The Senate parliamentarian ruled in February that a plan passed by House Democrats to include a gradual measure to raise the federal minimum wage to $15 as part of the $1.9 trillion coronavirus relief package did not meet the complicated rules governing budget bills in the Senate.
Another area where the DOL may spend time issuing guidance is on the SECURE Act’s annuity safe harbor, which created fairly wide-sweeping legal protection for fiduciaries who follow prescribed guidance when choosing an annuity provider and select in-plan annuity products for plans.
“This was a long-sought proposal. Now it’s law and allows a 401(k) plan including pooled employer plans to add an annuity option on their investment platform. And it will allow the fiduciary that follows the statutory requirements to not be quite so concerned with fiduciary liability many years from now if something untoward happens to the annuity provider like insolvency,” Rutledge said.
The statutory language granting the safe harbor “is very precise. And the DOL may feel that guidance is not necessarily required, but many stakeholders may ask for guidance. So, we may see some EBSA guidance on the annuity safe harbor,” he added.
Under the new annuity safe harbor, a fiduciary is deemed to have met their legal burden if they follow prescribed steps in screening insurers, reviewing insurers’ financial strength, fees and commissions and making determinations that an insurer can fulfill the financial obligations of the annuity contract and that the relative costs are reasonable. Fiduciaries are not required to pick the lowest cost provider.
Although the DOL provided guidance in 2008 on how plan sponsors can meet fiduciary obligations when selecting an annuity provider, many plan sponsors were concerned that the guidance was too vague to mitigate the fiduciary risk of making this selection. As a result, historically most plan sponsors have decided not to offer an annuity in their defined contribution plans.