Deals and People May 6, 2019

Senate Confirms Gordon Hartogensis as Director of PBGC

Family trust trustee with Senate connections named 16th director of pensions lifeboat.

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The Senate has confirmed Gordon Hartogensis as the 16th director of the Pension Benefit Guaranty Corporation (PBGC) by a vote of 72 to 27, with one abstention. He replaces Thomas Reeder, who was director from 2015 to 2018.

When first announced last year, Hartogensis’ nomination raised concerns about nepotism as he is the brother-in-law of Senate Majority Leader Mitch McConnell and Transportation Secretary Elaine Chao. The nomination was also criticized because of Hartogensis’ apparent lack of relevant experience.

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Following the announcement, Democratic Senators Patty Murray of Washington and Ron Wyden of Oregon sent a letter to President Trump demanding an explanation for his decision to replace Reeder with Hartogensis, who the senators said “seems to have little to no prior experience relevant to the pension system and the work of the PBGC.”

And during a September 2018 Finance Committee hearing to consider the nomination, Wyden said Hartogensis “doesn’t have experience in policy dealing with pensions or retirement security,” adding that “he’s got the right political connections to be a nominee in this particular Senate, but he has no record from which this committee can draw conclusions about what he’d do as the head of PBGC.”

Despite his objections, Wyden ended up voting in favor of the nomination, while Murray voted against it.

Hartogensis has been managing trustee of the Hartogensis Family Trust since 2011, and was CEO and co-founder of software company Auric Technology from 2004 to 2011.

At the September Finance Committee hearing, Hartogensis said his apparent lack of relevant experience should be viewed as an asset, not a liability.

“Given the large issues facing the agency, I believe that the PBGC would benefit from the perspective of an outsider who can review these issues with fresh eyes,” he said.

He also said that his finance and investment experience “will be useful in running the PBGC from an early career on Wall Street, from running two companies, and from managing a private equity and angel investment portfolio.”

The PBGC also announced that it has named Franklin Pace as director of the Corporate Controls and Reviews Department (CCRD) in the office of the chief financial officer.

“During his 30-year career, Pace has gained extensive internal control and audit experience in the federal government, including 20 years at PBGC,” said the PBGC in a statement. “In his new role, Pace is responsible for managing PBGC’s overall program of internal control. Pace will continue to coordinate across the agency’s departments to maintain PBGC’s high standards of stewardship and accountability.”

Compliance May 3, 2019

DOL Says Members of AHPs Can Keep Coverage for Now

After a federal district court overturned final regulations on association health plans (AHPs) from the Department of Labor (DOL), the agency says “employers participating in insured AHPs can generally maintain that coverage through the end of the plan year or, if later, the contract term.”

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The U.S. Department of Labor (DOL) says it disagrees with the district court’s ruling in The State of New York v. United States Department of Labor vacating portions of the department’s final rule on association health plans (AHPs), and the U.S. Department of Justice filed an appeal on April 26.

The DOL has issued a policy statement which provides that for an interim period of time, it will not pursue enforcement actions against parties for potential violations stemming from actions taken before the district court’s decision in good faith reliance on the AHP rule’s validity, as long as parties meet their responsibilities to association members and their participants and beneficiaries to pay health benefit claims as promised. Nor will it take action against existing AHPs for continuing to provide benefits to members who enrolled in good faith reliance on the AHP rule’s validity before the district court’s order, through the remainder of the applicable plan year or contract term.

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A statement from the DOL’s Employee Benefits Security Administration (EBSA) says, “The Department recognizes that many businesses and employees have obtained health coverage from AHPs in reliance on the final rule before the district court ruling. Many of these businesses and employees have advised the Department that they are concerned that their health coverage must terminate, which will cause significant disruption.” It adds, “The Department is committed to taking all appropriate action within its legal authority to minimize undue consequences on employees and their families. Employers participating in insured AHPs can generally maintain that coverage through the end of the plan year or, if later, the contract term.”

According to the EBSA, the Department of Health and Human Services (HHS) advised the DOL that employer members of an insured AHP have an independent right under the guaranteed renewability provision of the Public Health Service Act (PHS Act) to continue insurance coverage (including maintaining all out-of-pocket accumulators for employees and their families) through the end of the applicable plan year, unless an exception applies.

HHS has advised the DOL that HHS will not pursue enforcement against nonfederal governmental plans or health insurance issuers for potential violations of title XXVII of the PHS Act caused by actions taken before the district court’s decision in good faith reliance on the rule’s validity, through the remainder of the applicable plan year or contract term that was in force at the time of the district court’s decision. HHS has also advised the DOL that it will not consider states to not be substantially enforcing the applicable requirements under title XXVII of the PHS Act in cases where the state adopts a similar approach with respect to health insurance coverage issued within the state.

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