After months of speculation, the Department of Labor’s newly released Spring 2023 regulatory agenda confirms that a fiduciary rule rewrite could be released later this summer; it also provides other key insight for the department’s regulatory plans for the coming months.
In fact, the fall regulatory agenda for the DOL’s Employee Benefits Security Administration (EBSA) had previously showed that the agency planned to issue a Notice of Proposed Rulemaking (NPRM) addressing the definition of fiduciary by the end of 2022. But with Lisa Gomez only being confirmed by the U.S. Senate to serve as Assistant Secretary for EBSA in late September 2022 and not starting until the beginning of October, it became clear to many observers that the agency would not meet that self-imposed deadline.
The updated Spring 2023 agenda now shows that EBSA plans to release a NPRM by August 2023. The title of the proposed rulemaking has also been changed from “Definition of the Term ‘Fiduciary’” to “Conflict of Interest in Investment Advice.” Note also that the regulatory identification number (RIN) and the abstract description of the forthcoming guidance remain the same.
“This rulemaking would amend the regulatory definition of the term fiduciary set forth at 29 CFR 2510.3-21(c) to more appropriately define when persons who render investment advice for a fee to employee benefit plans and IRAs are fiduciaries within the meaning of section 3(21) of ERISA and section 4975(e)(3) of the Internal Revenue Code,” the DOL’s unified agenda states.
The summary explanation further explains that the amendment will take into account “practices of investment advisers, and the expectations of plan officials and participants, and IRA owners who receive investment advice, as well as developments in the investment marketplace, including in the ways advisers are compensated that can subject advisers to harmful conflicts of interest.”
In conjunction with this rulemaking, EBSA is also evaluating available prohibited transaction class exemptions and plans to propose amendments or new exemptions to “ensure consistent protection of employee benefit plan and IRA investors.”
Released every spring and fall by the White House’s Office of Information and Regulatory Affairs, the unified agenda outlines actions that Federal agencies are considering over the coming months. While the agenda does not provide specific details, it does provide the most formal marker—beyond public speaking engagements—that additional changes are in the works. And because the fiduciary proposal will be issued in the form of an NPRM, that will allow for a formal public comment period.
Additional DOL Priorities
Meanwhile, among the additional retirement-related items from EBSA’s spring regulatory agenda are the following.
Retirement Plan Disclosures (pre-rule stage; 1210-AC09). Consistent with Section 319 of SECURE 2.0, this regulatory action will look to improve the effectiveness of retirement plan disclosures required under ERISA, balanced with the cost to plans, participants and beneficiaries of providing such disclosures. EBSA notes that the first step in this project is consulting with a “diverse set of stakeholders.”
Pooled Employer Plans (pre-rule stage; 1210-AC10). This action will address the need for guidance regarding the implementation of Section 101 of the SECURE Act. EBSA intends to start by consulting with stakeholders. The project will also take into account Section 344 of SECURE 2.0, which requires the DOL to conduct a study on how pooled employer plans can be improved.
Emergency Savings Accounts (pre-rule stage; 1210-AC18). Section 127 of SECURE 2.0 added provisions that provide for emergency-savings accounts linked to individual account plans. This action will assess options for implementing the changes, first by consulting with stakeholders to explore areas where regulatory or other guidance would facilitate the establishment of pension-linked emergency savings accounts.
Retirement Savings Lost and Found (pre-rule stage; 1210-AC19). Section 303 of SECURE 2.0 requires DOL, not later than two years after the date of enactment and in consultation with the Treasury Department, to create an online searchable database that allows retirement savers to search for potentially lost retirement plan benefits. This project will also start with stakeholder meetings, with the purpose of implementing regulations concerning the collection of information to create the Retirement Savings Lost and Found.
Worker Ownership, Readiness, and Knowledge (pre-rule stage; 1210-AC20). While not readily apparent in the title, this project aims to implement Section 346 of SECURE 2.0 directing DOL to establish an Employee Ownership Initiative to promote employee ownership. Section 346(c)(4)(B) also provides that DOL, in consultation with Treasury, shall issue formal guidance for “acceptable standards and procedures to establish good faith fair market value for shares of a business to be acquired by an employee stock ownership plan (as defined in section 407(d)(6) of ERISA).”
Exemption for Certain Auto-Portability Transactions (pre-rule stage; 1210-AC21). Section 120 of SECURE 2.0 added a statutory exemption for the receipt of fees and compensation by the automatic portability provider for services provided in connection with an automatic portability transaction, as defined. This project would implement the purposes of these amendments.
Voluntary Fiduciary Correction Program (VFCP) (proposed rule stage; 1210-AB64). This past spring, EBSA reopened the comment period following enactment of SECURE 2.0; the agenda shows that the agency is currently reviewing the comments submitted. Under this project, EBSA is amending and restating its VFCP under ERISA, which originally was adopted in 2002 and revised in 2005 and 2006. The amendments will expand the scope of some transactions currently eligible for correction and streamline correction procedures for certain others.
Improvement of Form 5500 (proposed rule stage; 1210-AC01). This regulatory action, which shows a target NPRM by March 2024, is part of a strategic project with the IRS and PBGC to improve the Form 5500 Annual Return/Report of Employee Benefit Plan. The project is also focused on enhancing the agencies' ability to collect employee benefit plan data that best meets the needs of changing compliance projects and activities.
Abandoned Plan Program (final rule stage; 1210-AC04). In late 2012, EBSA proposed amendments to, among other things, permit bankruptcy trustees to use the Abandoned Plan Program to terminate and wind up the plans of sponsors in liquidation under chapter 7 of the U.S. Bankruptcy Code. In September 2019, EBSA withdrew this entry from the semiannual regulatory agenda due to agency reprioritization. Following a review of agency priorities, this entry was returned to EBSA’s semiannual regulatory agenda in the fall of 2021. The agenda currently shows that EBSA plans to issue an Interim Final Rule by June 2023.
Prohibited Transaction Exemption Procedures (final rule stage; 1210-AC05). The proposed amendment seeks to revise the DOL’s procedures for granting prohibited transaction exemptions, which was last updated in 2011. However, this guidance project has been through the ringer over the past year, where after having been blasted by various industry stakeholders, the DOL reopened the comment period and held a public hearing on the proposed changes. The updated agenda now shows a target release date for a final rule in September 2023.
An important reminder is that the dates listed in these entries are target dates for release and are subject to change as events warrant.
