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Employee Plans Compliance Unit (EPCU) - Completed Projects - Fraud Project

Fraud Project Summary

Employee Plans Compliance Unit

The Employee Plans Compliance Unit (EPCU) completed the Fraud Project, one of the first projects worked by the newly formed group. The EPCU conducted compliance checks by contacting employee benefit plan sponsors who reported a loss due to fraud or dishonesty. 

An employee benefit plan that experiences a loss as a result of any dishonest or fraudulent act is required to report this loss on the Form 5500, Schedule H, Financial Information (100 or more participants), or Schedule I, Financial Information (less than 100 participants), line 4f. This loss is reported regardless of whether or not the loss was recovered by the plan. 

The project was set up to inquire about the circumstances surrounding the loss, how the loss was accounted for by the plan, information about recovering the loss, and what actions have been taken to prevent a loss in the future. The fidelity bond amount was also reviewed to ensure the plan fiduciaries were properly bonded.

The project involved over 800 returns defined as incurring a fraud loss. The EPCU discovered from reviewing the returns and contacting plan sponsors that only 13% actually incurred an actual fraud loss. A system line conversion error was also discovered which affected 19% of the cases. 

The majority of the results, 68%, were due to a line entry error in return preparation. Whether the error was made by a hand written entry or an electronic entry, the most common problem was the fidelity bond amount being entered on the line for a loss caused by fraud or dishonesty.

The EPCU helps to leverage the Employee Plans Examinations resources by expanding enforcement contacts through compliance checks. Although, some issues and operational problems require a field examination once a compliance check has been conducted. In the Fraud Project, less than 10% of the compliance cases worked in the EPCU were sent out to the field for an examination.

Page Last Reviewed or Updated: 27-Sep-2013