DOL

Effective November 2, 2022, the federal prime interest rate increased from 6.25 percent to 7 percent. The prime interest rate is largely determined by the federal funds rate, as set by the Federal Reserve’s Federal Open Market Committee (FOMC). As Department of Labor regulations require a retirement plan loan interest rate to be comparable to interest rates charged by entities that are in the business of lending money in similar circumstances, plan sponsors typically use a benchmark such as the prime rate to set the interest rate on plan loans.

The next FOMC meeting is scheduled for December 14, 2022.

A Department of Labor proposed rule restating the Voluntary Fiduciary Correction Program (VFCP) has left the Federal Office of Management and Budget—suggesting that official release may come soon.

The VFCP is a voluntary enforcement program that allows plan officials to identify and correct certain transactions, such as delinquent participant contributions, sales and exchanges, improper loans, and improper plan expenses. The VFCP was last updated in 2006.

The Department of Labor’s Wage and Hour Division has extended the deadline to comment on its proposed rule titled Employee or Independent Contractor Classification Under the Fair Labor Standards Act (FLSA). The original deadline to comment was November 28, and is now extended to December 13. Initial highlights of the proposal were announced upon its release.

The Pension Benefit Guarantee Corporation has determined premium rates applicable for the 2023 plan year in accordance with indexing rules provided in section 4006 of ERISA. The single-employer plan per-participant flat rate premium for plan years beginning in 2023 is $96, up from $88 in 2022 and more than triple the premium rate in 2007. The single-employer plan variable-rate premium for 2023 increases to $52 per $1,000 of unfunded vested benefits, up from $48 in 2022. The variable-rate premium per participant cap increased to $652 per participant, from $598 in 2022.

The Department of Labor (DOL) Wage and Hour Division has released a proposed rule titled Employee or Independent Contractor Classification Under the Fair Labor Standards Act (FLSA) that is scheduled to be published on October 13, 2022. The Department believes that its proposed rule would reduce the risk that employees are misclassified as independent contractors, while providing added certainty for businesses that engage with individuals who are in business for themselves.

Workers classified as independent contractors may not be afforded the protections of the FLSA. These include payment of federal minimum wage for all hours worked, and entitlement to overtime compensation for hours worked over 40 in a workweek.

The DOL is proposing to discontinue the use of “core factors” and instead return to a totality-of the-circumstances analysis of the economic reality test in which the factors do not have a predetermined weight and are considered in view of the economic reality of the whole activity. The proposal details six specific economic reality factors, but indicates that this should not be an exhaustive list for consideration.

(1) Opportunity for profit or loss depending on managerial skill

(2) Investments by the worker and the employer

(3) Degree of permanence of the work relationship

(4) Nature and degree of control

(5) Extent to which the work performed is an integral part of the employer’s business

(6) Skill and initiative

The Department is also proposing to formally rescind the 2021 Independent Contractor (IC) Rule. The effective date of the 2021 IC Rule was March 8, 2021. On March 4, 2021, the Department published a rule delaying the effective date of the 2021 IC Rule (Delay Rule) and on May 6, 2021, it published a rule withdrawing the 2021 IC Rule (Withdrawal Rule). On March 14, 2022, in a lawsuit challenging the Department’s delay and withdrawal of the 2021 IC Rule, a Federal district court in the Eastern District of Texas issued a decision vacating the Delay and Withdrawal Rules. The district court concluded that the 2021 IC Rule became effective on the original March 8, 2021, effective date.

Comments on the proposed rule must be received by November 28, 2022.

The Office of Management and Budget (OMB) has received a final rule entitled Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights from the Department of Labor (DOL). The OMB’s Office of Information and Regulatory Affairs (OIRA) provides final review of regulatory guidance before its official release.

The final rule is pursuant in part to Executive Order 14030, which directed the Secretary of Labor to suspend, revise or rescind previous guidance on this matter promulgated during the Trump administration. A proposed rule was published in the Federal Register on October 14, 2021.

Effective September 21, 2022, the Federal prime interest rate increased from 5.50 percent to 6.25 percent. The prime interest rate is largely determined by the federal funds rate, as set by the Federal Reserve’s Federal Open Market Committee (FOMC).

The Department of Labor (DOL) is extending the comment period for receiving written comments related to prohibited transaction class exemption 84-14 (the Proposed QPAM Amendment) to October 11, 2022. The DOL also intends to hold a public hearing on November 17, 2022, at which time a supplementary comment period will begin, and close approximately 14 days after the hearing transcript is posted on the EBSA’s web page.

Details of the proposed amendment were previously announced.

The Department of Labor (DOL) has released Interpretive Bulletin 2022-01 (IB) relating to independence requirements for accountants who audit employee benefit plans. Under ERISA, plan administrators of benefit plans requiring an audit are required to retain an “independent qualified public accountant” to conduct an examination of the plan’s financial statements and render an opinion as to whether the financial statements and required schedules are presented fairly in accordance with generally accepted accounting principles (GAAP).

The Office of Management and Budget has received a proposed rule from the Department of Labor (DOL) titled “Adoption of Amended and Restated Voluntary Fiduciary Correction Program”. The Voluntary Fiduciary Correction Program (VFCP) is a voluntary enforcement program that allows plan officials to identify and correct certain transactions, such as delinquent participant contributions, sales and exchanges, improper loans, and improper plan expenses. The VFCP was last updated in 2006.