Deals and People January 25, 2022

EBSA Nominee Gomez’s Policy Priorities Unclear

President Joe Biden’s nominee for assistant secretary of labor for the Employee Benefits Security Administration, Lisa Gomez, has deep experience in labor issues.

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The nominee to be the new assistant secretary of the Department of Labor (DOL)’s Employee Benefits Security Administration (EBSA), Lisa Gomez, is likely to be confirmed to the position by the U.S. Senate, according to retirement industry sources.

“Her nomination has not yet been put on the Senate calendar, but we do expect that it will be at some point,” says Jason Berkowitz, chief legal and regulatory affairs officer at the Insured Retirement Institute (IRI). “We do expect to see her nomination acted upon and approved and ultimately for her to assume the role as head of EBSA.”

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What’s less clear is the regulatory approach Gomez is likely to take that will impact defined contribution (DC) retirement plan sponsors, and the resulting policies she will prioritize. 

The Senate confirmation calendar is controlled by Majority Leader Chuck Schumer, D-New York. President Joe Biden nominated Gomez to the position and the United States Senate Committee on Health, Education, Labor and Pensions (HELP) advanced her nomination earlier this month.

The HELP committee voted 12 to nine, along party lines, to advance her nomination. Gomez now must be confirmed to the position by a full Senate vote.

“Her nomination should be confirmed,” explains Mark Iwry, former senior adviser to the secretary of the Treasury in the Obama administration and currently nonresident senior fellow at the Brookings Institution and visiting scholar at the Wharton School. 

Policy

Gomez’s background has mostly focused away from DC plans, and therefore it’s less clear to sources what will be her areas of policy focus that will impact DC plan sponsors. She is a partner in the law firm Cohen, Weiss and Simon LLP and the chair of the firm’s management committee.

However, Gomez is expected to put to good use in the EBSA position her extensive knowledge and experience practicing employee benefits law, Iwry says.

“In addition to retirement and other employee benefits, EBSA of course is a player in the health policy area, as employer sponsored health plans are within their jurisdiction,” Iwry said. “How to move the Affordable Care Act (ACA) forward, how to continue implementing it and other health legislation through regulation and administrative actions, and how to improve ACA legislatively continue to be important issues for EBSA.”

Gomez’s background as an attorney has focused on unions, labor, multi-employer pension and welfare benefit plans, and other employee benefit issues, Iwry adds. 

“Given Lisa’s background, and under the leadership of [Department of Labor] Secretary Walsh, we can expect the Department’s employee benefits policy to be particularly strong in support of American workers and organized labor,” he said.

Berkowitz says IRI wants Gomez to complete pending rulemakings for lifetime income illustrations mandated by the 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act.  

“There are some open questions that the department has to address, and we very much hope to see her shepherd that through and over the finish line so that consumers can start benefiting from having access to those estimates of what their nest egg could produce in terms of monthly lifetime income,” he says.

IRI also would like Gomez to finalize the pending DOL proposal on rules for environmental, social and governance (ESG) investments in DC plans.  

“Incoming assistant secretaries tend to be of two different types: some have a track record that is fairly well known on the most important specific issues currently facing their organization, while others have less of a record on those particular issues and their specific views therefore are not as well known,” Iwry said.

Ask the Experts January 25, 2022

What Is a Look-Through Investment Vehicle?

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.

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“I was reading the plan document for our 403(b) ERISA plan and came across the term “look-through investment vehicle” in the context of offering a broad range of investment alternatives under ERISA 404(c). Can the Experts tell me what a look-through investment vehicle is, whether any/all of our plan investments (we utilize annuities and mutual funds) are look-through investment vehicles, and any actions we should be taking in this regard?”

Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

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First, the Experts commend you taking the time to read your plan document. One of the basic fiduciary responsibilities under the Employee Retirement Income Security Act (ERISA) is to follow the plan document. Thus, reading and understanding the plan document, though not always the most exciting exercise, is an integral part of being a fiduciary.

You have come across a little-used term that might have some meaning in the context of your plan, presuming your plan is intended to comply with ERISA 404(c). The fiduciaries of a “404(c) plan” are not liable for any losses that may result from a participant’s exercise of investment control over the assets of his/her account; most ERISA 403(b) plans seek to comply with 404(c) for this reason. The 404(c) regulation includes requirements that the plan make available a “broad range of investment alternatives” that, in aggregate, allow a participant to diversify his/her investment holdings to minimize overall investment risk and the risk of large losses through diversification. The concept of a look-through investment vehicle addresses the investment diversification issue by “looking-through” to the underlying holdings of a plan investment option that satisfies the regulation’s definition. A look-through investment vehicle is defined under Department of Labor Regulation 2550.404c-1(e)(1) as follows:

(i) An investment company described in section 3(a) of the Investment Company Act of 1940, or a series investment company described in section 18(f) of the 1940 Act or any of the segregated portfolios of such company;

(ii) A common or collective trust fund or a pooled investment fund maintained by a bank or similar institution, a deposit in a bank or similar institution, or a fixed rate investment contract of a bank or similar institution;

(iii) A pooled separate account or a fixed rate investment contract of an insurance company qualified to do business in a State; or

(iv) Any entity whose assets include plan assets by reason of a plan’s investment in the entity.

The mutual funds in your plan likely satisfy item (i) of this definition, and the annuities in your plan likely make available pooled separate account and fixed rate investments that satisfy item (iii). Thus, all of your plan’s investments are likely look-through investment vehicles for 404(c) purposes.

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Rebecca.Moore@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.

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