In April, we posted about the U.S. Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) issuing cybersecurity guidance for employee retirement plans. That is, April 14, 2021. Shortly thereafter, the DOL updated its audit inquiries to include probing questions for plan fiduciaries about their compliance with “hot off the press” agency guidelines.

So, what do those inquiries look like?

In short, the DOL is asking plan sponsors to produce:

all documents relating to any cybersecurity or information security programs that apply to the data of the Plan, whether those programs are applied by the sponsor of the Plan or by any service provider of the Plan

For plan fiduciaries that are new to cybersecurity and have not received a DOL audit in the last few months, it may not be clear what documents or materials the DOL is expecting. The DOL fleshes out its general inquiry with a laundry list of items. Here are some examples of those more specific requests:

  • All policies, procedures, or guidelines relating to such things as:
    • The implementation of access controls and identity management, including any use of multi-factor authentication
    • The processes for business continuity, disaster recovery, and incident response.
    • Management of vendors and third party service providers, including notification protocols for cybersecurity events and the use of data for any purpose other than the direct performance of their duties.
    • Cybersecurity awareness training.
    • Encryption to protect all sensitive information transmitted, stored, or in transit.

The list above is not complete, but it makes clear the DOL is looking for information about what plan fiduciaries are doing to safeguard their own information and systems to address privacy and security, not just that of their service providers. Some plan fiduciaries might be wondering what should policies, procedures, or guidelines look like to protect plan data. There are many frameworks to consider when adopting reasonable safeguards. Examples include guidance published by the National Institute of Standards and Technology, the New York SHIELD Act, the Massachusetts data security regulations, the privacy and security standards under HIPAA, etc.

In addition to policies, procedures, and guidelines summarized above, the DOL also seeks in its audit request copies of other materials, some of which are listed below.

  • “All documents and communications relating to any past cybersecurity incidents.”

So, evidently, the DOL would like to discover whether the plan had a prior cybersecurity incident. It is unclear whether this request refers only to “breaches of security” or similar terms as defined under state breach notification laws which require notification, or mere “incidents” that do not rise to the level of a reportable breach.

  • “All documents and communications describing security reviews and independent security assessments of the assets or data of the Plan stored in a cloud or managed by service providers.”

Here the DOL makes a distinction between plan “assets” and plan “data,” seeking security reviews and assessments relating to both. Recent litigation called into question whether plan data could be considered a “plan asset.” In one of the most recent cases, Harmon v. Shell Oil Co., 2021 WL 1232694 (S.D. Tex. Mar. 30, 2021), the U.S. District Court for the Southern District of Texas rejected the argument that plan assets include plan data.

  • “All documents describing security technical controls, including firewalls, antivirus software, and data backup.”

An important note here is that it may not be enough to say, “we are doing this,” or “we have implemented antivirus and firewalls to protect our information systems.” The DOL is looking for documents that describe those safeguards and controls.

  • “All documents and communications from service providers relating to their cybersecurity capabilities and procedures.”
  • “All documents and communications from service providers regarding policies and procedures for collecting, storing, archiving, deleting, anonymizing, warehousing, and sharing data.”
  • “All documents and communications describing the permitted uses of data by the sponsor of the Plan or by any service providers of the Plan, including, but not limited to, all uses of data for the direct or indirect purpose of cross-selling or marketing products and services.”

The DOL would like to see how plan fiduciaries are communicating with their service providers to assess service provider cybersecurity risk, as well as the documents and other materials from service providers concerning the processing of plan data. Importantly, the DOL is not just looking for cybersecurity related information. The agency apparently wants to know how service providers are permitted to use plan data. Plan fiduciaries will want to think carefully about their current practices, including their communications, when selecting and working with service providers.

No plan fiduciary wants to experience a DOL audit of their retirement plans, or any other audit for that matter. But cybersecurity clearly is a new and important area of interest for the DOL and plan fiduciaries need to be prepared to respond. Feel free to contact us if you would like to discuss audit readiness concerning cybersecurity for your plans.

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with…

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Mr. Lazzarotti also is a member of the firm’s Employee Benefits Practice Group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Mr. Lazzarotti counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Mr. Lazzarotti’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Mr. Lazzarotti speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Mr. Lazzarotti served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.