Experts suggest the openness of the DOL on these questions, along with the size of its budget request are favorable signs for plan sponsors going forward. This additional guidance in the face of uncertainty requested relatively shortly after the SECURE Act 2.0’s passage is a strong indication that the Department is working to ease the burden on plan administrators.
The announcement of a request for information from the Department of Labor’s Employee Benefits Security Administration concerning certain aspects of the SECURE 2.0 has clearly caught everyone’s attention. But, as an update to our June 2023 article on auto-enrolling employees in emergency savings accounts, we thought it might be worthwhile to highlight that the DOL is specifically requesting comment on this topic and detail the two questions on which the DOL seeks comment.
By way of refresher, in our article Auto-Enrolling Beyond 401(k)s and Regulatory Rules we said:
While the benefits are obvious, the regulations around auto-enrolling employees in savings accounts to help prevent crises, like Health Savings Accounts (HSA) or emergency accounts, are not as straightforward. When it comes to HSAs, healthcare eligibility requirements limit auto-enrollment. However, sponsors may want to contact their healthcare benefits providers because “[s]ome HSA providers benefit from state law that provides that an HSA is automatically established on the first day of coverage under an HSA-qualified healthcare plan as long as the HSA is opened before the federal income tax filing deadline for that year.” When it comes to auto-enrolling in savings accounts, sponsors may be concerned with other regulations, specifically, those involving testing. [1]
Just a handful of weeks later, the DOL made a public notice that it is seeking public comment on several topics, noting that several sections of the new law create or change existing reporting and other requirements. Comments are due to the department on or before October 10, 2023. Other sources have made clear that the DOL is taking a lot of care in how it implements the changes to regulations under the SECURE 2.0 Act. “Though met with little fanfare, the DOL is seeking close to $5 Million dollars and twelve full-time employees to begin the implementation of the SECURE 2.0 Act of 2022….”[2]
While our concern with auto-enrolling employees in emergency savings accounts discussed predominantly the impact that such increased participation would have on anti-discrimination testing, the DOL’s request for public comment appears at first glance to be focused more on reporting. As the DOL stated in its notice: “Section 127 of SECURE 2.0 amended ERISA section 3 to add a new definition, at section 3(45), for a “pension-linked emergency savings account” (PLESA). A PLESA is a short-term savings account established and maintained as part of an individual account plan…. Section 127 of SECURE 2.0 also amended section 110 of ERISA to grant the Department authority to prescribe an alternative method for satisfying any reporting and disclosure requirement under ERISA with respect to PLESAs.”[3] The DOL then solicited comments on two specific questions:
· What guidance, if any, do plan administrators need to effectively implement the requirements of section 127 of SECURE 2.0 and new part 8 of ERISA?
· Would administrators of plans that include PLESAs benefit from a model notice or model language for inclusion in the required notice under section 801 of ERISA?
Experts suggest the openness of the DOL on these questions, along with the size of its budget request are favorable signs for plan sponsors going forward. This additional guidance in the face of uncertainty requested relatively shortly after the SECURE Act 2.0’s passage is a strong indication that the Department is working to ease the burden on plan administrators.[4] It’s possible that this action by the DOL was prompted by a letter from the Chamber of Commerce asking that the DOL enter the fray.
The Chamber of Commerce’s May 2023 letter to the DOL urged quick action: “[a]lthough it might seem that items that are not effective until 2024 may not need immediate guidance, updating systems for these changes will take time….”[5]Specifically, the Chamber’s letter echoed our noted concern: “[b]oth the ERISA and Code provisions specifically allow the Secretary to provide for reasonable restrictions. Plan sponsors will be reluctant to set up accounts until Treasury and DOL determine what, if any, restrictions will apply.” The Chamber asked that the DOL seek to prevent unnecessary reporting and disclosure as to these accounts.
[1] https://www.bcgbenefits.com/blog/auto-enrolling
[2] https://www.maynardnexsen.com/publication-dol-prioritizes-secure-act-2-0-in-2024-budget-proposal
[4] https://www.maynardnexsen.com/publication-dol-prioritizes-secure-act-2-0-in-2024-budget-proposal
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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