Benefits Regulator Shifting Enforcement to ‘True Bad Actors’

The Department of Labor’s employee benefits regulator will target the most egregious violations that cause significant harm, according to new guidance outlining agency priorities.

The Employee Benefits Security Administration published a field assistance bulletin Tuesday outlining four priorities, which include ensuring the agency is not regulating by enforcement and requiring that senior agency officials review all critical enforcement initiatives.

EBSA will stop “second-guessing the prudent discretionary judgement of fiduciaries” and instead have “even-handed and fair enforcement,” Assistant Secretary Daniel Aronowitz said in a statement.

The changes to EBSA’s enforcement principles are in line with the agency’s shifts under Aronowitz. The agency, which has seen an exodus of staff, including investigators, has in recent months issued new enforcement priorities and submitted multiple employer-friendly amicus briefs.

“This update to our enforcement program makes it clear that our focus is on true bad actors whose actions harm the benefits American workers and retirees have earned for themselves and their families,” Aronowitz said.

EBSA said it will prioritize criminal cases that address the most significant harm to the system. In civil cases, the agency said it will prioritize investigations where a fiduciary breach of loyalty under the Employee Retirement Income Security Act is at issue.

“To the extent any enforcement activity is solely based on a prudence breach, and given that ERISA is a law of process and not results, EBSA must avoid cases that unfairly second-guess process-based fiduciary judgments,” the agency’s bulletin said.

The bulletin said EBSA “will not regulate through enforcement whenever possible and consistent with our mission.” The agency said all enforcement activity must be based on violations of ERISA, department regulations, or clearly established case law.

EBSA said all proposed significant enforcement activities must be reviewed by agency leadership to “ensure consistency of enforcement across all regions.” The fourth principle states that EBSA’s enforcement “must be responsive and timely.”

The agency in January announced an overhaul of its enforcement projects, which included an end to the focus on valuations at employee-owned companies and a greater emphasis on issues like cybersecurity.

The focus on more serious violations comes as EBSA has faced significant staffing reductions since the start of the second Trump administration. EBSA has only one investigator for every 17,500 plans covered by ERISA, according to its budget justification submitted in June.