Year in regulation: new policies may not see the light of day

From overtime rules and HIPAA desk audits to the never-ending updates of the Fiduciary Rule, the benefits industry saw a wave of new policies, regulations and laws come up that had advisers and clients alike scrambling to prepare for compliance.

Now that Donald Trump is set to take the Oval Office in January and the Republican Party holds the majority seats in Congress, many policies put forth over the past eight years are sitting in a state of limbo and could very well disappear in the coming year.

Capitol.Bloomberg.jpg
The Capitol building stands in Washington, D.C., U.S., on Wednesday, Nov. 17, 2010. U.S. House Republicans voted to continue for the next two years their ban on budget "earmarks" that direct money to lawmakersÕ pet projects, joining Senate Republicans who adopted a similar policy earlier this week. Photographer: Andrew Harrer/Bloomberg

Fiduciary Rule
Possibly the most talked about benefits rule in 2016 was the infamous Fiduciary Rule. Erin Sweeney, counsel at Miller & Chevalier, says between the issuance of the rule and litigation proceeding it, many of her clients had large portions of their time absorbed into ensuring they remain compliant with the final rulings. Now with Trump entering the White House, her clients are uncertain what may happen with the new rule.

“I’ve been asked a number of times, “can the Trump administration decide not to defend the litigation over the Fiduciary Rule,” and the answer is, “that’s not going to work,”” Sweeney says. “The Fiduciary Rule has a private right of action, which means a plaintiff lawyer can sue on the Fiduciary Rule even if the Trump administration decides not to defend the Fiduciary Rule itself.”

Sweeney added that because the rule is already in effect, Trump cannot make an administrative order on his first day in office requesting non-enforcement of the rule. Instead, he will need to publish a notice in the Federal Registrar.

“He would need to publish an interim final rule, if you will, to extend the deadline,” Sweeney says. “Then the question would be, “are they actually going to roll it back or rollback parts of it, and how is that going to work?””

Also see: “The year in voluntary benefits: Products see popularity surge

Overtime Rule
FLSA’s overtime rule determined whether employees are eligible or exempt for overtime pay. The rule extends protection to 4.2 million workers who are not currently eligible under federal law. This means that workers who do not earn at least $47,476 a year will have to be paid overtime, even if they’re classified as a manager or professional.

As of Dec. 1, the rule has been placed under injunction by the federal court and could very well be put on pause until after Trump takes office. Plus, and with the appointment of Andrew Puzder for the role of Secretary of Labor, the rule may never see enforcement.

“The Trump administration is going to do their best to make it as if the Obama administration never happened,” Sweeney says. “Puzder will likely focus the bulk of his attention on ACA dismantling and eliminating the overtime regulation, [and] although [his] views on the Fiduciary Rule are not on record, he has generally advocated withdraw of the regulations issued by the Obama DOL, so it is likely the rule is on his hit list.”

Also see: “Pension Protection Act made retirement security more tenuous

EEOC and ADA final rule on employer wellness programs
On May 17, the EEOC issued a final rule to amend the regulations and the appendix implementing Title I of the ADA as they relate to employer wellness programs. The rule says employers may provide limited financial and other incentives in exchange for an employee answering disability-related questions or taking medical examinations as part of a wellness program, whether or not the program is part of a health plan.

“The [EEOC’s] final set of wellness rules under the [ADA] and GINA were supposed to go into effect in the 2017 plan year, so we had a little bit of time to prepare, but they altered the wellness rule landscape that we had when all we really had to deal with was HIPAA and perhaps the tax code,” says Chris Beinecke, counsel at Haynes and Boone, LLP. “It will cause some employers to rethink or change their wellness programs and will cause some employers to modify some of the incentives they’ve been providing for certain activities.”

The proliferation of state and local leave laws
Another regulation that stuck out for Beinecke was the passing of new leave laws in several states and cities across the country. These new laws required special leave, either paid or unpaid, to be provided to employees residing in these locations. This places employers who hold businesses in multiple locations in the awkward position of offering special leave to those in specific states or cities while not offering the same type of leave to employees outside of locations such as California or Chicago.

“I think there is more than two dozen unique state and local leave laws in effect that we didn’t have as little as a year or two ago,” Beinecke says. “It’s causing a patchwork system for multi-state employers who are maybe having to put in things to comply with a set of laws because they have an office in a particular location and perhaps the employer does not need to offer something similar elsewhere, but is considering whether or not it is going to so it does not appear to look unfair or unbalanced to its employees.”

Executive and CFO pay
Donald Kalfen, partner at Meridian Compensation Partners, LLC, says he saw very little regulatory movement in the executive pay world; however there were several rules that were shot down this year that could have altered executive and CFO pay drastically. These rules included:

Pay for performance disclosure: It requires, among other things, that public companies disclose the ratio of the CEO’s annual total compensation to the median annual total compensation of all other employees.

Mandatory clawback provision: The rule would require national securities exchanges to adopt new listing standards requiring listed companies to adopt and enforce clawback policies.
Hedging policy disclosure rule: The proposed rule would require disclosure about whether directors, officers and other employees are permitted to hedge or offset any decrease in the market value of equity securities granted by the company as compensation or held, directly or indirectly, by employees or directors.

“SEC denied final issue rules on outstanding Dodd-Frank rules, which were the pay for performance disclosure, the mandatory clawback rule and the hedging disclosure,” Kalfen says. “There were no statutory provisions enacted regarding any new types of disclosures on project managers or any new types of internal revenue code regulation, at least significant ones that bare on executive pay.”

Kalfen added that because there has been little movement on the executive pay front, the bigger question that needs to be asked is, where do we go from here?

“Really, it has been a steady state this last 12 months, from a federal regulatory standpoint, and the big question is, “is a lot of it going to be unwound,”” Kalfen says. “The answer is maybe, or until we see the outlines of what the Trump administration is thinking on corporate governance and disclosure, we really don’t know unequivocally what will happen.”

For reprint and licensing requests for this article, click here.
Employment and benefit-related legislation Law and regulation Compliance Fiduciary Rule Fiduciary standard Overtime rule FLSA ADA Wellness programs Wellness FMLA PTO policies PTO Workforce management
MORE FROM EMPLOYEE BENEFIT NEWS