The federal Department of Labor’s Employee Benefits Security Administration is ratcheting up scrutiny of advisor pension plan fees.

Beginning its third year, EBSA’s Fiduciary Service Provider Compensation Project is aimed at ensuring comprehensive disclosure about direct and indirect service provider compensation and conflicts of interest.

The investigations are on track to expand in the coming year as the agency increases its overall Major Case Initiative with an emphasis on service providers -- including investment managers, advisors, consultants and brokers -- to 401(k) and other pension plans.

The goal of focusing on service providers is to have a greater impact since they provide functions for many large and small plans, a Labor Department official said.

“Traditionally, there have been more plan sponsor fiduciaries being investigated. Now, we’re seeing more fiduciary services providers such as registered financial advisors being audited,” said David Kaleda, a Washington attorney and member of the ERISA Advisory Council.

EBSA is cooperating in the compensation project with the Securities and Exchange Commission.

Through the project, EBSA recovered $187,000 of excessive fees for plans from service providers and plan fiduciaries and gained $3.2 million from the reversal of prohibited transactions in the federal fiscal year that ended September 30. In the previous year, the recoveries totaled $4.64 million, with the lion’s share from a settlement by ING Life Insurance and Annuity Company for its failure to disclose its policy on reconciling transaction processing errors to 1,400 plans.

The agency did not have a comparable number for 2013 on savings from corrections of prohibited transactions.

While the numbers are small, the Labor Department official said the biggest benefit of the compensation project has been to assist advisors and other plan service providers and sponsors with compliance.

“We are trying to get the fiduciaries to have all the pertinent information on direct and indirect compensation so when they hire service providers they can make informed decisions on whether it is a good arrangement for their plans,” the Labor Department executive said.

The Financial Service Provider Compensation Project is a continuation of greater Labor Department oversight of financial advisors that included the Consultant Advisor Project (initiated before EBSA had rules on indirect fees) and began with the start of a series of class action law suits in 2006 by St. Louis attorney Jerry Schlichter against pension fund advisors for excessive fees and conflicts of interest.

Adding to the DOL intensity is the personal attachment that long-time staffers have to the regulations after spending years developing them.

“They are very invested in the rules. DOL has concerns that financial advisors and other service providers are not providing individualized plan-level fee disclosures, but instead are providing generic fee disclosures that do not provide plan fiduciaries with the disclosure they need under the rules,” says employee benefits lawyer Emily Peterson.

Erisa Advisory Council member Kaleda recently detailed the compensation project's process for advisors at a seminar at the National Society of Compliance Professionals' annual conference.

When a project investigation starts, EBSA first notifies an advisor of an investigation with a letter or a phone call followed by a letter.

The letter includes a case number, names the company or individual(s) under investigation, details EBSA’s authority to investigate the matter and requests documents.

Information the investigators initially seek from the documents includes ownership and structure of the advisory firm and the name and description of every product sold to each Erisa plan participant.

In addition, the investigators are after documents disclosing services and products provided and sold to each plan client with contact information for each client’s administrator, trustee and contact person.

EBSA also seeks the fiduciary status the advisor has with each of its Erisa clients and a current statement of all assets held by the advisor for each plan client with the name of the asset and its fair market value.

Other information being sought includes documents on revenue sharing and a list of all funds the advisor has sold or managed year to year.

In interviewing the RIA’s staff, investigators allow the employees to have legal counsel present.

After an inquiry, EBSA investigators sent the advisor a closing letter.

If violations are found, the agency will outline violations and typically issue what is called a “Voluntary Compliance Letter.”

Investor advocate Ric Edelman called the EBSA initiative a positive development.

“I’m glad to see they’re focusing on it. Too many employers are 'sold' plans by insurance agents and stock brokers -- and the employers don’t realize the costs of the investment choices in the plans, or the conflicts of interest that exist,” Edelman said.