The US Department of Labor (DOL) released an extensive regulatory agenda in January 2023 laying out the agency’s priorities for the year. The DOL has faced scrutiny from Congress this legislative session, demonstrated most recently by the congressional repeal of the DOL’s so-called “ESG Rule” in early March. President Joseph Biden’s veto of that repeal on March 20, 2023, rescued the ESG Rule from the congressional chopping block. Luckily for the DOL, however, many of the other 70-plus priority items for 2023 appear to be less controversial. Below we summarize a few of those items that have direct relevance to Employee Retirement Income Security Act (ERISA) regulated retirement plan sponsors.
Pooled Employer Plans
The SECURE Act of 2019 (SECURE 1.0) created the novel pooled employer plan (PEP), a centrally administered defined contribution plan that multiple unrelated employers can join. Since their introduction in 2019, PEPs have proved to be an attractive opportunity for employers looking to outsource retirement plan responsibilities and limit their fiduciary responsibilities to those retirement plans. The DOL and Internal Revenue Service (IRS) have issued additional regulations regarding PEPs in the years following the passage of SECURE 1.0 (which we have covered at length in ML BeneBits posts and a number of LawFlashes.)
The DOL intends to continue adding to the PEP regulatory landscape in the coming months. According to the regulatory agenda, the DOL will consult with a broad set of stakeholders to determine what additional guidance is needed regarding the implementation and regulation of PEPs.
Changes to Form 5500
The regulatory agenda has two agenda items related to the Form 5500: “Improvement of the Form 5500 Series and Implementing Related Regulations under ERISA” and “Implement SECURE Act and Related Revisions to Employee Benefit Plan Annual Reporting on the Form 5500.”
The latter Form 5500 agenda item, “Implement SECURE Act and Related Revisions to Employee Benefit Plan Annual Reporting on the Form 5500,” has been brewing for some time at the DOL, having been part of a set of rules first proposed in September 2021. The DOL (along with the IRS and Pension Benefit Guaranty Corporation) recently released the third final rule implementing the changes to Forms 5500 and 5500-F mandated in Section 202 of SECURE 1.0.
The other Form 5500 agenda item appears to follow up on the extensive changes to the Form 5500 originally proposed in 2016 with the goal of “modernizing” the form’s financial and other annual reporting requirements. While the 2016 proposal generated extensive comments, the current project summary describes issuing another notice of proposed rulemaking without reference to the prior proposal, suggesting that there may be a number of changes from the previous revisions.
Amended Voluntary Fiduciary Correction Program
Another item on the agenda for DOL action in 2023 is the amendment and restatement of the DOL’s Voluntary Fiduciary Correction Program (VFCP). This amendment and restatement was proposed in November 2022, and its comment period was recently extended to April 17, 2023 to account for a provision on voluntary correction included in the recently enacted SECURE Act 2.0. The DOL is restating the VFCP in its entirety and, as part of that process, is rolling out several changes to the longstanding program (originally adopted in 2002) and requesting public comment on the amendments in particular and the program in general.
The amendments aim to simplify and expand the VFCP, including by expanding the types of errors eligible for correction under the VFCP, streamlining (or eliminating) the VFCP correction process for certain errors, and amending the related prohibited transaction class exemption. One significant aspect of the proposed amendments is the expansion of errors eligible for self-correction, rather than correction through an existing VFCP method.
Prohibited Transactions
Also pending on the agenda are final changes to the DOL’s prohibited transaction exemption procedures. The proposal was published in March 2022, followed by a public hearing in September 2022. Additionally, while not appearing on the agenda because it is not a regulation, the DOL is working on finalizing changes it proposed in October 2022 to Prohibited Transaction Class Exemption 84-14, more commonly known as the QPAM (qualified professional asset manager) exemption. The DOL held a public hearing on the proposed QPAM exemption changes in November 2022 and recently reopened the comment period to accept additional comments until April 6, 2023.
Participant Disclosures
Appearing on the agenda for the first time is a project focused on improving the effectiveness of ERISA retirement plan disclosures by exploring alternatives for refining the readability and effectiveness of disclosures required under ERISA. Another disclosure-related item is finalizing the rules for lifetime income illustrations on pension benefit statements, which went into effect at the end of 2021.
If you have any questions or would like more information on the issues discussed in this blog post or other items on the DOL’s regulatory agenda, please contact the authors or any of your regular Morgan Lewis contacts.