House Committee Okays Bills Affecting EBSA Enforcement, ESOP Valuations
The House Education and Workforce Committee on Sept. 17 approved a package of bills that include provisions that would make the investigative and enforcement efforts of the Department of Labor’s Employee Benefits Security Administration (EBSA) more transparent, as well as create a safe harbor for fiduciaries when they appraise shares in ESOPs.
Balance the Scales Act
The Balance the Scales Act (H.R. 2958), which was introduced April 17 by Rep. Mike Rulli (R-Ohio), would amend ERISA to require that EBSA submit an annual report to Congress on so-called “common interest agreements” (CIAs) or what the bill referred to as “adverse interest agreements.”
A substitute amendment offered by Rep. Rulli that made technical changes to the legislation was approved by voice vote, while H.R. 2958, as amended, was approved on a party-line vote of 19-16.
In general, H.R. 2958 would amend ERISA to provide transparency to what the sponsor described as “abusive practices” that came to light under the Biden administration. Under the legislation, before sharing information or providing any form of assistance to private attorneys for use in ERISA litigation, the Department of Labor would be required to enter into a written agreement defining the nature and extent of the assistance the department is planning to provide.
The DOL must provide a copy of the agreement to any employer plan sponsor or fiduciary that may be “adversely impacted.” In addition, the DOL must file an annual report with Congress detailing any agreements in effect for the prior fiscal year.
“When I learned that DOL had gathered information during an employee benefit plan investigation and then secretly shared it with the class-action plaintiffs’ attorneys, I was completely appalled; that kind of misguided information sharing was government abuse at its absolute worst,” Rep. Rulli stated when offering his amendment.
In contrast, Rep. Bobby Scott (D-Va.), who is the ranking member of the Education and Workforce Committee, suggested that the legislation is an overreach, and that the committee should, instead, wait for the results of a forthcoming inspector general report before proceeding. What’s more, Scott noted that, under ERISA, the Secretary of Labor is permitted to share information obtained during an investigation through what’s called a common interest agreement, and that such agreements are rare occurrences.
“In fact, in response to a Freedom of Information Act request covering a 15-year span from 2009 to 2024 and more than 31,000 investigations by the Employee Benefits Security Administration, they were only able to identify less than four common interest agreements for every 10,000 investigations,” Scott noted. “Quite simply, H.R. 2958 is a bonanza for the defense bar and stacks the deck against workers who have been harmed,” the ranking member added.
EBSA Investigations Transparency Act
The House Education and Workforce Committee also considered and approved an amended version of the EBSA Investigations Transparency Act (H.R. 2869), which was introduced April 10 by Rep. Lisa McClain (R-Mich.). The amended version was also approved on a party-line vote of 19-16.
Dovetailing with the “Balances the Scales Act,” H.R. 2869 would require EBSA to submit an annual report to Congress providing a status update on its investigations in order to help the committee conduct “effective oversight on investigations” by EBSA.
“Despite robust oversight efforts by the committee, the Biden Harris administration refused to answer for its abuse of power when DOL conducted overreaching, endless and aimless investigations,” Chairman Tim Walberg (R-Mich.) said in his opening statement, further noting that the legislation will restore transparency of the DOL’s investigative efforts.
To that point, Rep. McClain observed that since 2000, EBSA has not been statutorily required to report to Congress on its open investigations or enforcement backlogs, and that employer plan sponsors and stakeholders have voiced frustration with EBSA’s investigatory practices, contending that the agency fails to conduct investigations in a timely manner.
The bill would require that, not later than Dec. 31 of each year, the Labor Secretary shall submit a report to Congress on the status of cases in enforcement, including investigations that are active or in relation to which the Secretary asserted investigative authority or engaged in targeted compliance monitoring under Section 504(a) of ERISA.
The DOL would also be required to explain whether an investigation was concluded within a 36-month period, and if not, why not, as well as the estimated date of conclusion. The report would not include information identifying any party to the investigation, including any plan sponsor, fiduciary, service provider, employee, or participant.
In voicing opposition to the legislation, Rep. Suzanne Bonamici (D-Ore.) noted that investigations may be large and complex, taking significant time and resources to conduct, and that EBSA’s budget has been targeted for further cuts, which would only make the backlog worse. “As we know, the appropriations have not kept pace over the years and unfortunately the administration’s fiscal year 2026 budget request goes even further in the wrong direction by proposing to cut $10 million from EBSA’s base appropriations in addition to cutting staff,” Rep. Bonamici explained. “We all agree that EBSA has an important role to play, but this bill does not improve that,” she added.
Retire Through Ownership Act
Finally, the committee approved on a bipartisan basis an amended version of the Retire Through Ownership Act (H.R. 5169) sponsored by Rep. Rick Allen (R-Ga.), who is chairman of the Subcommittee on Health, Employment, Labor and Pensions (HELP). The vote on this legislation was a unanimous 35-0.
Adequate consideration, or the process of appraising shares in an ESOP, and the legal liability that stems from it, has been perhaps the most important hindrance to ESOP adoption. But the Retire Through Ownership Act would create a safe harbor for ESOP fiduciaries that use IRS rules for appraising shares in ESOPs.
“H.R. 5169 points to tried-and-true Internal Revenue Service guidelines for valuing employer stock. It also provides that ESOP fiduciaries can rely in good faith on a valuation provided by an independent valuation expert or business appraiser who relies on the IRS’s guidelines for valuing the stock,” Chairman Walberg stated.
“For more than 50 years ever since enactment of ERISA, ESOP fiduciaries have been waiting for guidance on how to value employer stock, but the Department of Labor has never published definitive guidance. Instead, the DOL began a national enforcement project targeting ESOPs rather than tell the ESOP community how to value the stock,” Rep. Allen stated during the committee’s consideration of his bill. He suggested that the legislation will bring an end to the uncertainty and will encourage the establishment and maintenance of more ESOPs.
Rep. Allen further advised that his amendment incorporates changes to more closely match language requested by Senate Democrats which were incorporated into the Senate companion bill, which was approved by the Senate HELP Committee in July.
Those three changes include clarifying that the Secretary of Labor may issue regulations on this legislation, that the bill does not expand the Secretary of Labor's authority, and that no changes are being made to ERISA Section 404 concerning fiduciary obligations of prudence and loyalty.
Several committee Democrats, including Reps. Bobby Scott, Lucy McBath (D-Ga.), Alma Adams (D-N.C.), and Suzanne Bonamici voiced their support for the legislation.
Additional Legislation
During the Wednesday markup, the Education and Workforce Committee also approved amended versions of the Tribal Labor Sovereignty Act of 2025 (H.R. 1723), the Michael Enzi Voluntary Protection Program Act (H.R. 2844), and the Direct Seller and Real Estate Agent Harmonization Act (H.R. 3495).
These bills are now cleared for consideration by the full House of Representatives.