Top Retirement Plan Legislative, Regulatory Issues for the New Administration

“Preston had the highest-ranking position in the first Trump Administration with respect to retirement policy,” American Retirement Association (ARA) CEO Brian Graff said of Former Assistant Secretary for Labor for the Employee Benefits Security Administration (EBSA) Preston Rutledge.

Rutledge joined Graff on Monday for the latter’s popular general session, From the Hill to the Summit, at the NAPA 401(k) Summit in Las Vegas, Nevada.  

Referring to Rutledge now as a lobbyist, the Assistant Secretary quickly corrected him, calling himself a “government affairs consultant” to laughter from the audience.

Graff asked Rutledge what his potential successor, Daniel Aronowitz, should expect from the confirmation process and what will happen when he takes office.

“Well, the first process will be sitting down with the Deputy Secretary of Labor and the Secretary of Labor and discussing the administration’s priorities,” Rutledge said. “You may see some executive orders that have been issued. There was an executive order issued before I arrived. And anytime you see something in an executive order directing your agency to do something, that becomes priority No. 1. So, there were some priorities in place before I got there. I’m sure there will be before Dan gets there.”

Graff asked about the level of White House involvement and if the president was sitting around thinking about ERISA.

“When it came to 401(k)s? Yes, actually, he cares about 401(k)s,” he answered. “But it’s the folks that work in the White House, particularly the National Economic Council, run by Kevin Hassett. They have someone devoted to the Department of Labor and maybe even to EBSA. Those folks are supposed to keep the trains moving and communicate their priorities. It won’t be that the White House will direct everything that the DOL does, but they will direct some things. Dan will probably have a few weeks to get on his feet, kind of get a sense of how the place works, and then he’ll move forward from there.”

Graff asked if the fiduciary rule would be a priority for the department.

“First, it will be a priority,” Rutledge said. “The question will be how do they deal with it? And, since the litigation is ongoing, there’s a preliminary injunction in place, and the challenge to the preliminary injunction by the previous administration is sitting at the Fifth Circuit, the same circuit that overruled the Obama-era fiduciary rule. It’s a very favorable situation for the administration to let that run its course and see if the Fifth Circuit will vacate the rule again.”

Graff argued that one of the biggest concerns for the retirement plan industry and plan sponsors is the accelerated proliferation of ERISA plan lawsuits. He cited data showing that a third of large, and half of mega plans, have faced a lawsuit. 

“There are numerous examples where these lawsuits are cut-and-paste filings and sometimes they don’t even correct the name of the plaintiff from the previous plan suit,” he said. “Through Plan Sponsor Council of America, our sister organization, we’ve conducted several focus groups of mega-plan sponsors, and they repeatedly say their No. 1 job as a plan sponsor is not to get sued.”

He said the fear has a chilling effect on innovation in retirement plans, such as lifetime income options. He said, “The reality is that it’s very much having, in our view, a negative effect on our industry and, most importantly, to the detriment of plan innovation and participants.”

Graff mentioned a DOL proposal to clarify the definition of plan assets, including settlements and awards.

“The reason that’s important is because if something is a plan asset, the lawyers would only be able to get reasonable hourly rates,” he said. “There’s a lot of logic to that because presumably they’re arguing that plan assets were used improperly. If they’re just basically copying and pasting these filings, presumably, they’re not doing a lot of hours of work. So, they really wouldn’t get very much, which would mean the venture capitalist guys funding these suits don’t get too much. It kind of changes the economics of this litigation business.”