DOL Remains Focused on Three Critical 401k Areas: Preston Rutledge

‘It demonstrates how high a priority it is for the administration’
Employee Benefits Security Administration (EBSA)
Image credit: © Filmfoto | Dreamstime.com

According to Preston Rutledge, the Department of Labor’s Employee Benefits Security Administration (EBSA) will continue to focus on three areas important to the administration despite several other regulatory issues that have surfaced recently.

Preston Rutledge

Rutledge, Founder and Principal of Rutledge Policy Group and the last person to officially hold the EBSA Assistant Secretary position, said all three relate to ESG and climate initiatives—or, more specifically, rules involving ESG, proxy voting, and climate-related financial risk.

“With all this stuff swirling around EBSA, it’s an extremely busy time for them,” Rutledge said. “I still feel like these are No.1, No.2, and No.3 on the list. Crypto has risen in priority dramatically in the last few weeks, but those three are important.”

He added that the agency has pushed hard to finish a review of the thousands of comments they’ve received on the first two prosed rules, “Financial Factors in Selecting Plan Investments” (ESG rule) and “Fiduciary Duties Regarding Proxy Voting and Shareholder Right.” They are now categorizing them into what he calls “buckets of general concern.”

“Although there might be 1,000 comments, there are not a thousand discrete issues,” Rutledge explained. “You can file most comments into three or four buckets—qualified default investment issues, tiebreaker issues, what to do and what not to do.”

While it might feel longer to many people, he emphasized that it’s only been since mid-December since they’ve received the comments, and although it’s a lot to work, “they should be getting pretty close.”

“I do think that they’ve got to finish that before they move on to some of the bigger things. That would be my suspicion of how it will roll out.”

Layered in last is a request for information (RFI) on whether they should collect, categorize, and possibly report data on climate-related financial risk.

“It demonstrates how high a priority it is for the administration,” Rutledge noted. “The RFI comments are due on May 16, so it’s still outstanding. That’s probably the precursor to another regulatory project down the road.”

If EBSA had its way, it might pursue other issues higher on the list, but the Department of Labor, as an agency, follows the administration’s priorities, which are now mostly related to climate change.

“The climate-related RFI is occurring while the same thing is happening at the SEC,” he concluded. “It’s interesting how EBSA and the SEC are sometimes connected at the hip. We saw that with Regulation Best Interest (Reg BI) at the SEC, which was followed by the fiduciary rulemaking at EBSA. We’re seeing that now with the climate-related financial risk, where the SEC has a very comprehensive proposal to have companies collect and report on their carbon footprint. It’s a government-wide effort by the administration.”

John Sullivan
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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.

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