Enforcement actions at the Department of Labor have remained steady compared to the previous administration in the nearly two years since President Donald Trump took office, while calls for additional guidance persist, according to attorneys who specialize in ERISA-related matters.
Although anecdotal — the DOL will release Employee Benefits Security Administration enforcement statistics for fiscal year 2018 early next year — Nancy Ross, partner and co-chairwoman of the ERISA litigation practice at Mayer Brown LLP, Chicago, said enforcement actions such as opening investigations and filing lawsuits against company retirement plans have not decreased as much as many expected in the past two years.
"I was hoping we would see a difference in how aggressive the department was," Ms. Ross said. "I have not recognized as much of a decrease in EBSA's involvement in monitoring benefit plan administration or operation as I would have hoped with this new administration with the view of 'less government is better.'"
Thomas E. Clark Jr., a St. Louis-based partner with The Wagner Law Group, said he was expecting the DOL under Secretary Alexander Acosta to adopt a similar approach to that of former Secretary Elaine Chao during President George W. Bush's administration. Mr. Clark described Ms. Chao's approach as a "greater push by the DOL to fix problems without playing 'gotcha'" with plan sponsors.
"I think it would be fair to say that with a Republican administration the expectation is you go back to more of an Elaine Chao DOL than the Tom Perez DOL," Mr. Clark said, referring to the former Labor secretary under President Barack Obama. "I think under Secretary Acosta you generally see the (Perez) programs have continued."
Under the current administration, the DOL has filed two advisory opinions, including one last week. In the proceeding eight years under Mr. Obama, 28 advisory opinions were issued — but just four in the first two years — while under President George W. Bush, the DOL filed 102 advisory opinions in eight years, including 23 the first two years.
Michael P. Kreps, principal at Groom Law Group, said the DOL under both the Obama and Trump administrations has focused more on broad regulations, like the fiduciary rule in the last administration and expanding multiple employer plans in this administration, than subregulatory guidance, like advisory opinions.
"Historically, the retirement industry has relied on subregulatory guidance to help get a sense of how the department views various issues," Mr. Kreps said of the decline in advisory opinions. "It's seen by many as a way for the department to do softer touch regulation; by putting opinions out there they can facilitate practices they like and put the kibosh on practices they don't like or are concerned about without having to necessarily rely on a back-end enforcement strategy."
Mr. Kreps said it's likely the DOL will issue more advisory opinions in the next two years than the past two years because it will have had "more time to think about the issues and reach conclusions." Industry stakeholders said there could be further clarity on issues related to employee stock ownership plans and missing participants.
Calls for guidance
Preston Rutledge, assistant secretary of labor for the EBSA, started his job in January 2018, a year after Mr. Trump took office and nearly nine months after Mr. Acosta was sworn in. The position was vacant for a year. Through June 2018, the main focus at DOL was the Obama-era fiduciary rule, said Will Hansen, senior vice president, retirement and compensation policy at the ERISA Industry Committee, Washington. The rule would have required brokers to act in the best interests of clients in retirement accounts. In June, the 5th U.S. Circuit Court of Appeals confirmed a March decision to strike down the rule after the Department of Justice, acting on behalf of the DOL, declined to appeal the decision.
Mr. Hansen said between nominating and confirming political appointees and waiting for a court decision on the fiduciary rule, it took awhile for the current DOL administration to get into gear on new initiatives.
All the while, the DOL kept its focus on similar issues from one administration to the next, according to Mr. Kreps.
"DOL operates as an institution and has statutory mandates regardless of who's in power," Mr. Kreps said. "Even if changes are made to enforcement priorities and policies, those can take time to be implemented and there's a level of decentralization in DOL enforcement because there are field offices, and field offices do different things. It's kind of inherent in the structure."
The DOL has continued its efforts in going after plan sponsors that are delinquent in making contributions to plans and sponsors that do not provide sufficient fee disclosures to participants and service providers, Mr. Kreps said. It has also pursued companies with ESOPs that it believes have not used a fair market valuation when purchasing stock on behalf of its employees.
While the DOL hasn't issued any amicus briefs in court contests over broad plan management, product choices, fees and other defined contribution plan practices, according to the DOL's website, it has done so with respect to ESOPs, Mr. Kreps noted, including one in July that called on a federal appeals court to uphold a nearly $30 million judgment issued against Wilmington Trust N.A. for purchasing company stock for the company retirement plan at a price above the fair market value.
Ms. Ross cited the July amicus brief after saying the DOL has taken some ESOP trustees "to the woodshed" over the past two years.
While there is a debate as to the proper way for ESOP trustees to calculate fair-market value, Mr. Kreps said it would be productive for the department to make its views on the subject known. "It's an area that's ripe for guidance," he said.
ERIC and other industry stakeholders have been clamoring for guidance on another issue: missing participants. Much like under the previous administration, DOL auditors have kept up the pressure on plan sponsors to try to find missing terminated, vested participants, Mr. Hansen said.
Plan sponsors are still unsure about what they're required to do in order to find those missing participants, he added. When the current administration took office, Mr. Hansen said he was hopeful the DOL would issue guidance on this subject, "but unfortunately that hasn't happened. So now we're two years in and we still have a lot of frustrating experiences for not only employers but participants who are receiving phone calls from auditors at the DOL and causing a lot of confusion in the area."
DOL officials have asked for feedback on this issue and Mr. Hansen said he's optimistic some "best practices" will be published in the not-too-distant future.