By Randy Myers
- Carol V. Calhoun, Counsel, Venable, LLP
- Gene Paranczak, ERISA Attorney and Senior Pension Consultant, Strategic Retirement Consulting, The Vanguard Group
- Michael Richman, Partner, Morgan, Lewis & Bockius LLP
Moderator: Susan Graef, Principal, The Vanguard Group
During the first few months of this year, debate over the future of the Affordable Care Act dominated discussions about how employee benefits would be impacted under the Trump administration. But the outlook for employee benefits is actually uncertain on a broad front, industry experts said during a panel discussion at the 2017 SVIA Spring Seminar. They zeroed in on five key issues:
The Department of Labor’s new fiduciary rule. Following Michael Richman’s update, Carol Calhoun said the administration might find it hard to back out of the new rule, in part because it had been a bipartisan initiative for many years. In the meantime, she and other panelists said, there are a number of best practices plan sponsors
can follow to manage their risk as fiduciaries, regardless of what happens with the new fiduciary rule. Among their suggestions:
- Make clear exactly who sits on the plan committee by designating them by position, such as chief financial officer or human resources director, rather than by name.
- Make sure committee members are qualified for the role, perhaps by providing them with appropriate training.
- Engage in ongoing monitoring of plan advisors and vendors, and also of the committee itself, perhaps by the company’s board of directors.
- Make sure plan advisors present ample evidence for their recommendations.
- Document factors considered in making plan decisions. Courts are unlikely to second-guess such decisions even if their results prove unfavorable.
- Adhere to the plan’s investment policy statement, if one exists.
- Remember that committee members have final responsibility for their plan and its investment decisions, which includes ongoing monitoring of investment decisions. As part of that effort, said Gene Paranczak, committees should know whether their plan has low-cost investment options, and, if not, why it doesn’t. “Don’t rest on your laurels,” he said. “You should always be asking service providers if there are lower-cost options available. The bigger the client you are, the more leverage you should have in the marketplace.”
Health savings accounts (HSAs). HSAs are tax-advantaged savings vehicles available to individuals covered by high-deductible health insurance plans. President Trump and his Republican colleagues have indicated they would like to see HSAs get greater use. To that end, House Speaker Paul Ryan has endorsed increasing the contribution limits for health savings accounts to the maximum out-of-pocket limits for high-deductible health plans. This year, those maximums are $6,550 for individuals and $13,100 for families. Raising contribution levels for HSAs, noted Carol Calhoun, would further encourage their use as retirement savings vehicles.
Socially responsible investments. In 2008, the DOL issued guidance that tended to discourage plan fiduciaries from considering Economically Targeted Investments when making investment decisions. In 2015, the DOL published an interpretive bulletin that clarified that plans could consider an investment’s benefits other than its direct economic return as long as the investment was “economically equivalent, with respect to return and risk” to investments without those collateral benefits. “This has been a very partisan issue,” Calhoun said. “At this point, having a Republican administration, are we going to go back to the theory that retirement plans can’t target investments based on anything other than economics? We would expect that sooner or later this will come up.”
State-sponsored retirement accounts. Many states have been working to create state-administered retirement plans for private-sector employees who don’t have access to a plan where they work. In some cases, the plans would function much like individual retirement accounts, with employers facilitating them through automatic enrollment of their employees. In other instances, they could be set up as multiple employer plans subject to ERISA. Last August, the Department of Labor issued a final rule aimed at allowing states to launch plans using the IRA model without having their plans subject to ERISA, which typically preempts state law. “We’re looking at more hostility to that in the federal government. It’s not clear how far states can go under existing law, but it does not look like there’s going to be any expansion of existing law.” “The momentum seems to be gone, at least on the IRA side,” added Michael Richman, partner with the law firm of Morgan, Lewis & Bockius LLP.
Update: In May, the rule relating to savings arrangements established by states was nullified.
Legal protections for LGBT employees. Calhoun said there was speculation with Trump’s ascension to the White House that he might rescind previous executive orders providing protections for LGBT employees. “Trump has in fact reiterated that there will be such protections,” Calhoun said. On the other hand, she noted, Trump also eliminated a previous executive order requiring contractors to prove they had complied with the first order. “The question,” she added, “becomes to what extent the (Trump) administration is going to back off from this—and whether there have been enough court cases so that lawsuits are likely to be successful.”