By all accounts, the administration of Donald J. Trump is slashing regulations across government. However, there are some exceptions to the rule, and a less ambitious deregulatory regime seems likely under new leadership at the Department of Labor.
On Dec. 21, the U.S. Senate confirmed Preston Rutledge, a veteran Capitol Hill staffer and former tax law specialist at the Internal Revenue Service, as the new head of the Department of Labor's Employee Benefits Security Administration.
Mr. Rutledge will undoubtedly reshape EBSA's agenda based upon his own experience and beliefs about what should receive the focus of his organization's attention. While there is little doubt that Mr. Rutledge will be aligned to the administration's overall deregulatory agenda, his background suggests he may want to do more than just cut.
Indeed, new regulations may be in the offing under his leadership.
The Office of Management and Budget's regulatory agenda — the punch list of policy initiatives that all federal agencies must file twice a year with the OMB — provides a rough sense of what's on the docket.
Several of the items listed for EBSA are clearly deregulatory initiatives. The DOL's fiduciary rule is the most prominent example. It had already been adopted by the administration of President Barack Obama, and therefore dropped from EBSA's pre-election priority list. However, the Trump administration placed it back on the list for further review.
Mr. Rutledge has not commented publicly on the DOL's current fiduciary rule, other than to say the regulation should have had more input from the Treasury Department, which oversees IRAs but which by law must defer to the DOL in drafting prohibited transaction exemptions. Based upon comments made earlier by DOL Secretary Alexander Acosta, the parts of the fiduciary rule put in place last June are likely to be retained but most of the parts delayed until July 2019 will be radically scaled back or eliminated.
Interestingly, Mr. Rutledge's wife, a lobbyist, represented a trade association that was generally supportive of the fiduciary rule. Mr. Rutledge has said he will do whatever is necessary to avoid or properly manage conflicts and his wife has stated that she would not directly lobby EBSA.
In terms of new regulations, one of the more intriguing possibilities is that Mr. Rutledge might decide to do more to promote annuity options in 401(k) plans.
The Obama administration was considering several rules, now simmering on the back burner, to promote the use of annuities in 401(k)s. One rule, for example, would provide a safe harbor for plan sponsors offering an annuity option as a qualified default option in a 401(k) plan. A second would require a lifetime-income illustration that shows how a participant's account balance translates into prospective annuity payments.
Mr. Rutledge may be inclined to return to these initiatives. As senior staff counsel on the Senate Finance Committee, he was instrumental in helping craft legislation to promote the use of annuity options in retirement plans. The 2016 legislation, the Retirement Enhancement and Savings Act, would have (among other things) required the Labor Department to finalize some of the previously mentioned annuity rules.
In his new role, Mr. Rutledge could conceivably accomplish through rule-making much of what the 2016 legislation would have required. The 2016 bill easily passed the Senate Finance Committee with strong bipartisan support, although it did not make it to the Senate floor for a full vote. If the legislation's requirements appeal to Mr. Rutledge, he might very well work to make them happen.
EBSA covers a lot of ground and Mr. Rutledge will have his hands full but, given his expertise in retirement issues, it's likely he will push to make it easier to save for retirement. This could take the form of cutting from or adding to regulations, or issuing guidance to redefine rules already in place.
Blaine F. Aikin is executive chairman of fi360 Inc.