DOL, IRS Announce Spring Regulatory Agendas

The Internal Revenue Service and Department of Labor published on Friday their regulatory agendas for spring 2024. The agendas describe the short-term objectives for the regulators and contained items related to the fiduciary adviser definition proposal, SECURE 2.0, health plans, fiduciary corrections and employee ownership.

Fiduciary Corrections

As part of the announcement, the DOL announced it would publish a final rule on fiduciary corrections this month to close the process it began it November 2022.

The DOL initially proposed to amend the Voluntary Fiduciary Correction Program to permit fiduciaries to self-correct without pre-approval errors related to not vesting employee contributions or processing participant loan repayments. The errors must be no older than 180 days and related to amounts no greater than $1,000 in total.

If finalized, this would enable self-correction of a majority of the errors made by plan fiduciaries.

Fiduciary Adviser Proposal

The Conflict of Interest in Investment Advice proposal, sometimes called the retirement security proposal, was listed in the DOL’s agenda. However, the agenda did not outline a timetable for a final rule or even next steps. A public hearing on the proposal is scheduled for December 12, and the comment period closes on January 2, 2024.

SECURE 2.0

As it relates to the SECURE 2.0 Act of 2022, the DOL’s agenda contains updates on employee ownership and automatic portability.

Section 346 of SECURE 2.0 requires the DOL to “issue formal guidance for acceptable standards and procedures to establish good faith fair market value for shares of a business to be acquired by an employee stock ownership plan.”

The regulatory agenda shows that the DOL intends to propose a rule in March, though agendas of this kind are not legally binding and can be aspirational in nature. The issue of regulatory clarity on properly valuing private equity is a source of much litigation and is a major deterrent to the creation of ESOPs.

For automatic portability, Section 120 of SECURE 2.0 created a “statutory exemption for the receipt of fees and compensation by the automatic portability provider for services provided in connection with an automatic portability transaction.” The agenda announced that the DOL intends to begin hosting stakeholder meetings in June 2024.

Health Plans

The IRS announced it would finalize a new rule related to the Mental Health Parity and Addiction Equity Act in June 2024. The IRS initially proposed a new rule under MHPAEA in August. The proposal seeks to limit the ability of plan sponsors to use non-quantitative treatment limitation to restrict access to mental health treatment.

The DOL also announced it will finalize a rule that seeks to reconcile access to contraceptives with religious objections thereto by August 2024. The proposal was published in February.