DOL's New Regulatory Focus on Retirement Plans and Compliance Support
During a recent virtual session hosted by the Securities Industry and Financial Markets Association, Keith Sonderling, Deputy Secretary of Labor, outlined upcoming regulatory priorities from the Department of Labor (DOL) to industry professionals. Sonderling highlighted an impending rule aimed at clarifying the incorporation of private investments within defined contribution (DC) plans. This regulatory initiative seeks to alleviate concerns of liability for plan sponsors by providing a safe harbor to encourage broader asset diversification in these retirement plans.
Exploring Alternative Investments in DC Plans
Sonderling referenced a previous executive order issued by former President Donald Trump. This directive advocated for the exploration of alternative investments, such as private equity and cryptocurrencies, in 401(k) plans. It enables the DOL to revisit and redefine the parameters set by the Employee Retirement Income Security Act (ERISA) regarding permissible investments, reflecting evolving industry standards.
Regulatory Review and Fiduciary Responsibilities
The executive order tasked regulators with reassessing current and earlier guidance about fiduciary responsibilities under ERISA when considering alternative assets for plan participants. This regulatory review is scheduled for completion by early February, offering a timeline for stakeholders to prepare for potential changes impacting risk management.
Streamlining DOL's Investigatory Processes
Sonderling's discussion reiterated ongoing efforts within the DOL to streamline investigatory processes, fulfilling prior commitments under Daniel Aronowitz, the head of the Employee Benefits Security Administration (EBSA). Under Aronowitz's leadership, the department is working towards reducing prolonged investigations. A recent advisory opinion confirmed that AllianceBernstein L.P.’s Lifetime Income Strategy complies as a qualified default investment option under ERISA standards, promoting operational efficiency.
Emphasizing Compliance Resources Over Litigation
The department aims to enhance its provision of compliance resources over litigation efforts. Sonderling emphasized the importance of supporting plan sponsors with detailed guidance to reduce the fear of potential legal repercussions. "The most important thing [the DOL] can do is lead with compliance assistance," he stated, underscoring the intention to empower industry stakeholders with tools to ensure regulatory compliance and participant protection.
DOL's Support for Employers in Legal Matters
Sonderling mentioned a recent amicus brief filed by the DOL in support of HP Inc., indicating a potential shift towards a more employer-supportive stance in legal matters. This approach may signal a broader use of amicus briefs to influence favorable outcomes for plan sponsors in court proceedings.
Overall, Sonderling's remarks suggest a strategic pivot by the DOL towards reducing litigation risks and fostering greater confidence within the retirement plan sector. The department’s initiatives aim to create a regulatory environment prioritizing compliance over punitive actions, thereby enhancing operational clarity and market stability.