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

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.

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.