Senate Committee Passes Bill That Would Boost EBSA Funding

The bill differs from a recent House Appropriations Committee proposed budget that would cut funding for the Employee Benefits Security Administration. 

The Senate Committee on Appropriations on August 1 passed the annual funding bill for the Department of Labor, including increased spending for both the DOL and the Employee Benefits Security Administration, which differed from budget cuts passed by a House Committee in June. 

According to the bill, the DOL would receive $13.8 billion in discretionary funding, and EBSA will receive $206 million, an increase of $15 million, for fiscal year 2025. 

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Acting Secretary of Labor Julie Su had testified before the House Committee on Appropriations in April, requesting a $13.9 billion total budget for 2025. Her request also included a plan to set aside $4.7 million to implement provisions from the SECURE 2.0 Act of 2022.  

Meanwhile, the House Appropriations Committee voted 31 to 25 on July 10 to advance an appropriations bill that would prevent the DOL from using any funds to implement the Retirement Security Rule, which has now been stayed by two federal courts. The proposed budget also contained sharp cuts to the Employee Benefits Security Administration and the Occupational Safety and Health Administration. 

The House committee-passed bill provided a total discretionary budget of $10.5 billion for the DOL, which is $3 billion, or 23%, below the fiscal year 2024 funding level and $3.6 billion below the president’s budget request. 

The Senate Appropriations Committee also urged the DOL in its recent bill to finalize its ESOP valuation regulations. 

“The Committee is disappointed that EBSA failed to achieve the latest regulatory agenda goal of issuing an adequate consideration notice of proposed rulemaking in March of this year,” the report stated. “The Committee urges the Department to prioritize a timely, formal notice and comment rulemaking on the adequate consideration exemption that ensures taxpayers benefit from stakeholder input and experience, consistent with congressional intent.” 

The Senate bill will get further debate and amendment, as will the House bill.  

401(k) Trading Hit Four-Year High on Monday

A market dip to start the week saw more 401(k) trades toward safe assets than had been seen since the March 2020 onset of the pandemic, according to Alight.

Market declines come and go. But Monday’s sharp sell-off appeared to spook even everyday 401(k) savers more than usual, with trading activity hitting its highest mark since the pandemic spooked markets back in March 2020.

Trading activity in 401(k) plans held by recordkeeper Alight surged to 8.3 times the average daily volume, according to Rob Austin, head of thought leadership for Alight Solutions. Net trading on August 5 made up 0.08% of balances; for comparison, the net trading for all of July was 0.09%, according to Alight.

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Austin, who tracks trading through Alight’s 401(k) Index, notes that people are most likely to trade in their retirement plans when market indices fall by 2% or more in a day; on Monday, the three major U.S. indices fell by more than 2.5%.

The 401(k) traders “overwhelmingly sought safety” in their choices, according to Austin, with stable value funds, bonds and money markets accounting for most inflows.

Meanwhile, outflows were primarily from large-cap U.S. equities, along with target-date funds, though to a lesser extent.

By Tuesday, the markets had begun to settle, clawing back some gains. But Austin notes that many 401(k) traders may hold those safer assets, at least for a while.

“Trading activity often settles, but much depends on how the market responds,” he says. “Historically, people are much more likely to quickly react when stocks fall, and they often don’t buy back into equities until well after they have rebounded.”

He also noted, as did many retirement saving experts that PLANADVISER spoke to on Monday, that plan sponsors will likely be communicating a message of calm to participants, without overstepping their role.

“Many plan sponsors will provide communications on the importance of staying the course and not reacting to daily swings in the market, but they also don’t want to accidentally become a fiduciary by providing specific advice,” he said.

There’s no question trading outside of 401(k)s was running rampant on Monday, in part due to a soft employment market report that came out Friday morning, August 2. Retail brokerages Charles Schwab and Fidelity Investments both reported issues on their trading platforms, with website Downdetector, which tracks online service outages, noting a high volume of problem reports from customers.

Alight is the third largest defined contribution recordkeeper by both assets and participants, following Fidelity and Empower in both categories, according to the Recordkeeping Survey by PLANSPONSOR, a sister publication of PLANADVISER.

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