Borzi: DOL Seeks Easier State Embrace of ERISA

By John Iekel • October 20, 2015 • 0 Comments

The Department of Labor is seeking to make it easier for states to fit within the framework of ERISA in their efforts to establish state-run retirement plans, says Phyllis C. Borzi, head of the Employee Benefits Security Administration.

Borzi spoke at an Oct. 20 session of the 2015 ASPPA Annual Conference that addressed recent and impending government activity. Joining Borzi were Senior Advisor and Deputy Assistant Secretary of the Treasury Mark Iwry, newly appointed Pension and Benefit Guaranty Corporation Director Tom Reeder and Commissioner of the IRS Tax Exempt and Government Entities Division Sunita Lough. (Read our post about Lough's comments on the discontinuance of the IRS policy of proving answers to questions via email here.) 

In embracing ERISA in the effort, Borzi said, a state “in essence becomes a service provider to employers that want to participate in that plan.” 

“The states are moving ahead in a variety of ways,” Borzi said. Many, she noted, are doing so in a way that avoids ERISA by crafting laws that are similar to the federal "MyRA" auto-IRA approach; others follow a different tack premised on the notion that if they do avoid ERISA, still they eventually will have to incorporate consumer protections.

“States want greater certainty into what they can do,” Borzi said. To that end, she noted that the DOL has proposed a rule that will assist the states in designing plans and would create a new payroll deduction safe harbor, and that the rule is at the Office of Management and Budget now for its review.  In addition, the DOL is preparing regulatory guidance. The DOL will be issuing guidance on state-run retirement plans “no later than year’s end,” she noted.

These efforts fit within the broader theme Borzi outlined. “Most particularly we’re all focused on two big challenges: expanding coverage and improving adequacy,” she remarked. 

Status of Fiduciary Rule

Regarding the DOL’s proposed fiduciary rule, Borzi said the agency is “trying desperately” to get through the comments it has received. “We actually have been working on this for five years,” she commented, adding that she was not sure how the DOL could have provided more opportunity for comment on the proposal, nor how much longer the process could be prolonged. 

2016 Form 5500 Filing Deadline

Borzi was affirmative when asked by ASPPA Executive Director Brian Graff whether the DOL would be open to moving the maximum available deadline for calendar year plans to file the Form 5500 back to Oct. 15 from the Nov. 15, 2016 deadline set by the Surface Transportation and Veterans Health Care Choice Act. She indicated that the DOL was taken by surprise to an extent by the change to a Nov. 15 deadline, remarking “we were unaware of this until after it passed. It moves in the wrong direction, we think.” 

PBGC Update

Reeder, the newly minted PBGC Director, reiterated commitment to his agency’s mission. “We’ve come to the point where we have to do what we can” with plans that lack sufficient funds to cover benefits, he said, adding “at a minimum, we must secure the promises we’ve already made” to retirees.

Multiemployer Pension Plans

Retirement professionals are not alone in contending with recent changes concerning multi-employer pension plans — they also are one of the areas on which Treasury is spending a significant amount of time and energy, Iwry told attendees. “The exceptions to ERISA are something that imposes challenges on everyone involved,” he said.

ASPPA's Contributions Lauded

Iwry thanked ASPPA for its work in expanding coverage. He said that in part due to ASPPA, Treasury has been encouraged to come out with guidance to make it easier to adopt auto enrollment and auto escalation. He added that Treasury is interested in input regarding whether its actions are helping to encourage the adoption of auto features. Borzi herself gave such features a vote of confidence, remarking that automatic features “do assist us greatly” in increasing retirement plan coverage. 

Iwry also gave a “shout out to [American Retirement Association General Counsel] Craig Hoffman regarding his comments on the mid-year amendments to safe harbor 401(k) plans. And he indicated that guidance is on the way, telling attendees, “The good news is, we’ve been working hard, we’re well along.” Treasury is not ready to release guidance that would provide relief yet, but should be able to “in the near future.” 

Reeder and Lough also thanked ASPPA; Reeder for ASPPA’s work concerning reportable events regulations and Lough on ASPPA’s comments regarding the remedial amendment period. “I really want to compliment ASPPA,” she said, adding that those who drafted the comments “did a great job.” 

For more of our coverage of the 2015 ASPPA Annual Conference, visit the Conferences "station" on ASPPA Net