Since 2024 is an election year, it’s possible that a new administration could call for change in various leadership positions, resulting in a change in enforcement priorities again. Regardless of what generates the change in enforcement action, plan sponsors may want to confer with compliance counsel when assessing risks and strategies for their next fiscal year.
Given the potential changes in regulatory power that could flow from the Supreme Court’s decisions in the summer of 2024, plan sponsors may be wondering if there might be changes in how the DOL enforces its regulations. But that might not be the right tree to go barking up. Instead, a key to understanding changes in enforcement actions could lay with its leadership and its budget.
Already this year, we’ve noted that the SEC’s whistleblower program returned more than $1 billion to investors, with a modest increase in enforcement actions. We also wrote that the DOL had undertaken several enforcement actions on profit sharing plans.[1] Their enforcement wing, the Employee Benefits Security Administration (EBSA), reported a significant drop in total recoveries by amount in 2023 as compared to 2021 and a significant drop in overall cases.[2]
It’s possible to read this data to say that the EBSA has been focusing on the amount rather than volume of cases. In other words, EBSA is choosing to prosecute larger enforcement actions over more enforcement actions: going high instead of going wide. A change in how an agency prosecutes enforcement action sometimes happens when leadership changes. That could mean that when Lisa Gomez took over the top role at EBSA in October of 2022, the direction of the agency may have shifted slightly. Thus, the change in data on enforcement actions.
Much of the discussion in plan sponsor arenas concerning Gomez has focused on the Retirement Security Rule. The rule could have made participant education more difficult for plan sponsors in that it could have broadened the concept of fiduciary from direct intentional advice to include unintentional directive advice from participant educators. However, a court order in July of 2024 stayed the rule during the pendency of litigation.[3]
Yet, Gomez’s leadership of EBSA, in terms of enforcement action priorities, has been less often a topic of discussion. This is true even though in the summer of 2024 she specifically stated that her priorities might change without further budget help from Congress. “Although EBSA has been assigned important, challenging, and numerous additional responsibilities by Congress in recent years, its budget has not kept pace, steadily declining in real dollars as appropriations have largely stayed flat, and expenses have dramatically risen. Should this continue, EBSA will have to make hard choices about how it can best perform its duties and effectively achieve its mission going forward.”[4] The DOL’s budget is the subject of disagreement in Congress, with some efforts by lawmakers to directly defund the DOL as to the Retirement Security Rule.[5]
If not budget constraints, then an alternate explanation for the slight shift in enforcement priorities may be due to Gomez’s background representing MEPs and SEPs.[6] Gomez led employment law litigation for decades in the private sector. By way of comparison, her predecessor Preston Rutledge worked in various government capacities before leading the agency from January of 2018 to May of 2020, including as tax and benefits counsel for the majority staff of the Senate Finance Committee and as a tax law specialist and management official at the Internal Revenue Service.[7]
EBSA has a lot on its proverbial plate. It has a heavy lift on enforcing health benefits, including new mental health parity requirements, as well as a new initiative to encourage employee ownership of companies. Then there is the added work concerning the fiduciary rule and litigation concerning it. That could mean that when it comes to how the EBSA choses its priorities for enforcement actions against plan sponsors, it may choose to go high instead of wide for the foreseeable future.
Since 2024 is an election year, it’s possible that a new administration could call for change in various leadership positions, resulting in a change in enforcement priorities again. Regardless of what generates the change in enforcement action, plan sponsors may want to confer with compliance counsel when assessing risks and strategies for their next fiscal year.
[1] https://bcgbenefits.com/blog/enforcement-actions-and-litigation-sec
[2] https://www.bcgbenefits.com/blog/ebsa-enforcement-data
[3] “The Court STAYS, as of the date of this decision, the effective date of the Rule during the pendency of this suit and any appeal” Am. Council of Life Insurers v. United States Dep't of Labor, Civil Action 4:24-cv-00482-O, 17 (N.D. Tex. Jul. 26, 2024).
[4] https://edworkforce.house.gov/uploadedfiles/gomez_testimony.pdf
[5] https://www.planadviser.com/house-republican-appropriations-proposal-cut-ebsa-block-fiduciary-rule
[6] https://www.ahip.org/people/lisa-m-gomez
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.
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