Trumps’ budget tackles major reforms at Labor Department — FEDERAL NEWS
On May 23, 2017, President Donald Trump released his budget, which according to Director of Management and Budget Mick Mulvaney, is a "taxpayer first" budget, constructed with an eye toward the folks who are paying for it, rather than its recipients. Mulvaney stressed that the budget balances in 10 years based on 3 percent economic growth (as opposed to 1.9 percent, which the previous administration saw as a ceiling), but many commenters have called this economic growth estimate unrealistic. Among other things, the budget proposal would impose several major reforms at the Department of Labor.
Reform pillars. The budget rests on eight pillars of reform supporting what the Trump Administration sees as it "moral commitment to replacing our current economic stagnation with faster economic growth":
Tax reform and simplification
Reductions in federal spending
American energy development
Major savings and reforms. The president’s budget is geared to bringing spending under control and returning the federal budget to balance within 10 years through both discretionary and mandatory savings proposals that "encompass a common sense approach to redefine the proper role of the Federal Government, and curtail programs that fall short on results or provide little return to the American people," according to Major Savings and Reforms. That document highlights 2018 savings of $57.3 billion in discretionary programs, including $26.7 billion in program eliminations and $30.6 billion in reductions.
Department of Labor. Several eliminations and reforms are targeted to sub-agencies within the Department of Labor, including these:
The proposal would eliminate international labor grants and reduce International Labor Affairs Bureau staff, instead focusing ILAB on ensuring that U.S. trade agreements are fair for American workers, providing $67 million less in funding than under the Continuing Resolution of 2017.
The Migrant and Seasonal Farmworker Training program (also known as the National Farmworker Jobs Program) would be entirely eliminated as purportedly duplicative because it creates a parallel training system for migrant and seasonal farmworkers, even though these individuals are eligible to receive services through the core Workforce Innovation and Opportunity Act (WIOA) formula programs.
Funding for the Office of Disability Employment Policy (ODEP) would be reduced by $11 million to $27 million, a move that would return the agency closer to its core mission of policy development, technical assistance, and dissemination of effective practices to increase the employment of people with disabilities, according to the White House. The proposal would also have ODEP begin a demonstration project in 2018 to test effective interventions to promote greater labor force participation of people with disabilities.
At OSHA, the Susan Harwood training grants would be eliminated because they are "unnecessary and unproven." This program provides one- to five-year competitive grants to non-profit organizations to develop and conduct occupational safety and health training programs.
The proposed budget would also do away with the Senior Community Service Employment Program (SCSEP) because it is purportedly ineffective in its goal of transitioning seniors into unsubsidized employment. This program distributes grants to states and public and private non-profit organizations to provide part-time work experience in community service activities to unemployed low-income persons ages 55 and over—some 68,000 individuals each year. The Trump Administration believes the programs goals can be addressed through WIOA programs.
The solvency of the Pension Benefit Guaranty Corporation (PBGC) would be improved by increasing the insurance premiums paid by underfunded multiemployer pension plans. PBGC premiums are currently far lower than what a private financial institution would charge for insuring the same risk. The proposed premium reforms would improve PBGC's financial condition and are expected to be sufficient to fund the multiemployer program for the next 20 years, the administration says.
The OFCCP would be merged into the EEOC, according to the budget appendix, creating one agency to combat employment discrimination. The OFCCP and EEOC would work collaboratively to coordinate this transition to the EEOC by the end of FY 2018.
A minimum solvency standard would address the challenge states face in maintaining sufficient reserves in their Unemployment Trust Fund accounts to weather future recessions. Despite several years of recovery since the recession, State Unemployment Insurance programs are still not adequately financed. According to the White House, fewer than half the States have sufficient reserves to weather a single year of recession, the common measure of trust fund solvency.
Reform of federal disability programs. The budget proposal would "evaluate creative and effective ways to promote greater labor force participation (LFP) of people with disabilities by expanding the demonstration authority that allows the Administration to test new program rules and requires mandatory participation by program applicants and beneficiaries." This aspect of the budget applies to multiple agencies. It contemplates an expert panel that would identify specific changes to program rules that would increase LFP and reduce program participation, informed by successful demonstration results and other evidence. There would be smaller reforms to address inequities in the system and close loopholes that make the program more susceptible to fraud. Among other things, the retroactively of disability insurance payments would be reduced from 12 months to six months.
Source: Written by Pamela Wolf, J.D.
Fiduciary rule moving forward with temporary enforcement relief — AGENCY REGULATION
On May 22, the Department of Labor, headed by its new Secretary Alexander Acosta, confirmed that its controversial "fiduciary rule" will move forward, with partial compliance with its conflicts of interest provisions taking effect on June 9, 2017. At that time, investment advice providers to retirement savers will become fiduciaries, and the "impartial conduct standards" will become requirements of the exemptions. Other exemption conditions originally scheduled to become applicable on April 10, 2017, will be delayed to January 1, 2018, while the DOL conducts an ongoing examination of the rule as required under a presidential directive.
Fiduciary rule delayed. The final rule was published in the Federal Register on April 8, 2016; it became effective June 7, 2016. The rulemaking included a new best interest contract exemption (BICE) and amendments to prohibited transaction exemptions (PTEs). The rule was initially slated to be applicable as of April 10, 2017.
However, on April 7, 2017, the Labor Department issued a final rule extending for 60 days the applicability dates of the fiduciary rule and related exemptions, including the BICE. The delay was said to give the DOL time to conduct the review directed by President Trump’s memorandum of February 3, 2017.
Transition period requirements. The DOL has issued a set of frequently asked questions that map out the phased-in conflict of interest requirements that must be met during a transition period from June 9, 2017, to January 1, 2018. This guidance, like the fiduciary fule and related exemptions, is generally limited to advice concerning investments in IRAs, ERISA-covered plans, and other plans covered by section 4975 of the Internal Revenue Code.
During the transition period, financial institutions and advisers must comply with the "impartial conduct standards," according to the FAQs. These are consumer protection standards aimed at ensuring advisers adhere to fiduciary norms and basic standards of fair dealing. Advisers and financial institutions must:
Give advice that is in the "best interest" of the retirement investor. This best interest standard has two chief components: prudence and loyalty:
Under the prudence standard, the advice must meet a professional standard of care as specified in the text of the exemption;
Under the loyalty standard, the advice must be based on the interests of the customer, rather than the competing financial interest of the adviser or firm;
Charge no more than reasonable compensation; and
Make no misleading statements about investment transactions, compensation, and conflicts of interest.
Unless the DOL takes further action, the transition period ends January 1, 2018, and full compliance with all of the exemptions’ conditions is required for firms and advisers that choose to engage in transactions that would otherwise be prohibited under ERISA and the Internal Revenue Code.
What do these conditions include? Among other things, these conditions include requirements to execute a contract with IRA investors with certain enforceable promises, make specified disclosures, and implement specified policies and procedures to protect retirement investors from advice that is not in their best interest. Although that contract is permitted to require the IRA investor to pursue individual claims through arbitration, it must preserve the investors’ ability to bring class action claims in court.
Temporary enforcement policy. In Field Assistance Bulletin (No. 2017-02) dated May 22, 2017, Employee Benefits Security Administration Director of Regulations and Interpretations John J. Canary announced a temporary enforcement policy. During the phased implementation period ending on January 1, 2018, the DOL will not pursue claims against fiduciaries who are "working diligently and in good faith" to comply with the requirements of the fiduciary duty rule and exemptions. Nor will the department treat those fiduciaries as being in violation of the fiduciary duty rule and exemptions. If circumstances surrounding the applicability date of the fiduciary duty rule and exemptions give rise to the need for other temporary relief, EBSA will consider additional steps.
What’s on the horizon? Canary noted in his memorandum that the DOL is actively engaging in a careful analysis of the issues raised in Trump’s memorandum, and that additional changes to the fiduciary rule and PTEs may be proposed, depending on the results of that examination. In the near future, the DOL intends to issue a Request for Information (RFI) soliciting additional public input on specific ideas for potential new exemptions or regulatory changes based on recent public comments and market developments.
Canary also said the department knows that after the fiduciary duty rule and PTEs were issued, firms started developing new business models and innovative market products to mitigate conflicts of interest. Thuse, the RFI will seek public comment on whether it is likely to take more time to implement these new approaches than the timeframe envisioned by the DOL when it set January 1, 2018, as the applicability date for full compliance with all of the exemptions’ conditions, and if so, whether an additional delay would reduce burdens on financial services providers and benefit retirement investors by permitting a smoother implementation of those market changes.
Assistance versus violations and penalties. The Field Assistance Bulletin also stated that while the DOL has a statutory responsibility and broad authority to investigate or audit employee benefit plans and plan fiduciaries to ensure compliance, "compliance assistance for plan fiduciaries and other service providers is also a high priority for the Department." Canary reiterated that the DOL’s "general approach to implementation will be marked by an emphasis on assisting (rather than citing violations and imposing penalties on) plans, plan fiduciaries, financial institutions, and others who are working diligently and in good faith to understand and come into compliance with the fiduciary duty rule and exemptions." Accordingly, the DOL concluded that temporary enforcement relief was appropriate and in the interest of plans, plan fiduciaries, plan participants and beneficiaries, IRAs, and IRA owners.
Source: Written by Pamela Wolf, J.D.
Survey finds Americans forfeit half of their earned paid time off — SURVEY RESULTS
According to a new survey from Glassdoor, the average U.S. employee (of those who receive vacation/paid time off) has only taken about half (54 percent) of his or her eligible vacation time/paid time off in the past 12 months. This is relatively consistent with how much vacation time employees reported taking in 2014 (51 percent), when Glassdoor first conducted this survey. However, more Americans (66 percent) today report working when they do take vacation compared to three years ago (61 percent). This survey, conducted online in March-April by Harris Poll among 2,224 adults ages 18 and older, took a look at employee vacation time realities, including the percentage of eligible vacation time/paid time off employees actually take, along with how much they work and why while on vacation, among other trends.
Of employees who receive vacation/paid time off, nine out of 10 (91 percent) report taking at least some time off in the last 12 months, up from 85 percent in 2014. Over the same time period, 23 percent reported taking 100 percent of their eligible time off, while another 23 percent of employees reported taking 25 percent or less of their eligible time off (both down two percentage points from 25 percent in 2014). Nine percent reported taking no vacation or paid time off at all.
Despite slightly more employees taking vacation time overall, it doesn't necessarily mean more are getting away from work. Fewer employees who take vacation/paid time off report being able to completely "check out" while they are on vacation (54 percent in 2017, down from 63 percent in 2014) and more than one quarter (27 percent) are expected to stay aware of work issues and jump in if things need their attention while they are away, up from 20 percent in 2014. More than one in ten (12 percent) employees who take vacation/paid time off are expected to be reachable, deliver work and/or participate in conference calls etc. while on vacation (compared to 9 percent in 2014).
Given these expectations, it may be no surprise that many employees remain in contact with colleagues and managers while using paid time off. While on vacation, 29 percent of employees who took vacation/time off from work in the past 12 months report being contacted by a co-worker (up from 24 percent in 2014) about a work-related matter, and one in four (25 percent) report being contacted by their boss (up from 20 percent in 2014). Work is also on Americans' minds more even when they are on vacation, as 23 percent of employees who took vacation/time off from work in the past 12 months said they had a difficult time not thinking about work while on vacation (up from 17 percent in 2014). Fourteen percent also said a family member complained that they were working while on vacation (up from 9 percent in 2014). However, not all employees who used vacation time actually intended to take a vacation. More than one in ten (12 percent) employees used their paid time off in the past 12 months to interview for another job.
Of those who reported working while on vacation, the top reasons they said they do so are because they fear getting behind (34 percent), no one else at their company can do the work while they're out (30 percent), they are completely dedicated to their company (22 percent), and they feel they can never be disconnected (21 percent).
"We are seeing a push and pull situation when it comes to employees taking vacation and paid time off, in which people attempt to step away from the office for a break from work, but technology is keeping them connected with the swipe of a finger," said Carmel Galvin, Glassdoor chief human resources officer. "While taking a vacation may make employees temporarily feel behind, they should realize that stepping away from work and fully disconnecting carries a ripple effect of benefits. It allows employees to return to work feeling more productive, creative, recharged and reenergized. In turn, employers should consider what a vacation really means - to actually vacate work - and how they can support employees to find true rest and relaxation to avoid burnout and turnover within their organizations."