House Committee Advances 3 Retirement Bills

The House Committee on Education and the Workforce advanced three retirement-related bills during a Wednesday markup.

Two of the bills, introduced in April, target the Department of Labor’s audit process, which sparked a heated debate during a July 22 committee hearing. The third bill concerns employee stock ownership plan valuations and has received bipartisan support in both houses of Congress.

Each bill will now advance to the full House of Representatives.

The Retire through Ownership Act, introduced by Representative Rick Allen, R-Georgia, passed unanimously, similar to the Senate version of the bill that cleared the Senate Committee on Health, Education, Labor and Pensions on July 30, as ESOPs continue to garner bipartisan support.

The legislation addresses the question of valuation risk associated with ESOPs by aligning their valuation with IRS standards, offering a “safe harbor” for trustees who rely on certified appraisers using these guidelines.

According to Allison Wilkerson, head of McDermott Will & Shulte’s ESOP practice group, the legislation would go a long way in reducing the valuation and fiduciary risk for ESOP trustees who currently rely on case law more than anything else for guidance.

“The math isn’t what’s important,” she says. “It is, ‘Did you undertake the right process?’ And unfortunately, every time we learn [regulations] via litigation and fiduciary process agreements, somebody moves the line.”

Similarly, during the hearing, members of Congress lauded the bill’s effort to provide regulatory guidance they said is much needed.

Meanwhile, the committee passed the two other bills along party lines. The Employee Benefits Security Administration Investigations Transparency Act, introduced by Representative Lisa McClain, R-Michigan, passed by a 19-to-16 vote, with two Republican members of the committee absent during the vote.

The legislation would force the DOL’s Employee Benefits Security Administration to report to Congress information about its investigations, such as when an investigation began, what documents were requested from the target of the audit, when an investigation was concluded or likely to be concluded, and explanations for any investigation that exceeded three years in duration.

Democrats on the committee, who opposed the bill, stressed that investigations take time, and EBSA has limited resources. Last week, the House Committee on Appropriations advanced, in a party-line vote, a proposed $10 million cut to EBSA’s budget that includes shrinking its headcount. 

“What does not help is saddling EBSA with an additional administrative burden,” said Representative Robert Scott, D-Virgina, the top-ranking Democrat on the committee, during the hearing, noting that the bill does not authorize additional funds for EBSA to adhere to the bill’s orders.

The final measure, the Balance the Scales Act, introduced by Representative Michael Rulli, R-Ohio, also passed in a party line vote.

 It would require EBSA to submit an annual report to Congress on any “adverse interest agreements” into which the agency entered.

An adverse interest typically refers to situations in which personal interests conflict with an organization’s duty and lead to improper decisionmaking, of which the DOL has been accused by House Republicans.

 In January, the House Committee on Education and the Workforce issued a request to the DOL’s Office of Inspector General to investigate an allegation that DOL personnel shared confidential retirement plan information with a plaintiffs’ attorney.

During Wednesday’s hearing, Rulli described the bill as “basic good government.”

In opposition to the bill, Scott said that common interest agreements are scarcely used.

“Quite simply, H.R. 2958 is a bonanza for the defense bar and stacks the deck against workers who have been harmed,” Scott said.