Feds Poised to Implement Four Policy Changes Affecting ERISA Plans Before End of 2022

The Biden administration plans to introduce various rules before the end of 2022 that will impact ERISA-regulated benefits plans. Meanwhile, Congress is working to smooth out differences between the Senate and House on a broad retirement policy omnibus bill. 

Secure 2.0

The House passed H.R. 2954 in March, which it dubbed “Secure 2.0,” as a continuation of the original Secure Act passed in 2019. The overall aim of Secure 2.0 is to expand 401(k) access, but differences remain as to whether Secure 2.0 will require employers to enroll more workers in 401(k) plans automatically. 

The Senate intends to combine two bills that passed out of their respective committees unanimously: a retirement package out of the Finance Committee, and S. 4353, which advanced out of the Health, Education, Labor, and Pensions Committee in June. These combined bills do not go as far as the Senate’s bill regarding auto-enrolling workers in 401(k) plans. 

Climate Risk Rule

The U.S. Department of Labor (DOL) intends to publish a final rule concerning climate risk by December 2022. This rule will clarify that retirement plans can evaluate environmental, social, and governance (ESG) factors, including climate change, when making investment decisions and detail how they can do so.

Plan sponsors must pay close attention to the upcoming rule due to the recent rapid federal policy shifts. In October 2020, the DOL, under the Trump administration, restricted fiduciaries from considering ESG factors via final rule. The Biden administration immediately backed off the restriction, but the Trump administration’s rule remains on the books, at least for now. 

Revision of the Fiduciary Rule 

The fiduciary rule governs investment advice by retirement plan advisors. The Biden administration plans to rewrite the fiduciary rule in light of litigation that has plagued various versions of the rule since 2016. For instance, the DOL rule finalized in 2016 led to a lawsuit by the U.S. Chamber of Commerce, and  the U.S. Court of Appeals for the Fifth Circuit invalidated the rule. 

In response, the Trump administration’s DOL released an ERISA prohibited transaction exemption for retirement investment advisors in 2020, which reinstated a 1975 five-part test to evaluate advisors’ fiduciary status. Conflicting statements in the preamble to the exemption caused confusion about its legal impact. In part, the exemption allows retirement investment advisors to avoid prohibitions in ERISA on self-dealing by agreeing to adhere to “impartial conduct” standards. Accordingly, the Biden administration has kept the exemption in place, going as far as supplementing its finalization with FAQs agency guidance in April 2021. 

Litigation against the DOL looms in Texas, in which licensed independent insurance agents and the Federation of Americans for Consumer Choice, Inc. seek to invalidate the 2020 rule. At the same time, the American Securities Association has sued the DOL in Florida, challenging the validity of the April 2021 FAQs. 

State Abortion Laws

Employers are scrambling to change their plans in response to the U.S. Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization. In that decision, the high Court overturned Roe v. Wade and opened the door for states to impose previously prohibited restrictions and outright bans on abortion. The issuance of the decision triggered laws in many states to go into effect immediately, and dozens more are likely to follow as states begin to hold special legislative sessions to enact their own restrictive laws and bans. These laws create new liabilities for employers who wish to retain abortion services for their employees, including issues with enforcement that may vary significantly from one state to the next. 

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.
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