Trump's Labor secretary pick presents 'mixed bag,' retirement experts say

Rep. Lori Chavez-DeRemer, R-Ore., President-elect Donald Trump’s pick to run the Department of Labor, has supported some positions in Congress outside the Republican mainstream, making it difficult to predict what her tenure as labor secretary could mean for retirement plan regulation and oversight, sources said.

Chavez-DeRemer, a one-term congresswoman who lost her bid for reelection this year, was one of three Republicans to co-sponsor the Protecting the Right to Organize Act, or Pro Act, a bill aimed at making labor organizing easier. Despite her support, the bill didn’t advance in the Republican-controlled House.

Also of note, Chavez-DeRemer in July split with most Republicans on the House Education and the Workforce Committee when she voted against a resolution to overturn the Labor Department’s fiduciary investment advice rule.

“She was a surprising pick,” said Kevin Walsh, a principal at Groom Law Group, noting these positions.

“To some extent, she seems like a substantially more pro-union pick than one would expect from a Republican administration, but the Trump administration has signaled some willingness to buck what would have been expected from Republican administrations more historically,” Walsh added.

But what her confirmation as labor secretary would mean for fiduciary investment advice regulation remains to be seen, according to Andrew Oringer, who heads the Wagner Law Group's New York office and serves as its general counsel.

Under the Biden administration, the Labor Department in April finalized the Retirement Security Rule, which, among other things, changed the five-part test so that one-time advice, such as rollovers to IRAs or annuity purchases, must be in an investor’s best interest.

Insurance and annuity groups have challenged the rule in two separate lawsuits. Two District Court judges in July each favored the plaintiffs’ arguments and stopped implementation of the rule, which was slated to take effect in September.

The cases are now before the 5th U.S. Circuit Court of Appeals in New Orleans. That’s the same court that in 2018 struck down an Obama-era rule that broadened the definition of a person or entity taking on fiduciary responsibilities and replaced the five-part test that determines when someone is an investment advice fiduciary under ERISA.

After the 5th Circuit’s 2018 ruling, the Trump administration elected not to appeal the decision and the fiduciary rule died.

But late in the Trump administration, the department in 2020 issued PTE 2020-02, an exemption that permits investment advice fiduciaries to receive compensation for more types of guidance that are otherwise prohibited under ERISA, such as rollover recommendations, so long as they comply with the exemption's conditions, which include care and loyalty obligations and conflict-of-interest mitigation.

“With this particular secretary, predicting what’s going to happen is hard,” Oringer said. “The last time that the amended fiduciary rule was rejected by the courts, the Trump administration did not appeal to the (U.S.) Supreme Court, but then they went and reinterpreted the rule in a way that was averse to financial institutions,” he said, noting PTE 2020-02.

“This particular pick as secretary makes any effort to handicap even more difficult,” Oringer added. “For anybody who thinks that they know how this Department of Labor is going to view the Retirement Security Rule, boy, good luck with that. It’s just a real mixed bag.”

But on a separate vote against a different Biden administration DOL rule, Chavez-DeRemer voted with Republicans. In February 2023, she supported a resolution to overturn a rule that permits retirement plan fiduciaries to consider climate change and other environmental, social and governance factors when selecting investments and exercising shareholder rights.

President Biden vetoed the resolution in March.

The Biden-era rule was in response to two rules promulgated late in the Trump administration that said retirement plan fiduciaries could not invest in "non-pecuniary" vehicles that sacrifice investment returns or take on additional risk and outlined a process a fiduciary must undertake when making decisions on casting a proxy vote.

Walsh said he expects the DOL under a second Trump administration to move quickly on promulgating a new ESG rule.

“In light of her vote on the ESG resolution, and in the light of the idea that I think every change of control of the White House has led to changes in the ESG rule or sub-regulatory guidance, the next Trump administration is very likely to redo the ESG rule,” Walsh said. “To me, that’s the low-hanging fruit.”