2023 Retirement Plan Department of Labor Update

Each year, our Technical Services Committee creates a Regulatory Update covering the legislative, regulatory, and litigation developments affecting retirement plans. This year, the Department of Labor was focused on ESG and cybersecurity.

ESG Rule

The use of Environmental, Social, and Governance (ESG) factors when making investment decisions has remained a political hot potato throughout 2023.

The Department of Labor (DOL) introduced a final regulation, effective Feb. 1, 2023, allowing plan fiduciaries to take ESG factors into consideration when making investment decisions. This rule replaced a previous DOL rule initiated during the Trump administration that would have limited plan fiduciaries from considering ESG factors in these same decisions.

The current rule provides the following guidelines:

  • Fiduciaries may take ESG factors into consideration when making investment decisions;
  • These same considerations may be used in selecting a default investment vehicle for a plan;
  • When reviewing two similar funds, consideration of collateral benefits may be used (Tiebreaker Standard);
  • May consider participants' non-financial preferences' when selecting investments.

The rule does not require plan fiduciaries to take ESG factors into consideration but allows fiduciaries to do so if they choose. Despite the voluntary nature of the rule, it has been challenged since its inception.

The House and Senate immediately challenged the rule and a bill was approved seeking to overturn the rule. The Republican House passed the measure on party lines while the Senate passed the measure 50-46, with Democratic Senators Joe Manchin and Jon Tester joining the Republicans. The measure was sent to President Biden, where he used his first veto while in office to overturn the bill and retain the current DOL rule.

The rule has also made its way into the courts, with 25 Republican-led states filing a lawsuit in the Northern District of Texas challenging the legality of the rule. The case states the rule will reduce economic growth, reduce tax revenues, and negatively impact participants' retirement savings.

The judge in that case recently ruled in favor of the Department, granting summary judgement and thereby validating the rule. Individual participants are also getting in on the action where a former American Airlines pilot is seeking class-action status for his suit alleging the airline's 401(k) took ESG factors into consideration, which negatively affected overall investment performance.

Many retirement plans offer or are considering offering ESG-focused investment options. Even if the DOL rule was withdrawn these investments can be retained in the plan. However, it is important to follow the same prudent process for selecting and monitoring these funds as they would for any other investment offered in the plan.

As the pendulum continues to swing, fiduciaries may want to consider two things related to ESG investments.

  1. Avoid implementing fund lineups that are 100% ESG-focused
  2. Avoid using purely ESG-focused investments as the qualified default investment alternative

While the current rule does allow ESG-focused default investment vehicles, a new rule could be enacted by a future administration. We will continue to monitor the legislative, legal, and regulatory activity related to this issue.

DOL Cybersecurity Best Practices

The importance of cybersecurity for retirement plans became front and center when the widely publicized MOVEit data breach occurred in May.

Pension Benefit Information (PBI) was impacted by the breach. PBI is a third-party provider of audit and address research services used by several major retirement plan recordkeepers like Fidelity, Corebridge, TIAA, Genworth Financial, and Putnam Investments.

As a result, large numbers of retirement plan participants had personally identifiable information (PII) such as social security number, gender, date of birth, and address stolen. The software vulnerability was fixed within two days of discovery, but a large amount of data was still compromised. As a result, PBI notified impacted participants, offering 24 months of complimentary identity monitoring services.

Whether your plan was impacted or not, this serves as a reminder of the importance of protecting plan participants' PII.

In 2021, the DOL issued "Cybersecurity Program Best Practices." The guidance included 12 suggestions plan sponsors should follow as it relates to cybersecurity and handling PII. Employers transfer large amounts of PII to recordkeepers and other service providers on an ongoing basis and are, therefore targets of cyber-criminals.

Plan fiduciaries should review the best practices document and review their protocols for managing participants' PII.

2023 EBSA Agenda Items

The Employee Benefits Security Administration (EBSA) is the agency in the DOL that oversees and enforces provisions of ERISA. Their 2023 agenda focuses on various retirement planning topics in the pre-rule, proposed rule, and final rule stages.

Below are the EBSA areas of focus related to defined contribution plans:

Pre-Rule Stage:

  • Collecting information on ways to improve the required retirement plan disclosures sent to participants.
  • Review the need for additional guidance in creating and managing pooled employer plans (PEPs).
  • Determine if additional guidance is needed for SECURE 2.0 provision allowing for emergency savings accounts to be linked to individual account plans.
  • Beginning stages to develop the Retirement Savings Lost and Found, an online searchable database to allow participants to search for lost retirement plan savings.

Proposed Rule Stage:

  • The EBSA continues to work on a revised fiduciary definition that has been sent to the Office of Management and Budget (OMB) for review. The proposed rule may be publicly released in October.
  • Review and update of data requirements for 5500 reporting.
  • Expansion of the scope of transactions eligible for self-correction.

Final Rule Stage:

  • The final rule released related to the lifetime income illustration requirement that was included in the SECURE Act.
  • Update on the process for the DOL to grant exemptions to the prohibited transactions rules to be released this year.


Untitled - 2023-09-26T113102.443Click here to download a full copy of our 2023 Regulatory Update covering all the legislative, regulatory, and litigation developments affecting retirement plans this year.






Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice. Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s clients.

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