Industry & Regulatory NewsDOL Releases Spring 2022 Regulatory Agenda
The Department of Labor has posted online its upcoming guidance priorities. A number of the guidance items deal with retirement savings arrangements, including the following.
- Two items in the “prerule” stage include improving the effectiveness of retirement plan disclosures and guidance on pooled employer plans
- A former initiative to modernize the Form 5500 appears in the proposed rule stage
- A rulemaking to amend the definition of fiduciary to include persons who render investment advice for a fee to employee benefit plans and IRAs
- Revised procedures for granting prohibited transaction exemptions
- A final rule regarding pension benefit statement lifetime income illustrations as required under the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019
- Updates to the Voluntary Fiduciary Correction Program
- A third final rule concerning Form 5500 changes related to the SECURE Act
- A final rule regarding prudence and loyalty in selecting plan investments and exercising shareholder rights
- Amendments to the abandoned plan program
Industry & Regulatory NewsWashington Pulse: Some Big Changes May be in Store for the Davis-Bacon Act
The Davis-Bacon Act (DBA) has played a major role in the construction industry for over 90 years. Passed in 1931, it has been described by the Supreme Court as a “minimum wage law designed for the benefit of construction workers.” The DBA generally requires payment of locally prevailing wages under direct federal contracts and for covered contractors and their subcontractors. The employer’s obligation can be met by paying the applicable prevailing wage entirely as cash wages or by a combination of cash wages and employer-provided, bona fide fringe benefits—including pension and health benefits.
Industry & Regulatory NewsFinancial Freedom Act Proposed in House
Representative Byron Donalds (R-FL) and several Republican co-sponsors have introduced HR 7860, the Financial Freedom Act of 2022. This is companion legislation to S 4147 introduced earlier this month by Senator Tommy Tuberville (R-AL). The proposal would prohibit the Department of Labor (DOL) from restricting the types of investments that plan participants can choose through participant directed accounts and self-directed brokerage accounts. The bills are in response to regulatory guidance released by the DOL and announced in March.
Industry & Regulatory NewsSenate HELP Committee Releases Retirement Bill Discussion Draft
Senators Patty Murray (D-WA) and Richard Burr (R-NC)—chair and ranking members of the Senate Health, Education, Labor and Pensions Committee respectively—have released a discussion draft of compiled retirement provisions from several bills into the Senate’s latest version of what has been coined SECURE Act 2.0. The RISE & SHINE Act shares some similarities to, and builds upon the Securing a Strong Retirement Act bill that passed the House in March.
Industry & Regulatory NewsFinal Form 5500 Revisions Guidance Issued
The Department of Labor’s Employee Benefits Security Administration (EBSA), IRS, and the Pension Benefit Guaranty Corporation (PBGC) have released final forms revisions to the Form 5500 Annual Return/Report of Employee Benefit Plan and Form 5500-SF Short Form Annual Return/Report of Employee Benefit Plan, and related instructions, that apply to plan year reports beginning on or after January 1, 2022. A proposed rule was issued last September.
Industry & Regulatory NewsFinancial Freedom Act Proposed in Senate
May 10, 2022 – Senator Tommy Tuberville (R-AL) has introduced the Financial Freedom Act, legislation aimed at prohibiting the Department of Labor (DOL) from restricting the types of investments that plan participants can choose through participant directed accounts and self-directed brokerage accounts. The bill is in response to regulatory guidance released by the DOL and announced in March.
Industry & Regulatory NewsWashington Pulse: U.S. House Passes Significant Retirement Bill
The U.S. House of Representatives passed the Securing a Strong Retirement Act of 2022 (SSRA) by a 414-5 vote on March 29, 2022. H.R. 2954 (also commonly referred to as “SECURE 2.0”) contains over 50 retirement plan provisions—nearly double the number as the original Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. The U.S. Senate is expected to take up a similar bipartisan bill later this year, which could result in the need for a conference committee to reconcile differences between the two bills.
Industry & Regulatory NewsComment Period for Prohibited Transaction Exemption Guidance Extended
The Department of Labor’s Employee Benefit Security Administration has announced the extension of the public comment period for proposed amendments to procedures governing the filing and processing of prohibited transaction exemption applications. The comment period was initially set to expire on April 14, 2022, but has been extended an additional 45 days through May 29, 2022.
The agency has received multiple requests from interested parties to grant additional time to develop and submit comments. Details of the proposal were previously announced and can be found here.
Industry & Regulatory NewsProtecting America’s Retirement Security Act Approved by Committee
The House Committee on Education and Labor approved by a 29-21 party line vote to release the Protecting America’s Retirement Security Act without amendments to the House floor for consideration. The bill contains the following retirement plan proposals.
- Requires the Department of Labor, within two years of enactment, to explore how disclosure requirements for participant directed individual account plans can be improved to enhance participants’ understanding of fees and expenses and their cumulative effect on savings over time
- Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code to require spousal consent and notarization for all distributions, with certain exceptions
- Amends ERISA and the Internal Revenue Code to require eligible employees who are not participating in the plan to be re-enrolled at least every 3 years for any automatic contribution arrangement that becomes effective after December 31, 2024
Industry & Regulatory NewsDOL Issues Compliance Release on Cryptocurrencies
The Department of Labor (DOL) has issued Compliance Assistance Release 2022-01 pertaining to the use of cryptocurrencies as plan investments in 401(k) plans. In it, the DOL cautions fiduciaries to exercise extreme care before considering the addition of cryptocurrency options in a plan’s investment menu and elaborates that the failure to remove an imprudent investment option from a menu of options is a breach of fiduciary duty.
The DOL expresses concerns about significant risks and challenges related to fraud, theft, and loss due the following factors
- Speculative and volatile investments due to early stage of development
- Ability for participants to make informed investment decisions due to the unique nature of cryptocurrencies and lack of investor knowledge
- Custodial and recordkeeping concerns related to the asset not being held in a trust or custodial account but rather, stored as “lines of computer code in a digital wallet”
- Valuation concerns with reliability and accuracy, citing disagreements by experts
- Evolving regulatory environment that could result in unlawful transactions or inadequate disclosures
The DOL intends to conduct an investigative program aimed at plans that offer participant investments in cryptocurrencies and related products—including those within brokerage windows and take “appropriate action” to protect the interests of plan participants and beneficiaries.