClain. Yes.
Mr. Bonham. Right? Provide everything right now.
Mrs. McClain. Right. I am the employer, I have got to give
you everything right now, but once I give it to you, well, you
can take as long as you want.
Mr. Bonham. Correct.
Mrs. McClain. It seems a little unfair, does it not?
Mr. Bonham. It does.
Mrs. McClain. Yes.
Mr. Bonham. I would add to that, there is an ongoing
buildup of costs for the employers as well.
Mrs. McClain. Sure.
Mr. Bonham. We have to answer every single year, do you
have any open cases or investigations at the Department of
Labor when we fill out our insurance forms.
Mrs. McClain. Would it make sense to hold the agency
accountable too?
Mr. Bonham. Sure.
Mrs. McClain. Thank you.
Chairman Allen. The gentlelady yields. Now, I call on
Ranking Member DeSaulnier of California for your questions.
Mr. DeSaulnier. Thank you, Mr. Chairman, and to the last
comments, before the Conference Chair leaves, she is not
listening. I am happy to followup in a dialog. It is consistent
with my opening statements. These hearings drive me crazy too.
As a professional health care patient for the last 10
years, and as a former small business owner, and we have had
these conversations multiple times, the Chair and I, this is
just something that just seems so obvious, and unfortunately
our current atmosphere in the Congress does not bode well that
we will actually come to conclusions.
I would say that waiting for the IG report would be very
helpful, and hopefully the Inspector General will give us a
real objective way that we can make this beleaguered agency
work. Given that we have one investigator for every 17,500
plans. Mr. Khawar, give a moment here to talk about the cuts in
efficiencies, and I would be interested in hearing from private
employers.
If you are not going to fund a program to make it
efficient, why would you be surprised it does not work well?
Talk about the budget cuts, and then if you could talk about
just, it was Brandeis who said, ``Sunshine is the best
antidote,'' but how do we get to that point where it is
efficient, so everybody has it?
This nefarious idea that somehow the employees are getting
information, and as you said to Mr. Scott's comments, that you
are not history, that is not your history, you are trying to
help with a settlement that is both efficient and is acceptable
to both parties. Speak to both, cutting the budget, and then we
added money in the No Surprise Act, so that helped the budget.
Speak to the budget problems, but then this accusation from
the majority that there are nefarious things going on that
benefit the one side as opposed to working with both sides, to
mutually agreed acceptable settlement and conclusion.
Mr. Khawar. Thank you. I will do my best in the remaining
time to answer all of that. On the budget cuts, I mean I think
it is ironic to have a conversation about additional reporting
at a time when the agency's personnel has been cut so much, and
the budget cut is important to understand in the context of the
personnel cuts that it creates.
If the agency can only support 640 employees all told,
which is what the Fiscal Year 2026 budget request is for, that
is not just 640 investigators, that is the investigators, that
is economists, that is reg writers, that is benefits advisors,
that is also people that handle personnel, travel, those kinds
of things. There is an accounting function.
It is everything that the agency does in 640 people. At its
peak the agency had close to 1,000, so it is in that context
tiny for the obligations that it has, and that the timeliness
problem is going to get worse, and I just wish the conversation
we were having, it is not coming at a point where the agency
has been given a fair chance to do everything that it can to
close investigations in a timely manner for example.
Instead, it has been resourced starved. It has been trying
to figure out how to make due with less and less and less. One
function is that investigations are going to take longer. That
is going to be another consequence of the budget cuts.
On this issue of, you know, the trust, and the relationship
between the agency and its various stakeholders, I mean I have
a few thoughts. First is just as Mr. Golumbic you know,
observed in his opening statement, that you know he does not
view the agency as playing the same role that it used to.
I would say the same is true for the private defense bar in
particular, which has become over the years far more
antagonistic. Another cause of untimely investigations is that
the private defense bar increasingly tells their clients that
they should not cooperate with EBSA, they should not help us
get to the bottom of it.
What we really want to do is get in, get the documents,
figure out the problem, fix it and move out. The agency's goal
is to solve problems voluntarily. It is in no one's interest
for the agency to start bringing lawsuits and everything, and
what we want to try and do is have an efficient process that
works for plan sponsors, works for the agency, but importantly
also works for participants, and makes sure that their rights
are actually being realized.
Mr. DeSaulnier. Thank you. I yield back.
Chairman Allen. All right. The gentleman yields, and I
think we have no more questions. I want to now recognize the--
well, first, I will give my closing statement, and then--well,
actually the Ranking Member gives his closing statement. Would
you like to close out your side? You did a good job on
questions by the way.
Mr. DeSaulnier. Oh, thank you, Mr. Chairman. Collegiality,
maybe it will come back, Mr. Banducci, and then you can come
back as well. Well, I do appreciate that, and although we have
had some serious disagreements, this is something I think can
really be constructive Mr. Chairman, to have a conversation
about it.
With the increase in denials that we had hearings about in
this Subcommittee over the last couple sessions, your
predecessor, Mr. Good, who is no longer a Member of Congress,
we actually worked to try to make corrections in a bipartisan
way, but it is so important if people are going to be--not be
able to access Medicaid, and we have more denials in the
private--in the employer-employee section, having been on the
governing body of a public hospital, do you know where people
are going to end up?
They are going to end up in the emergency room, with
critical care. If we do not get this right, it affects the
whole system. If you cut police, unfortunately there are going
to be people who do bad things. You have got to have the
appropriate level of funding, so that people like Mr. Khawar
can work in good faith with both parties.
I would just say, Mr. Chairman, there is an opportunity
here. I am afraid that ethical behavior more and more in our
culture, politically and businesswise, is making it harder for
us to get people to do the right thing without regulators. Just
consistently underfunding and demeaning public sector employees
who are doing a good job does not help the situation.
From my perspective, as opposed to our conversations about
our experience in the business sector, it is eroding the level
of trust, and in this case where you have got denials going up,
and the efficiency of the system unfortunately not working, it
would be really a wonderful opportunity for us to work together
to see if we could fix some of the challenges we have.
Just defunding and blaming the people who are left, I do
not think it speaks well to our institution that is trying to
engage in problem solving. Mr. Banducci, Mr. Khawar, I have the
feeling in a former setting the two of you could go into a room
and negotiate a lot of this for everybody's benefit,
particularly all of the American taxpayers, consumers, and high
road business owners, both public and private, so with that,
Mr. Chairman, these bills do not solve the problem.
I would argue that it would be better for us to take a deep
breath, wait for the Inspector General's report, and engage in
constructive bipartisan heavy work of legislating in good faith
to see if we can fix the situation before we make it worse, and
I will yield back.
Chairman Allen. Okay. I thank the Ranking Member, and yes,
I agree. We need to get to the bottom of this problem. You
know, a couple of things that I heard is obviously, the
insurance companies are a big problem, and of course you know,
somehow in this country we have got to get healthcare back to
our providers, and those who are actually treating people for
these sometimes fatal decisions.
That is another matter, but going forward the Employment
Benefits Security Administration is the small agency with vast
jurisdiction. In these conversations, it kind of reminds me of
the IRS. You are guilty until you prove yourself innocent. I do
not think that is exactly the juris prudence in our Nation, you
know, we are supposed to be innocent until you are proven
guilty.
We have got it backward in many instances here. It is
important for this agency to use its investigative resources
wisely and efficiently, and you know, it needs to be open. No
behind the back, behind the scene activity. Employers sponsor
retirement plans voluntarily, and EBSA should work with
employers to promote and protect employee retirement savings.
Republicans are committed to protecting retirement savings
for workers, retirees, and their families. As we learned today,
government agencies that resist oversight can run amuck, and
their actions can harm workers and job creators. Under the
Biden Harris administration, EBSA teamed up with class action
Plaintiff attorneys to bypass Court rules on fair litigation.
That is a black eye, and it needs to be dealt with.
The legislation we discuss today calls for transparency.
Sunlight is the best disinfectant, and Ranking Member, I look
forward to working with you, and all the members of this
Committee to providing a workable solution that secures
workers' retirement, and with that I yield back.
I would like to thank all of our witnesses again for taking
the time to testify before the Subcommittee today, and without
objection, there being no further business, the Subcommittee
stands adjourned.
[Whereupon, at 12:01 p.m., the Subcommittee was adjourned.]
[Additional submissions from Chairman Allen follows:]
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[Additional submissions from Representative McClain
follows:]
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[Additional submissions from Representative Rulli follows:]
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[Questions and responses submitted for the record by Mr.
Khawar follows:]
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