Based on updates to the Department of Labor’s Spring 2022 regulatory agenda, it appears that stakeholders will have to wait a little longer for the agency’s revisions to the definition of fiduciary, as well as final guidance on ESG-based factors and additional Form 5500 changes.
Fiduciary Rewrite?
The latest regulatory agenda of the DOL’s Employee Benefits Security Administration (EBSA) still includes plans to revisit the definition of fiduciary (RIN: 1210-AC02), along with potential additional changes to the existing prohibited transaction exemptions. But it now shows that EBSA has a December 2022 target date for release of a Notice of Proposed Rulemaking, instead of December 2021 as originally planned.
That rulemaking would amend the regulatory definition of the term fiduciary 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 ERISA Section 3(21) and Code Section 4975(e)(3). In addition, EBSA notes that it plans to also evaluate available prohibited transaction class exemptions and propose amendments or new exemptions to ensure consistent protection of employee benefit plan and IRA investors.
While many industry stakeholders believed the Biden administration would immediately pull the plug on the then-Trump administration’s Prohibited Transaction Exemption (PTE 2020-02) for investment advice fiduciaries, EBSA officials confirmed in February 2021 that the department would allow the PTE to go into effect as scheduled on Feb. 16, 2021.
The DOL had announced last October that it was issuing a temporary delay of the enforcement effective date for PTE 2020-02 until February 2022, and that it would not enforce the specific documentation and disclosure requirements on why a rollover recommendation is in a participant’s best interest until July 1, 2022, which is now upon us.
For additional information on PTE 2020-02 documentation requirements, Nevin Adams and Fred Reish discuss in their latest podcast the new parameters, how they’re applied, and the conditions that might (and might not) be sufficient to warrant rolling money out of a qualified plan and into an IRA.
ESG Guidance
Unlike the fiduciary guidance, the DOL did pull back on the Trump-era rules and subsequently released proposed guidance in October 2021 (Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights) in relation to ESG considerations and proxy voting. The ARA submitted comments on the proposed rule last December. Now, according to the regulatory agenda, the DOL’s target date for a final rule is December 2022.
Additionally, DOL has requested information on whether the department should take action to protect retirement savings from risks associated with climate changes, which the ARA also weighed in on, contending that the DOL should not call out climate-related risks for special attention.
Form 5500 Revisions
While some Form 5500 revisions have been issued in the past few weeks, it appears that additional changes have also been pushed back. In May, the DOL released updated forms for plan years beginning on or after 2022, but noted that it is continuing to review certain aspects of its September 2021 proposal, including the DCG reporting and related audit issue. The regulatory agenda for this project (RIN 1210-AB97) now shows that a “phase III” of the revisions is not expected until March 2023.
Moreover, a longer-term project to improve the Form 5500 series (RIN: 1210-AC01), which the agenda notes is part of a strategic process between DOL, Treasury and the PBGC to modernize the Form 5500 process and requirements, has also been pushed back from an original target date of this September to March 2023.
Note, as always, that the dates listed in the regulatory agenda are target dates for release and are subject to change.
