MEMORANDUM FOR:                     OLENA BERG
                                                              Assistant Secretary for Pension
                                                                and Welfare Benefits Administration
 

                                                                  / s /
FROM:                                                JOHN J. GETEK
                                                             Assistant Inspector General
                                                                for Audit

SUBJECT:                                        Streamlining the ERISA Filing Acceptance System (EFAST) and
                                                             Development of the Enforcement Management System (EMS)
                                                             As of January 31, 1998
                                                             Final Status Report No. 17-98-001-12-001

On September 30, 1997, the Office of Inspector General (OIG) issued Final Status Report
No. 09-97-007-12-001. Since then, OIG has continued to consult with staff of the Pension and Welfare Benefits Administration (PWBA) on its project to streamline the Employee Retirement Income Security Act (ERISA) Filing Acceptance System (EFAST) and the associated task to redesign/revise the Form 5500 series for annual reporting. Also, OIG has been working with PWBA's project manager and team on the Enforcement Management System (EMS) development. This report is the second of what will be a series of semiannual reports, that will present results (status) on accomplishments, issues, and concerns of our joint endeavor with PWBA.

At the end of our fieldwork (January 15, 1998), much still remains to be done with the Form 5500, EFAST and EMS. Contractor proposals must be evaluated in order to acquire contractor services to design and operate the systems; the public's comments about the Form 5500 must be considered before it is finalized; and the EMS must undergo system integration testing and test plans must be completed. We performed our work using guidance from the Information Systems Audit and Control Foundation's Control Objectives for Information and Related Technology, September 1996.

During the last 6 months, PWBA made much progress in redesigning/revising the Form 5500 series. PWBA published the proposed revisions to the Form 5500 in the Federal Register for public comments on September 3, 1997, and also held a public hearing on November 17, 1997. At this hearing, PWBA solicited comments regarding how the proposed changes could be implemented in a manner that would minimize the impact on plan administrators and direct filing entities. As a result of the hearing, the U.S. Department of Labor (DOL), the Internal Revenue Service (IRS), the Social Security Administration (SSA), and the Pension Benefit Guaranty Corporation (PBGC) decided that it would be appropriate to introduce the new Form 5500 for the 1999 plan year. This new date was selected for two main reasons: (1) to consider how best to accommodate the comments received from the public and (2) to give plan administrators and service providers more time to modify their management information systems to provide the data needed for the Form 5500.
 

PWBA is replacing its Case Management System (CMS) and Field Office Case Management System (FOCMS) with a new system that will be called the Enforcement Management System (EMS). The total replacement of the PWBA case management systems is necessary for several reasons: (1) the limitations of the current mainframe system, (2) the difficulty in moving an old DOS-based application to the new Windows platform used by the agency, and (3) inefficient double record keeping in the field and National Office. This new system according to PWBA's original project management plan was to be operational by October 1, 1997. It was not implemented on schedule due to: (1) new requirements imposed as a result of the Government Performance and Results Act (GPRA), (2) complexity of programming within the Windows environment, and (3) shifting of EMS development resources to other PWBA priorities. Because of additional programming requirements, the cost of EMS has risen by $483,905; from $1.21 million to $1.69 million.

BACKGROUND

Since 1996, PWBA has been working on streamlining ERISA information processing requirements. PWBA's streamlining project consists of developing a computer system which will expedite the receipt and processing of Form 5500's information and revising the Form 5500s to reduce the filers' paperwork burden. PWBA has also worked on developing a new internal management information system for the enforcement case tracking system. The Congress has approved moving the Form 5500 processing from the IRS to PWBA. PWBA has represented that the cost for the EFAST development will be $9 million. Congress appropriated $6 million in Fiscal Year 1997 (with 2-year funding) and included an additional $3 million for this effort in PWBA's FY 1998 appropriation.

When the project is completed and EFAST is implemented, PWBA projects that over a 5-year life cycle, total operating costs will range from $68 to $79 million. Further, PWBA projects that over the same 5-year life cycle, the Government will realize about $57 million in savings because the new system will be cheaper to operate than the current IRS Form 5500 processing system. Other benefits include improved efficiency and effectiveness, reduced paperwork burden on the filers, and increased accuracy, timeliness, and quality of pension plan information.

PWBA is replacing CMS and FOCMS with EMS because CMS does not meet the current needs of management. FOCMS is an internal system used by PWBA field offices to track case openings, closings, and results achieved. FOCMS contains information such as open cases for each investigator in regional and district offices, the status of voluntary compliance attempts, cases referred to the National and Regional Solicitor, and summary data for closed civil and criminal cases. CMS is a nationwide system that compiles statistics from FOCMS and is used in reporting to Congress and other external entities.
 

ACTION ITEMS

ERISA FILING ACCEPTANCE SYSTEM (EFAST)

• Complete the evaluation of the proposals submitted by contractors for the design and development of EFAST and award contracts by June 1, 1998, so that the system can be operational in time to handle the first Form 5500s that will be received July 1, 2000.

• Develop an EFAST contingency plan within the next 6 months in order to be prepared for the possibility that the EFAST system may not be completed on time or fail to meet system requirements. At a minimum, OIG believes the contingency plan should include agreement between PWBA, PBGC, IRS and the SSA on processing priorities if delays in system implementation occur.

• Review the oral and written comments provided by the public and announce by mid-May the data elements of the new Form 5500 so that plan administrators and service providers can make necessary adjustments to their management information systems. Publish in the Federal Register, the final computer-scannable Form 5500 with the electronic filing option by November 1998.

• Request that the Department's Solicitor make as a top priority issuing an opinion on the legality of mandating electronic filing of Form 5500s under current ERISA legislation. PWBA had requested such an opinion on October 6, 1997.

• PWBA must continue to pay its share to IRS for processing the 1998 Form 5500s (est. $8 million).

• During the next 6-month period, PWBA should undertake serious deliberations and consultations with its stakeholders to learn of the cost and potential impact that phasing in over a 5-year period, mandated electronic filing of Form 5500 would have on the regulated community.

• Establish a new time table as to when EMS will be operational and provide to those who have a need to know exactly what the new schedule for designing, developing and testing a new system will be.

• Carry out system integration testing from March through May 1998. End user testing will occur from June through August 1998.

• Establish as a priority for the development team the requirement that test plans be completed by the end of April 1998.

• Ensure that all EMS data elements will be available for retrieval in the new system and the EMS will be fully capable of generating reports to meet GPRA requirements.

PWBA chose not to comment on the draft report. However, if you choose to comment on this final report, please do so within 60 days.

If you would like to discuss the report's contents, please contact Robert Curtis, Director, Office of Performance Audits at 219-6641.