Compliance November 15, 2023

No Additional Time for Fiduciary Proposal Comment, EBSA Confirms

An EBSA letter to SIFMA confirmed the 60-day comment period will proceed as originally planned.

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The Employee Benefits Security Administration has denied multiple requests for an extension of the comment period on the fiduciary rule proposal, declining to heed the advice of, among others, 18 organizations that sent a letter to the regulator last week.

EBSA will host virtual public hearings beginning on December 12, and the comment period will expire on January 2, 2024, as originally scheduled.

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The proposed rule amendments, called the “retirement security” proposal, would extend fiduciary status to advisers making regular one-time recommendations such as rollovers and to insurance professionals who make one-time recommendations for annuity products with retirement assets.

Industry actors had previously written to EBSA to ask for at least an additional 30 days to comment on the proposal. They noted that the rule is sophisticated and deeply consequential, and the comment period overlaps with many federal holidays. 

Assistant Secretary of Labor Lisa Gomez, in a response to the Securities Industry and Financial Markets Association, wrote that EBSA had engaged informally with many stakeholders prior to the proposal’s publication. Gomez, who heads EBSA, added that the agency has been working on regulating this space since about 2010 and was already familiar with the issue.

“At this point, EBSA does not intend to extend the comment period or delay the hearing,” Gomez wrote in the letter. “If you or any of your members would like to discuss any of the issues in the proposed rulemaking package with EBSA, we would be happy to set up a meeting, which would become part of the public record for the proposal.”

The Insured Retirement Institute, which was among the trade groups that had requested an extension of the comment period, Wednesday called EBSA’s decision “disconcerting and frustrating.”

In addition to criticizing the rejection of the request for more time, IRI questioned why the DOL set the hearing date for December 12.

“Such a short comment period for major federal rulemaking does not allow for meaningful public engagement,” said Wayne Chopus, president and CEO of IRI, in a statement. “I find it hard to understand why the Biden Administration is needlessly rushing to finalize a nearly 500-page proposed rule affecting retirement planning and financial security for millions of workers and retirees. “

Compliance November 14, 2023

Republican Budget Proposal Would Cut EBSA Budget, Roll Back ESG Rule

The budget, which President Joe Biden has pledged to veto, would also prevent the DOL from implementing the fiduciary adviser proposal.

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Republicans in the U.S. House of Representatives have proposed a budget for the Department of Labor that would block the DOL’s final rule on environmental, social and governance considerations in retirement plans and a proposed rule that would modify the definition of independent contractor. The House also approved amendments to the bill—H.R. 5894, the Labor, Health and Human Services, Education, and Related Agencies Appropriations Act of 2024—which would block proposed changes to the definition of a fiduciary.

The House passed, on a 336-95 vote, legislation funding the government past the Friday midnight deadline at current levels. Funding for four of the 12 annual appropriations bills is being extended through Jan. 19 and the other eight through Feb. 2. The Senate will need to approve the measure before Friday to avoid a shutdown as the continuing resolution currently funding the government expires at the end of the day Friday. There is unlikely to be sufficient time to pass a full budget for 2024 by then..

The base text of the DOL funding bill would prevent the DOL from implementing the ESG fiduciary final rule, which permits plans to consider ESG factors in qualified retirement plan investment selection, and from finalizing an October 2022 proposal which would modify the definition of independent contractor. The latter would make it easier for a worker to be classified as an employee and make workers less likely to be classified as independent contractors.

The White House explicitly opposed both measures and announced that President Joe Biden would veto the bill if it reached his desk; on March 20, Biden vetoed a prior Congressional attempt to overturn the ESG fiduciary rule via the Congressional Review Act.

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The House also approved amendments to H.R. 5894 that would block the new retirement security proposal that redefines the terms of being a fiduciary adviser to include one-time recommendations, including plan rollovers and annuity sales. The spending bill that those amendments are attached to has not yet been voted on.

The three amendments were proposed by representatives Rick Allen, R-Georgia, Anne Wagner, R-Missouri, and Ralph Norman, R-South Carolina. The amendments would prevent the changes to the definition of fiduciary adviser and related PTE changes proposed by the Employee Benefits Security Administration on October 31. They would also prevent EBSA from promulgating a substantially similar proposal in 2024.

The budget proposal would allocate $152.88 million to EBSA, another provision the White House opposes. The White House statement noted that this amount is inconsistent with the budget agreement reached between Biden and former House Speaker Kevin McCarthy, R-California, in May, when the Fiscal Responsibility Act was passed.

EBSA was funded with $233.87 million in 2023. The Senate Appropriations Committee, controlled by Democrats, planned to fund EBSA at $249 million for 2024, based on a funding bill passed by the committee in July by a vote of 25 to 1.

Neither the bill nor the amendments have been voted on, but H.R. 5894 is likely to pass the House in some form in the coming days. The bill is unlikely to pass the Senate in its current form, and the White House has already announced its intent to veto it.

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