House Spending Bill Would Block EBSA’s ESG Rule, but Senate’s Would Not

The Appropriations Committees for the House of Representatives and the Senate have advanced very different spending bills related to the Department of Labor.

The Senate version, which passed its committee 25-1 on Thursday, would provide $13.5 billion in discretionary funding to the DOL for fiscal year 2024. $249 million of the total is for the Employee Benefits Security Administration, an increase from the $191 million appropriated in 2023.

The House version appropriates $9.8 billion for the DOL, of which $153 million is for EBSA. The House version passed committee on July 14.

After this week, Congress is not scheduled to return to session until September 12. The bills must be harmonized by September 30, along with the rest of the federal budget, to avoid a shutdown, absent a continuing resolution.

The two bills do agree on funding for the Pension Benefit Guaranty Corporation. Both bills appropriate $513 million for the PBGC and provide for an additional $9.2 million in administrative funding for every 20,000 participants in excess of 100,000 in terminated plans. In both bills, this funding is provided through September 30, 2028.

The Senate anticipates that obligations related to the Special Financial Assistance program will cost the PBGC nearly $14 billion, but this funding is tied to the American Rescue Plan Act.

The Senate’s bill also requires “EBSA to create and widely disseminate educational materials focused on promoting best practices in employee ownership through the Employee Ownership Initiative authorized by Section 346 of the SECURE 2.0 Act of 2022.” This provision is absent in the House’s bill.

Section 346 of SECURE 2.0 requires the DOL to establish an Employee Ownership Initiative and authorized $50 million to promote employee ownership. 

The Senate Appropriations Committee previously approved $14 million for the creation of a retirement plan database, or “lost and found,” to be administered by the DOL. The House Appropriations Committee has yet to provide for this.

The House version also blocks the EBSA rule which permits environmental, social and governance considerations to be used in fiduciary decisions related to retirement plans and proxy voting. The Senate bill does not address that rule.

The ESG rule is currently being challenged by two lawsuits. The rule allows ESG funds to be used as a qualified default investment alternative and makes it easier for ESG funds to be placed in investment menus, but it does not change a fiduciary’s obligation to be loyal and prudent. The lawsuits assert that this rule violates the Employee Retirement Income Security Act, among other claims.