For example, according to Inspector General reports, job training money went to purchase $640,000 worth of equipment that was not used for program participants, as in the case of one university; or it went out as reimbursements of almost $700,000 for placing merely 8 people into longshoremen jobs, as in the case of a west coast program.

Are these isolated cases of fraud, or is there some systematic problem that needs to be fixed?

Answer. The incidents are isolated. In a program as large as JTPA, whose funding since its inception through the current program year totals over $24 billion, there are bound to be some questioned costs. Despite sensational reports to the contrary, abuses are not widespread and the disallowed costs are taken seriously.

When problems are identified either through ETA's regular oversight and monitoring activities, an OIG audit or any other In the means, immediate action is taken to correct the situation. three areas cited in the question, several actions have been taken by ETA to correct deficiencies.

PROCUREMENT

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We proposed amendments to JTPA which would have addressed issues concerning contracting and procurement. Although the amendments were not enacted, another proposal is currently being formulated. If included in the new package, these provisions would strengthen JTPA's fiscal integrity and would be a significant step forward for us in bringing an orderly and uniform approach to procurement practices in the JTPA system.

Since the amendments to JTPA were not enacted by the 101st Congress, and we were anxious to act quickly to correct program deficiencies, we decided to move ahead on regulatory reforms and published an Advanced Notice of Proposed Rulemaking (ANPR) which includes provisions on procurement.

The ANPR also contains a program income requirement that would specify that income under a program administered by a public or private non-profit entity may be retained by the entity only to continue to carry out the program, and the conditions under which such income may be used. Each entity would be required to maintain records sufficient to determine the amount of income received and the purposes for which it was spent.

DUPLICATION OF SERVICES

O JTPA statutory provisions call for coordination of services and activities and linkages of resources to maximize the

effective delivery of employment and training and to avoid duplication of effort and expenditures caused by the establishment of separate, independent and competing program structures. Evidence of appropriate coordination between programs would include the co-location of staff, the sharing of program resources, and the enrollment of all individuals served into both programs' management information systems.

In addition to the above actions, ETA has strengthened regular oversight activities and is ensuring that the States are conducting ongoing monitoring and oversight activities of the Service Delivery Areas (SDAS). We have also recently conducted a series of special oversight reviews in approximately 50 percent of SDAs in procurement and on-the-job training, and we are finalizing plans to review the remaining 50 percent. Corrective action plans have been put in place to address findings. All findings have either been resolved already, will be resolved soon, or were referred to the OIG for investigation. Finally, the ANPR would require each State, administrative entity and recipient to monitor the performance of service providers.

We have not been able to identify the audit cited concerning reimbursements of almost $700,000 for placing 8 people into longshoremen jobs. We have contacted the Office of the Inspector General and they were not able to assist us in identifying this audit. We would be pleased to respond if further information could be provided.

The other audit cited concerns misuse of JTPA funds by the Louisiana Department of Employment and Training. The Final Determination on this audit, which questioned a total of $1,042, 882, was issued by ETA in October 1990 and disallowed $993,368 ($617,457 in equipment costs). The State has remitted checks to us totalling $533,340 related to the equipment cost disallowance. The State has appealed the final determination to the DOL Administrative Law Judge. Until this process is complete, further funds will not be recouped.

Question. I understand the Labor Department is proposing regulatory changes to tighten oversight of job training programs, along the lines of legislation submitted last year. regulations be sufficient, or will legislation still be needed?

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Answer. We believe that many of the requirements to improve the administration and program integrity of JTPA can be accomplished through the regulatory process. However, there are specific matters which will require legislative change. Including these provisions in the statute would reinforce our ability to require SDA and State compliance.

HEALTH CARE FRAUD

Question. With the extremely high cost of health insurance today, the average American small employer is turning to self-funded insurance plans commonly known as "multiple employer welfare

arr-ngements" or MEWAs to provide coverage for his or her employees. These are often an excellent response to meeting employees' health insurance needs. However, criminal investigations by the Department's Inspector General's Office have found that an alarming number of these arrangements are fraudulent.

Typically, the perpetrators of these fraudulent schemes generate millions of dollars in monthly premiums from unsuspecting small companies and their employees. They pay some small claims and defer the major claims while embezzling the premium revenue. State regulation and civil enforcement actions against these frauds have proved ineffective in the past because there is no clearly orchestrated Federal enforcement program and because the criminals and the assets move quickly from state to state.

The consequences to the thousands of employers and their workers who are held personally liable for unpaid medical bills, which they had every good reason to believe were covered, are tragic. Just last December, operators of a fraudulent MEWA were charged with embezzling $21 million which left more than 1,300 families without health insurance coverage. Victims of that fraud include the parents of a three-year-old who suffers acute leukemia. They face paying $250,000 for treatments they believed were insured. In addition, many participants are left with pre-existing health conditions that preclude future health coverage.

Clearly, something needs to be done. address this costly and devastating problem?

What are your plans to

Answer. The Department believes that few, if any, MEWAS are themselves ERISA-covered "employee welfare benefit plans". If a MEWA is not an ERISA-covered plan, the arrangement is not directly governed by ERISA. However, even if the MEWA itself is not a covered plan, each employer or employee organization which utilizes the MEWA to provide health benefits for its employees or members, generally, would be considered to have established a separate, single-employer plan subject to ERISA. Where a MEWA holds assets of such individual plans, the promoters receiving, managing and disposing of these assets are fiduciaries under ERISA and subject to ERISA's fiduciary responsibility provisions, with respect to which the Department does have investigative and enforcement authority.

1. We are pursuing a vigorous enforcement program. Investigations into the operation of MEWAS to ensure that they are operated in accordance with ERISA requirements are a priority under PWBA's "significant issue" enforcement strategy. That strategy directs 50% of field investigative resources to investigations of financial institutions that act as fiduciaries to employee benefit plans and service providers to employee benefit plans.

As of December 31, 1990, we had 60 investigations pending with respect to MEWAS. Last year at this time the Department had 30 ongoing investigations. With the increase in PWBA'S field enforcement staff, PWBA expects to be able to continue to devote significant resources to investigations of MEWAS.

2. We are working closely with state enforcement agencies. As part of the Department's enforcement activities relating to MEWAS, representatives from PWBA field offices met personally with representatives from 36 state insurance departments during 1990 to

discuss areas of mutual concern, and share information concerning ongoing or potential MEWA cases. The remaining state insurance departments were contacted by letter or telephone to pursue cooperative arrangements with appropriate state agencies. Through these arrangements, PWBA's Area Offices share and discuss cases opened and closed by PWBA involving MEWAS, as well as make available to state regulators documents and information obtained in PWBA investigations.

For example, PWBA's Boston Area Office has shared investigative files and provided information regarding various insurance companies and MEWAS with many different states. This assistance, at least in part, enabled the states of North Carolina, Delaware, Georgia, California, and Colorado to revoke or suspend the certificate of an insurance company and enabled three other states to place the insurer under financial review. PWBA field offices continue to maintain contacts with their respective state insurance agencies in order to coordinate investigative activities involving MEWAS.

Most recently, the Assistant Secretary for Pension and Welfare Benefits, and other PWBA officials, met with the President and Vice President of the National Association of Insurance Commissioners on February 6, 1991, and discussed issues related to state and federal regulation of MEWAS.

3. We are participating in regional meetings and training sessions for staff of interested state and federal agencies. PWBA has also participated in various regional symposia on MEWAS and ERISA for the staffs of interested state and federal agencies, including a national conference on insurance fraud sponsored by the U.S. Attorney for the Northern District of Georgia's Law Enforcement Coordinating Committee. PWBA's Los Angeles and San Francisco offices participate in the State of California's Multiple Employer Trust (MET) taskforce quarterly meetings. These meetings have enabled field managers from these PWBA offices to discuss ongoing MEWA issues with state insurance departments from a number of states, including California, Washington, Utah, Idaho, Nevada and Alaska, as well as other federal agencies. Other meetings attended by PWBA field managers include meetings held by the Central District of California Working Group on Employee Trust Fund Fraud and an Insurance Fraud Symposium sponsored by the Texas State Board of Insurance.

We are expediting review of advisory opinions requests from states. PWBA has also played a significant role in increasing communications with the states on interpretive issues concerning MEWAS. Since January 1990, PWBA has processed over 36 MEWA related advisory opinion requests. PWBA is providing expedited review of advisory opinion requests from states on the issue of whether a particular entity is a MEWA for purposes of the exception to ERISA preemption of state regulation. The processing of MEWA advisory opinions is a high priority for PWBA.

PWBA also distributes, on a quarterly basis, copies of all advisory opinions concerning MEWAS to the insurance commissioners of each state. Copies of advisory opinions are, upon issuance, furnished to the National Association of Insurance Commissioners, which, in turn, disseminates the letters through their information service which provides on-line information to the states respect to MEWAS subject to cease and desist orders.

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5. We are providing technical assistance to states. PWBA is also preparing technical assistance materials designed to assist the staffs of state agencies with respect to MEWAS and ERISA issues.

In addition, to the forgoing, the Department has filed amicus briefs in two cases in an effort to assist the state in exercising their jurisdiction over MEWAs.

6. We are obtaining data regarding the characteristics of MEWA arrangements. The Department is also taking measures with respect to obtaining additional data regarding MEWAS. The Department has contracted with an outside contractor to perform research which will provide an estimate of the numbers of MEWAS, the number of employer groups participating in MEWAS and the number of individual employees covered under such arrangements. We expect this research to provide PWBA with helpful data for policy formation.

Question.

Would you support legislation to require registration for Multiple Employer Welfare Arrangements with the Department of Labor?

Answer. During the last Congress, the Department proposed an amendment to ERISA to require all MEWAS to file an annual registration statement with the Department of Labor. This amendment was part of a legislative package to enhance ERISA enforcement.

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I expect to re-propose legislation to strengthen enforcement provisions of ERISA. I am currently reviewing the specific elements of the proposal to determine whether any modification should be made in the Department's proposal.

Question. Do you think such legislation would be an adequate

remedy?

Answer. A registration statement would provide the means for closer regulation of MEWAs to deter abusive practices and provide assistance to the states in policing MEWAS without the problems that federal licensing and certification of MEWAS would create.

Included in the proposal is a requirement that the filer certify that a copy of the registration statement has been sent to the insurance commissioner of each state in which the MEWA conducts business or intends to conduct business during the following year. Registration would help state insurance commissions assess the level of MEWA activity in their states and to take appropriate and timely regulatory action. Willful failure to file by a trustee or other responsible person would be a violation of ERISA section 501. Criminal penalties under section 501 include imprisonment up to one year, a $5,000 fine, or both, and in the case of business entities, a $10,000 fine.

Furthermore, under section 411 of ERISA, any person convicted of such a violation would be barred from virtually any relationship with an employee benefit plan for a period of 13 years after the end of conviction or imprisonment, whichever is later. Criminal penalties for violation of this provision consist of imprisonment of up to five years or a fine of up to $10,000 or both. As previously noted, the MEWA registration proposal is being reviewed, as part the Department's legislative package to enhance ERISA enforcement.