As expected—and as has routinely been done in recent memory along with a change in administrations—the incoming Biden administration moved to immediately pause all pending and recently issued regulatory projects, including new retirement guidance by the Labor Department.
In a Jan. 20 memo, White House Chief of Staff Ron Klain instructed the heads of executive departments and agencies to place a hold on all recently issued rules and regulations. Moreover, Klain notes that agency heads should refrain from issuing new rules until they are reviewed by a department or agency head that was appointed after President Biden took office.
With respect to rules that have been sent to the Office of the Federal Register but not published, the memo advises agency heads to immediately withdraw them pending review and approval. And with respect to rules that have been published in the Federal Register or that have been issued in any manner, but have not taken effect, Klain advises that department heads should consider postponing the rules’ effective dates for 60 days.
PTE for Investment Advice (a.k.a. the “fiduciary rule”)
Based on the guidance outlined in Klain’s memo, the newly finalized Prohibited Transaction Exemption will likely be delayed and possibly be subject to additional review. The PTE was published in the Federal Register Dec. 18, but is not scheduled to take effect until Feb. 16, 2021.
Interim Final Rule on Lifetime Income Disclosures
An Interim Final Rule on the SECURE Act’s lifetime income disclosures was published Sept. 18, 2020, in the Federal Register, but is not scheduled to take effect until Sept. 18, 2021. This also seems likely to come under review, particularly given that House Ways & Means Committee Chairman Richard Neal (D-MA) took issue with the assumption that those interim final rules put forth regarding projected future earnings.
Financial Factors in Selecting Plan Investments (sometimes referred to as the ESG rule)
As noted in an earlier fact sheet, the Department of Labor’s newly finalized rule on “Financial Factors in Selecting Plan Investments” has already been identified as a rule that President Biden wants reviewed in accordance with the Executive Order “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis.” This rule—which moved away from the proposed rule’s focus on environmental, social and governance (ESG) factors in investing—became effective Jan. 12, 2021, so it will likely have to be revisited through a formal notice and comment rulemaking process.
Proxy Voting Standard
The DOL’s final plan fiduciary proxy voting rule was published Dec. 16 in the Federal Register and became effective Jan. 15, 2021. While the DOL pulled back on some of the more controversial aspects of the original proposal, it seems possible that this rule could be reopened. In addition, Sen. Patty Murray (D-WA), who is poised to take over as chair of the Senate Health, Education, Labor and Pensions (HELP) Committee, took issue with the rule when it was first proposed.
Published but Not Yet Effective
For rules postponed in this manner, the memo advises that agency heads should consider opening a 30-day comment period to “allow interested parties to provide comments about issues of fact, law, and policy raised by those rules, and consider pending petitions for reconsideration involving such rules.”
Moreover, it notes that as appropriate and where necessary to continue to review these questions of fact, law and policy, agency heads should consider either further delaying, or publishing for notice and comment, proposed rules—further delaying such rules beyond the 60-day period.
Following the 60-day delay, the memo explains that no further action needs to be taken for those rules that raise no substantial issues. But for rules that raise substantial questions, the memo advises, agencies should “notify the OMB Director and take further appropriate action in consultation with the OMB Director.”
Additional Guidelines
Klain’s memo does make an exception for emergency situations or other urgent circumstances relating to health, safety, environmental, financial or national security matters, or otherwise. The memo asks that agency heads notify the OMB Director promptly of any rules they believe should be excluded from the directives because of these circumstances.
It also advises that rules subject to statutory or judicial deadlines are excluded from the requested freeze, but also asks that agency heads identify such exclusions to the OMB Director as soon as possible. The OMB Director will review any such notifications and determine whether such exclusion is appropriate under the circumstances.
Klain further clarifies that the guidance in the memo also applies to:
- any substantive action by an agency (normally published in the Federal Register) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking; and
- any agency statement of general applicability and future effect that sets forth a policy on a statutory, regulatory or technical issue or an interpretation of a statutory or regulatory issue.
The White House Chief of Staff also reserves the right to modify the directives laid out in the memo. “Should actions be identified that were undertaken before noon on January 20, 2021, to frustrate the purpose underlying this memorandum, I may modify or extend this memorandum, pursuant to the direction of the President, to request that agency heads consider taking steps to address those actions,” Klain states.
Klain’s regulatory review memo, as well as the directive to review the final rule on Financial Factors in Selecting Plan Investments, come as part of a series of 17 Executive Orders issued on President Biden’s first day in office. One of those orders directs the OMB director to develop recommendations to modernize regulatory review and reverses the Trump administration’s regulatory approval process.
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