What awaits Lisa Gomez?


Now that the US Senate has confirmed Lisa Gomez as the Department of Labor’s Employee Benefits Security Administration (EBSA) Assistant Secretary, a long to-do list awaits her attention.

Since the start of the current administration, Ali Khawar has served as Acting Deputy Secretary of EBSA, assuming these responsibilities and serving as a point of contact, but these functions will now be transferred to Gomez in the days and weeks to come. come.

A regulatory program awaits you

In fact, there are a number of hot drafts of regulatory guidance that have either been proposed and are still pending, or are in the pre-rule stage and EBSA is considering next steps. The main elements related to the retirement of the EBSA regulatory program are as follows.

Trust Boards (RIN: 1210-AC02). EBSA’s regulatory program still shows plans to review the definition of fiduciary. According to the draft description, the regulations would change the regulatory definition of the term fiduciary to “more appropriately define when persons who provide 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 description further notes that the amendment “would take into account the practices of investment advisers and the expectations of plan sponsors and participants, as well as IRA owners who receive investment advice; and developments in the investment market, including how advisers are compensated. which may expose advisers to harmful conflicts of interest. The EBSA also plans to assess the available prohibited transaction class exemptions and propose amendments or new exemptions to provide consistent protection for employee benefit plans and IRA investors.

The agenda shows a December target date for publishing a notice of proposed rulemaking, but that date may slip, due to timing issues and Gomez’s update. Other factors could include new lawsuits filed against the current guidelines.

While the Biden-led DOL let Trump-era changes into effect that initiated a new prohibited transaction exemption for offering investment advice, two lawsuits were filed against those changes, one by the Federation Americans for Consumer Choice Inc., which seeks to strike down the fiduciary rule as expressed in PTE 2020-02 and a second by the American Securities Association arguing that the guidelines did not properly follow the Administrative Procedures Act.

At this point, it’s unclear what impact these lawsuits may have on the administration’s thinking in terms of implementing new guidelines — whether it delays the process or has the opposite effect and encourages EBSA to continue. Meanwhile, last July 1, advisors were required to begin documenting – in writing – why a rollover recommendation is in a participant’s best interest under TEP 2020-02.

ESG advice (RIN: 1210-AC03). Contrary to fiduciary guidelines, the DOL withdrew the Trump-era rules, announcing it would not enforce the changes. Subsequently, the DOL issued proposed guidance in October 2021 (Prudence and Fairness in Selecting Plan Investments and Exercising Shareholder Rights) regarding ESG considerations and proxy voting, and the ARA submitted comments in December.

In the meantime, the DOL has requested information on whether the department should take steps to protect retirement savings from the risks associated with climate change, which the ARA has also weighed in on, saying the DOL should not call climate-related risks for special attention. The regulatory program indicates a target date of December 2022 for the publication of a final rule, but it is also not clear whether this deadline has passed. It should also be noted that ESG has become a hot political topic in recent weeks.

Cryptographic Concerns

Gomez will also likely weigh in on the current debate surrounding the DOL’s warning in March warning plan trustees about the presence of cryptocurrency in a range of investments in a DC plan and Fidelity’s decision to move on. forward with a new “digital asset” capability for 401(k) plans. The crypto debate has even led to the introduction of legislation in Congress and legal action against the DOL, claiming that the department’s attempt to restrict the use of cryptocurrency in DC plans is ” arbitrary and capricious” and in violation of the Administrative Procedure Act. .

To date, Acting Assistant Secretary Khawar has been the public face of the defense of the DOL’s decision to issue the guidelines warning plan trustees to exercise extreme caution before considering adding an option of cryptocurrency. That public-facing role will likely pass to Gomez, who is expected to weigh in on the issue, which not only has the attention of the DOL, but that of the Plaintiffs Bar.

Illustrations of lifetime income (RIN: 1210-AB20). The interim final rules came into effect in September 2021 and sponsors of member-managed DC plans were required to provide lifetime income illustrations to their plan members no later than the second quarterly benefit statements of 2022. non-member-managed DC plans, sponsors must provide illustrations of lifetime income on the annual pension benefit statement for calendar year 2021 by October 15, 2022. Despite these deadlines, a final rule has yet to be finalized. been published and the agenda still indicates a target date of August 2022 for publication.

Additional action areas

PEP advice (RIN: 1210-AC10). According to the regulatory agenda, the DOL is still considering issuing additional guidance regarding joint employer plans under the SECURE Act. This item is still listed as being at the pre-rule stage, with DOL consulting with stakeholders on the need for further guidance.

Revisions to Form 5500 (RIN 1210-AB97). This regulatory action would implement the SECURE Act and related changes to Form 5500; one of the main focuses of this project concerns article 202 of the SECURE law, which requires the establishment of a consolidated annual report for certain groups of similar schemes. The DOL in May released updated forms for plan years starting from 2022 or later, but noted that it was still reviewing certain aspects of its September 2021 proposal, including reports on the group. defined contribution scheme (DCG) and the related audit issue. The program shows potential for further guidance in 2023.

Redesign of the 5500 form (RIN: 1210-AC01). Rather, according to the agenda, this is a longer-term project to improve the Form 5500 series. The agenda notes that this is part of a strategic process between the DOL, Treasury and PBGC to modernize the Form 5500 process and requirements. The regulatory schedule shows that the DOL intends to issue proposed guidance by March 2023.

PTE procedures (RIN: 1210-AC05). In March, the DOL announced proposed changes to its procedures governing the filing and processing of Prohibited Transaction Exemption (PTE) requests and the public comment period ended at the end of May. But after much criticism from various industry players, the DOL reopened the comment period on the proposed amendment and held a hearing in mid-September. The agenda shows that the Department is currently engaged in the comment review process.

Proposed change to QPAM exemption: Although not on the regulatory agenda, the DOL published a proposed amendment to PTE 84-14 (the QPAM exemption) on July 27, 2022, with a 60-day comment period; he later extended the comment period to October 11. The proposed amendment would expand the types of misconduct that prevent the regime’s asset managers from using the exemption and seeks to clarify that foreign convictions would prevent companies from using QPAM. The ARA had requested a longer extension, noting that the changes under the proposed amendment are significant. Additionally, the terms of the amended PTE 84-14 would significantly alter the relationship between plan sponsors and their advisors, the ARA noted.

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