Aronowitz Outlines ESOP-Friendly Agenda, Focus on Loyalty Breaches
The ESOP Community
Aronowitz explained that EBSA would be deemphasizing enforcement related to the appraisal of shares in employee stock ownership plans (ESOP). ESOP valuations had previously been an enforcement priority, which Aronowitz described as “unfair and unnecessary enforcement bias against ESOPs.”
Additionally, EBSA will be implementing provisions of SECURE 2.0 that funded grants to states to promote ESOP creation through non-profit partnerships, outreach and education, training and technical assistance. EBSA is currently working on applications and the criteria for grants, Aronowitz explained.
The ESOP community, and employer-sponsored plans in general, have been “under attack” by ERISA litigation, Aronowitz argued, and “American workers were on the losing end of this paralysis.”
Aronowitz blamed excessive litigation for reducing plan formation and innovation, including ESOP creation. “We want more employers to offer more benefits, and more inventive ones at that.”
Enforcement Priorities
Instead, Aronowitz explained that EBSA enforcement activity would focus more on “compliance assistance” and “egregious violations of fiduciary law.”
More specifically, EBSA will focus on the duty of loyalty, and issues related to cybersecurity, mental health parity, the No Surprises Act (NSA), asset management, and “criminal abuse.”
Elaborating on the duty of loyalty, Aronowitz said EBSA will also look into fiduciaries that are “enriching themselves” or indulging “disloyal pursuits of ESG, or its sister acronym DEI.”
Investigations would also be timelier and more focused, according to Aronowitz. “EBSA investigations are now on a shot clock.”
Jim Bonham, the president and CEO of TEA, described Aronowitz’s remarks as a “breath of fresh air” for the ESOP community, and said that he hopes Aronowitz is the “dawn of a new relationship between the ESOP community and the Department of Labor.”
Aronowitz’s remarks were delivered at The ESOP Association’s (TEA) National Conference in Washington, DC.
As seen in Plan Sponson Council of America
Photo credit: Cheyenne Arnold