What Might Top EBSA’s Priority List Under Aronowitz?

The newly confirmed head of the Employee Benefits Security Administration, Daniel Aronowitz, will have a busy schedule in his new role. The natural next question: What will he prioritize?

The new assistant secretary of labor in charge of EBSA, which is responsible for enforcement of the Employee Retirement Income Security Act, said during his confirmation hearings in June that he would streamline retirement plan oversight by reducing litigation and would end the “war” on employee stock ownership plans.

In the case of ESOPs, Aronowitz has received some help from Congress, which has advanced ESOP legislation with bipartisan support.

However, President Donald Trump’s August 7 executive order, which directs the Department of Labor and other regulatory bodies to reexamine guidance on alternative investments in defined contribution plans, might have leapfrogged to the top of Aronowitz’s priority list.

The executive order gave the DOL, of which EBSA is a subdivision, six months to provide guidance, leaving the new agency head little turnaround time. The agency must also comply with directives from Congress regarding the SECURE 2.0 Act of 2022.

“The DOL has a little over four months to respond within the 180[-day deadline] in the directive. So expect something on alternative assets and particularly on private funds,” says Frederick Reish, a partner in Faegre Drinker’s benefits and executive compensation practice group. “The SECURE 2.0 directives from Congress and their deadlines will also be high priorities. Federal agencies are very responsive to directives from the White House and responsive to directives from Congress.”

One way EBSA can respond to the executive order is by issuing a tip sheet on what fiduciaries should consider when incorporating alternatives into their investment lineup, such as through a target-date fund, says Kevin Walsh, a principal in Groom Law Group who advises clients on fiduciary matters.

Aronowitz is also likely to focus creating a new “ESG rule,” as past administrations have engaged in a back-and-forth regarding the role of environmental, social and governance factors in retirement plans covered by ERISA, according to legal experts.

Similarly, EBSA will likely abandon the fiduciary rule established under former President Joe Biden. Instead of issuing a new regulation, however, the agency may revert to the original 1970s regulation, with its five-part test for fiduciary status for non-discretionary recommendations, Reish says.

Given that Aronowitz’s EBSA will operate with a slimmer budget, it may be beneficial for the agency to avoid rewriting large regulations altogether and instead focus on issuing amicus briefs, according to Walsh. Although amicus briefs have less legal authority, they can significantly impact cases while using fewer resources and are less likely to be challenged in court, as demonstrated by the recent fiduciary rules.

“The reduced staffing does put constraints in place,” Walsh says. “But if they focus on narrow pieces of guidance, instead of rewriting the whole world through a single rule, they can still get a lot done.”