Administration July 28, 2023

Senate, House Far Apart on DOL Budget

The two appropriation bills are about $4 billion apart in terms of discretionary funding for the department.

Reported by

The Appropriations Committees for the House of Representatives and the Senate have advanced very different spending bills related to the Department of Labor.

The Senate version, which passed its committee 25-1 on Thursday, would provide $13.5 billion in discretionary funding to the DOL for fiscal year 2024. $249 million of the total is for the Employee Benefits Security Administration, an increase from the $191 million appropriated in 2023.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

The House version appropriates $9.8 billion for the DOL, of which $153 million is for EBSA. The House version passed committee on July 14.

After this week, Congress is not scheduled to return to session until September 12. The bills must be harmonized by September 30, along with the rest of the federal budget, to avoid a shutdown, absent a continuing resolution.

The two bills do agree on funding for the Pension Benefit Guaranty Corporation. Both bills appropriate $513 million for the PBGC and provide for an additional $9.2 million in administrative funding for every 20,000 participants in excess of 100,000 in terminated plans. In both bills, this funding is provided through September 30, 2028.

The Senate anticipates that obligations related to the Special Financial Assistance program will cost the PBGC nearly $14 billion, but this funding is tied to the American Rescue Plan Act.

The Senate’s bill also requires “EBSA to create and widely disseminate educational materials focused on promoting best practices in employee ownership through the Employee Ownership Initiative authorized by Section 346 of the SECURE 2.0 Act of 2022.” This provision is absent in the House’s bill.

Section 346 of SECURE 2.0 requires the DOL to establish an Employee Ownership Initiative and authorized $50 million to promote employee ownership. 

The Senate Appropriations Committee previously approved $14 million for the creation of a retirement plan database, or “lost and found,” to be administered by the DOL. The House Appropriations Committee has yet to provide for this.

The House version also blocks the EBSA rule which permits environmental, social and governance considerations to be used in fiduciary decisions related to retirement plans and proxy voting. The Senate bill does not address that rule.

The ESG rule is currently being challenged by two lawsuits. The rule allows ESG funds to be used as a qualified default investment alternative and makes it easier for ESG funds to be placed in investment menus, but it does not change a fiduciary’s obligation to be loyal and prudent. The lawsuits assert that this rule violates the Employee Retirement Income Security Act, among other claims.

Deals and People July 28, 2023

Vestwell Acquires Student Loan Benefits Firm Gradifi from Morgan Stanley

The move adds student loan related tools such as employee payment management and debt refinancing to the digital 401(k) providers platform.

Reported by

Small business and individual 401(k) provider Vestwell announced Friday it has agreed to acquire Gradifi Solutions, a student loan benefits provider, from Morgan Stanley.

The acquisition will add new student loan-related offerings to Vestwell’s platform, including programs to help employees manage and pay down student debt, contribute to education savings accounts and refinance student loans, according to the New York-based firm. Morgan Stanley inherited Gradifi when it acquired E*Trade Financial in 2020.

Gradifi provides participants with workplace education solutions, including financial literacy and student loan refinancing tools, as well as student loan repayment programs. Terms of the deal were not disclosed.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

“As millions of Americans carry student loan debt, it’s essential for employers to provide accessible tools and programs that enable individuals to pay down their student debt while saving for retirement simultaneously,” Aaron Schumm, founder and CEO of Vestwell, said in a statement. “Bringing Gradifi Solutions into Vestwell accelerates our product roadmap initiative alongside a top-tier client base. Through this acquisition, Vestwell is realizing its vision of enabling all savings in the workplace and beyond, with more offerings coming soon.” 

Vestwell’s announcement pointed out that, with the passage of the SECURE 2.0 Act of 2022, an employer can recognize an employee’s student loan payments as part of its retirement plan matching formula. That policy does not go into effect until 2024, with many experts predicting it will likely take longer for many plan sponsors to start implementing it.

Morgan Stanley expressed its support for the deal, as it is also building its workplace capabilities and offerings through Morgan Stanley at Work.

“We’ve partnered with Vestwell for white label recordkeeping, and we’re thrilled to extend that relationship through their acquisition of Gradifi,” Brian McDonald, head of Morgan Stanley at Work, said in a statement. “We look forward to bringing our clients and participants a more robust and comprehensive education savings offering as part of this deal.”

A federal student loan forgiveness program backed by the administration of President Joe Biden was cancelled earlier this year after a Supreme Court ruling that the program was unconstitutional.

«