Departing DOL Benefits Chief Urges Trump to Address 401(k) Rule

Trump Labor Department regulators will inherit a workplace retirement plan industry eager for clearer investment standards, particularly on an embattled 401(k) rule, according to Biden’s outgoing chief benefits regulator.

Assistant Secretary for Employee Benefits Security Lisa M. Gomez told Bloomberg Law she believes the incoming administration “does need to say something” to a regulated community straining to distinguish between multiple court orders and decades-old fiduciary investment regulations, because, “as it stands right now, there are too many unknowns.”

Gomez has overseen DOL’s Employee Benefits Security Administration under Biden for more than two years, and will exit when President-elect Donald Trump’s administration begins Jan. 20. The former partner at Cohen, Weiss and Simon LLP in New York has championed a worker-friendly approach to a fiduciary rule beleaguered by multiple lawsuits, defended the agency’s approach to do-good investing, and gone toe-to-toe with health plans to establish parity in mental health care.

In a wide-ranging and exclusive interview with Bloomberg Law just days before Trump’s inauguration, Gomez said she is proud of EBSA’s accomplishments.

“This agency, despite its constraints, really delivered for not only participants and beneficiaries but for the plan sponsor community,” she said. “It’s been a highlight for me just to be able to go and highlight the work of this agency.”

EBSA’s fiduciary rule, by far the largest rulemaking project the agency undertook under President Joe Biden, would broaden the kinds of investment advice subject to heightened workplace retirement plan standards. Its launch in 2023 struck a nerve on Wall Street and prompted a deluge of lawsuits accusing the agency of overstepping its bounds.

Gomez and her staff defended the rule as a means of ensuring more protections for retirees rolling 401(k)s into annuities and other financial products. But last year, a pair of federal courts in Texas blocked the rule, and its fate lies in the hands of a US Court of Appeals for the Fifth Circuit stacked with conservative Trump-appointed judges.

Trump, who hasn’t yet named a nominee to head EBSA, will face some pushback even from the regulated community to compromise on the investment advice proposal, Gomez said. She declined to predict whether new DOL solicitors will defend the Biden rule in court, but insisted that new EBSA staff will find the status quo unsustainable.

She pointed to Trump’s willingness to clear up confusion in the industry during his first term after an Obama-era fiduciary rule was struck down by the Fifth Circuit. The Republican administration’s prohibited transaction exemption allowed insurers and investment advisers to receive compensation, but opened the door for one-time conversations to qualify as fiduciary advice.

Opposing View

Gomez’s Senate confirmation in 2022 proved to be an unexpected political hurdle. EBSA, which has fewer than 1,000 employees and only about $200 million in annual appropriations, had recently promulgated a rule that would permit retirement plans to consider the environmental, social, and corporate governance impacts of prospective investments.

That rule drew bipartisan condemnation on Capitol Hill amid a nationwide backlash to ESG investing. Lawmakers forced Biden to wield his veto pen for the first time to defend the rule against a congressional block. After a Trump-appointed judge unexpectedly upheld the rule, it too awaits a Fifth Circuit appeal, which Trump could choose to abandon.

Gomez, who defended the rule once more as an attempt at taking “the thumb off of the scale” and allowing plan sponsors flexibility, said she’s not blind to the political reality of an incoming administration opposed to the Biden labor agenda.

“I have no doubt that the people who remain here, that the career staff will do their best to try to explain to the next administration why some of these issues should not necessarily be partisan issues,” she said, “and why they are good not only for participants and beneficiaries, but also helpful to the plan sponsor community generally.”

Like the ESG rule, the Trump administration is likely to overturn a Biden rule strengthening requirements under the Mental Health Parity and Addiction Equity Act. Gomez characterized that policy as a highlight of her tenure, but said she wished she had more time to oversee additional compliance tools and guidance, which industry groups say are needed to understand how to meet the new standards.

The 2008 law requires health plans to offer mental-health benefits on par with traditional medical benefits, but compliance remains spotty at best, according to a 2023 EBSA report.

A rule clamping down on short-term health insurance plans—which lack many consumer protections under the Affordable Care Act—is also at stake. And Trump may choose to revisit association health plans, which allow small employers to band together in purchasing health insurance under regulations similar to those governing large employers. Democrats derided both as “junk insurance” when Trump expanded them in his first administration.

“Buyer beware” guardrails should be kept in place for short-term plans to ensure consumers and employers are not misled into thinking they’re purchasing comprehensive coverage, Gomez said. And she said she’s hopeful that the new administration will keep a critical eye on which types of arrangements can qualify as association plans.

Gomez said she plans on “taking a little break” from government service once her term ends. She will leave behind unfinished work, including a not-yet finalized auto-portability rule and a proposal updating the arbitration process for surprise medical bills.

She added that she was disappointed that data transparency language, which would have given employers more drug pricing information from pharmacy benefit managers and insurance companies, was dropped from a late 2024 government funding package.

“I know that there’s a lot of bipartisan support generally for having some type of rule in that area,” she said, “and so I’m hopeful that going into the next administration, that is not a conversation that will just die.”