DOL

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.

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.

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.

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.

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.

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.

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

The Department of Labor (DOL) has released a proposal that would supersede the Department’s existing procedure governing applications for exemptions from the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. The Secretary of Labor is authorized to grant such exemptions and provide procedures for relief. Highlights of the proposal suggest substantially stricter standards and additional criteria for obtaining prohibited transaction relief, if implemented.

The DOL emphasizes that it will apply a high level of scrutiny to any retroactive exemption—including ensuring that no participants were harmed—and suggests contacting the agency before engaging in the transaction. Any information provided to the Office of Exemption Determinations, including during the pre-submission process, becomes part of an administrative record that is open for public inspection.

The DOL states that a previously issued exemption is not determinative of whether a future exemption would be approved under the same fact pattern. The DOL also proposes additional requirements in the application for exemption, several of which are highlighted below.

• The reason(s) for engaging in the exemption transaction
• Any material benefit that a party involved in the exemption transaction may receive because of the transaction
• The costs and benefits of the exemption transaction to the affected plan(s), participants, and beneficiaries—including quantification of those costs and benefits, if possible
• A detailed statement that describes possible alternatives to the exemption transaction and why the applicant did not pursue those alternatives
• A description of each conflict of interest or potential instance of self-dealing that would be permitted if the exemption is granted
• A statement that the transaction will be in the best interest of the plan and its participants and beneficiaries
• A statement that all compensation received, directly or indirectly, by a party involved in the exemption transaction will not exceed reasonable compensation within the meaning of ERISA and the Internal Revenue Code
• All statements made to the DOL, the plan, or, if applicable, the qualified independent fiduciary or qualified independent appraiser cannot be materially misleading at the time the statements are made
• A statement whether any prior transactions have occurred between the plan or plan sponsor and a party involved in the exemption transaction

The proposal modifies the definition of a qualified independent appraiser. It also addresses contractual obligations, prohibits indemnifications, and requires detailed information regarding relationships with any party or its affiliates (including past engagements) in an effort to determine independence. Similarly, the proposal expands requirements of qualified independent fiduciaries by prohibiting indemnifications, requiring fiduciary liability insurance sufficient to cover damages resulting by a breach of the independent fiduciary, and certifying that the exemption transaction complies with impartial conduct standards and the independent fiduciary has no conflicts of interest that could affect their judgement.

Under the proposal, applicants would have a duty to promptly notify the DOL of any material changes to representations made during the application process or after approval of the exemption, including disclosing whether a participating party in the exemption is the subject of an investigation or enforcement action. The changes would apply 90 days following receipt of a final rule in the Federal Register. Comments on the proposed rule must be submitted to the DOL by April 14, 2022.

Final regulations entitled, Implement SECURE Act and Related Revisions to Employee Benefit Plan Annual Reporting on the Form 5500, issued by the Department of Labor’s Employee Benefits Security Administration (EBSA), have been received by the federal Office of Management and Budget (OMB). The OMB’s Office of Information and Regulatory Affairs (OIRA) provides final review of regulatory guidance before its official release.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act included a provision that would allow employers sponsoring defined contribution plans that have the same trustee, administrator, fiduciaries, plan year, and investment options, to file one common Form 5500 beginning in 2022. Proposed guidance was issued last fall under a larger guidance package, with details shared in a Washington Pulse.

The Department of Labor’s (DOL’s) Wage and Hour Division has released a proposed rule Updating the Davis-Bacon and Related Acts Regulations. The DOL indicates that the proposal is the most comprehensive review of the Davis-Bacon Act regulations in 40 years.

The Davis-Bacon Act 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.

All comments must be received within 60 days of the rule being posted in the Federal Register. While the Wage and Hour Division solicits comments from across the construction industry, it encourages all stakeholders to participate in the process.