Our periodic Washington D.C. newsletter highlights the expertise of our Wagner Law Group attorneys analyzing legislative, regulatory and other cutting-edge benefits issues arising from activity in Washington or other important jurisdictions. Our office members are well suited for this given many of them have decades of experience working in key governmental agencies such as the Department of Labor (“DOL”) and Pension Benefit Guaranty Corporation (“PBGC”).
This edition of our Benefits Bulletin has articles analyzing:
- the DOL’s proposed regulation clarifying and expanding fiduciary discretion when selecting designated investment alternatives for 401(k) and other defined contribution plans
- two recent PGGC announcements regarding amicus brief and opinion letter programs
- an upcoming compliance deadline for 2024 amendments to Regulation S-P
- a recent Fourth Circuit opinion holding Merrill Lynch Wealth Choice Awards Are Not an ERISA Pension Plan
DOL Issues Proposed Rule on Alternative Assets
By Camille Castro and Stephen Wilkes
On March 31, 2026, the Department of Labor (the “DOL”) issued a proposed regulation that would clarify and expand fiduciary discretion when selecting designated investment alternatives for 401(k) and other defined contribution plans. The proposal responds to Executive Order 14330, “Democratizing Access to Alternative Assets for 401(k) Investors,” which called for expanded access to private market investments and other alternative assets in retirement plans. The Executive Order directed the DOL to reexamine guidance and clarify the DOL’s position on fiduciary process regarding alternative assets, including considering “appropriately calibrated safe harbors.”
The DOL’s proposed rule goes beyond the Executive Order by proposing an asset-neutral approach that involves a general, process-driven safe harbor for prudently selecting any designated investment alternative. The proposal emphasizes how ERISA is grounded in process, not outcomes, noting how prudence is evaluated based on the fiduciary’s reasoning at the time of the decision, not by hindsight. The proposed rule also confirms that fiduciaries have broad discretion to select investment types and emphasizes that plan fiduciaries who follow a prudent process should be given judicial deference by the courts.
The proposed rule establishes a process-based safe harbor, which involves six non-exhaustive factors that should be evaluated by plan fiduciaries. These factors include (1) performance; (2) fees; (3) liquidity; (4) valuation; (5) performance benchmarking; and (6) complexity. Under the proposed safe harbor, there is a presumption of prudence if a fiduciary objectively, thoroughly, and analytically evaluates the listed factors when selecting an investment. The proposal includes detailed examples illustrating how the factors can be satisfied in practice. The proposed rule also notes that significant judicial deference should be given to fiduciaries that meet the safe harbor’s requirements.
Public comments on the rule are due by June 1, 2026. To date, over 25,000 comments have been received, demonstrating the deep public interest in the proposal. For a deeper dive into the DOL’s proposed rule and its practical implications, see the Overview of the Proposed Regulation by the Wagner Law Group.
PBGC To Expand Its Influence Through Opinion Letters and Amicus Briefs
By Israel Goldowitz
Two recent Pension Benefit Guaranty Corporation announcements provide opportunities to obtain compliance assistance and participate in the development of law and policy concerning the federal pension insurance system.
On March 17, 2026, PBGC announced a “relaunch” of its Opinion Letter Program. https://www.pbgc.gov/news/press/pr26-003. The agency stated that the initiative “provides meaningful compliance assistance to the public by answering questions about how PBGC would apply the law to specific factual circumstances.”
And on May 7, 2026, the agency announced the “launch” of its Amicus Brief Program. https://www.pbgc.gov/employers-practitioners/legal-resources/amicus-curiae-program. Also part of the agency’s compliance assistance efforts, the program “establishes a process for private parties to request that the agency file an amicus brief in cases with potential implications for PBGC or the broader private pension system.”
As part of these announcements, PBGC published procedures for seeking an opinion letter or amicus participation. Among other things, an opinion letter request must contain a detailed description of the acts or transactions at issue (including any larger act or transaction of which they are part), an analysis of any documents submitted, and an explanation of the grounds for reaching a particular answer (if sought) and in any event the requestor’s views with citations to authority.
The opinion letter procedures also address such matters as who may seek an opinion letter, withdrawal of an opinion letter request, situations in which the agency will not issue an opinion letter, and who may rely on an opinion letter and in what circumstances.
An amicus brief request must state, among other things, the requestor’s interest in the case, whether there is a challenge to Title IV, PBGCs regulations, or informal guidance such as an opinion letter, whether the requestor wants the agency to advocate for a particular outcome, and, if so, how that outcome would affect PBGC’s interests or the integrity of the private pension system more broadly, and how that outcome would align with prior PBGC positions or court rulings.
PBGC’s Use of Opinion Letters and Amicus Briefs
PBGC has often staked out positions on major issues in opinion letters and amicus briefs.
Opinion Letter 91-1 (Jan. 14, 1991) provides a good illustration. There, the Agency’s General Counsel stated that ERISA does not authorize PBGC to guarantee benefits under annuity contracts distributed in a standard termination where the insurer later fails. At the time, there were incentives to terminate overfunded plans to capture surplus assets. With some insurers considered risky, some saw PBGC as the insurer of last resort for failed annuity issuers.
The General Counsel reasoned that the “insurable event” for a single-employer plan is plan termination. For example, ERISA Section 4022(a) provides that PBGC shall guarantee benefits under a single-employer plan “which terminates.” And Section 4061 provides that the agency shall pay benefits under a plan “terminated under this title . . . .”
That being so, a proper final distribution of plan assets completes the standard termination process and accordingly, “extinguishes the PBGC’s statutory guarantee obligation”:
PBGC does not stand behind benefits distributed in a lump sum payment, nor protect from subsequent loss a participant who chooses to “roll over” a lump sum distribution into an Individual Retirement Account. . . . Similarly, the failure of an insurance company subsequent to a proper distribution of plan assets through the purchase of annuity contracts does not result in an insurable event or reinstate the PBGC guarantee.
The General Counsel buttressed her conclusion by reviewing how the insurance program is financed. Under ERISA, insurance premiums continue to accrue until, but only until, a plan’s assets are distributed in a standard termination. “Obviously, had Congress intended the PBGC to guarantee against a subsequent failure of the insurance company from which annuities were purchased, it would have designed a premium structure to protect PBGC against that continued exposure.”
The Persuasive Power of PBGC Opinion Letters and Amicus Briefs
PBGC has never claimed more than the “power to persuade” under Skidmore v. Swift & Co., 323 U.S. 134 (1944) for its opinion letters. An opinion letter would not have been entitled to “deference” under Chevron USA v. Natural Resources Defense Council, 467 U.S. 837 (1984). Nor would a position an agency takes in an amicus brief, at least on questions not plainly governed by agency regulations.
But a persuasive opinion letter or amicus brief may represent the “best” interpretation under Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024). For instance, in Beck v. PACE Int’l Union, 551 U.S. 96 (2007), the Supreme Court agreed with PBGC that a plan merger is not a way of closing out a plan in a standard termination. The Court held that PBGC’s view is a “permissible one, and indeed the more plausible.” In language that evokes Opinion Letter 91-1, the Court reasoned that, in a closeout, “[t]he assets of the plan are wholly removed from the ERISA system. . . . Merger is fundamentally different: it represents a continuation rather than a cessation of the ERISA regime.”
PBGC Objectives
PBGC has historically sought to leverage its resources through regulations and informal guidance, including opinion letters, though that program has been largely dormant for several decades. Its amicus program has always been active, including support of the Solicitor General on a withdrawal liability issue in M & K Employee Solutions v. IAM Natl Pension Fund in the current Supreme Court Term.
Until now, the agency has not provided an official process for seeking an opinion letter or amicus support, or the criteria it will apply. Successfully invoking these processes will require a sense of the agency’s historical views, its priorities, and its general approach to legal policy matters.
In our experience, PBGC is mainly interested in the proper development of pension insurance law and policy. For instance, Opinion Letter 91-1 and PBGC’s position in Beck mainly reflect concern for the integrity of the pension insurance system. It is therefore important to understand the agency’s thinking in a given area and on the pension insurance system as a whole.
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Wagner Law Group’s Washington, DC office represents more than 100 years’ experience in senior positions at PBGC in litigation, regulations, legal policy, benefit policy, actuarial, financial, and ombuds functions, and more than 100 years’ in representing clients with PBGC issues. If we can assist you with a PBGC matter, including an opinion letter or amicus brief request, please contact one of us.
Compliance Reminder: Implementation of Regulation S-P Amendments
By Camille Castro and Stephen Wilkes
June 3, 2026, is the deadline for “smaller entities,” defined as those with less than $1.5 billion in assets under management, to comply with the 2024 amendments to Regulation S-P. The amendments impose new requirements related to incident response program obligations and data breach notifications, among other items. The amendments, which have been in effect for larger entities since December 3, 2025, apply to registered investment advisors, broker-dealers, investment companies, funding portals, and transfer agents (collectively, the “covered entities”).
Under the new requirements, covered entities must establish and implement written policies and procedures regarding detection, response, and recovery from data security breach incidents. These policies and procedures must address the oversight and monitoring of service providers that handle customer data to ensure that appropriate safeguards are in place to protect such information and provide notification within 72 hours to the covered institution of any data breach. Additionally, the amendments require notification to customers within 30 days of any breach involving “sensitive customer data,” such as Social Security numbers, account information, or passwords, that could cause significant harm or inconvenience to the customer. Covered entities are also required to retain written records documenting customer data security-related policies, procedures, investigations, and other related documents. The amendment also codifies an exception to the requirement to provide an annual privacy notice if the covered entity has not changed its privacy policies since the last notice and does not share nonpublic personal information with non-affiliates.
Fourth Circuit Holds Merrill Lynch Wealth Choice Awards Are Not an ERISA Pension Plan
By Eric Keller
Section 3(2) of ERISA provides that an “employee pension benefit plan” subject to ERISA includes any plan or program that “results in a deferral of income by employees for periods extending beyond termination of covered of employment or beyond”. On the other hand, a DOL regulation states an “’employee pension benefit plan’ … shall not include payments made by an employer to some or all of its employees as bonuses for work performed, unless such payments are systematically deferred to the termination of covered employment or beyond”.
Last month, the US Court of Appeals for the Fourth Circuit affirmed a district court’s holding that “Wealth Choice Awards” granted by Merrill Lynch to select financial advisor employees were bonuses exempt from ERISA’s definition of employee pension benefit plan even though some individuals who received payments under the awards were former Merrill Lynch employees. Milligan v. Lynch, 173 F.4th 128 (4th Cir. 2026). The awards in question were earned and vested if the employee remained employed with Merrill Lynch for eight years after the grant date. Payments were made within 2½ months after the vesting date. Generally unvested awards were forfeited upon termination of employment, but there were exceptions in the event of death, disability, retirement or involuntary termination as part of a reduction-in-force whereby unvested payments were vested and paid following termination of employment.
The plaintiff argued these exceptions caused the awards to systematically defer employee income to periods extending beyond termination of employment triggering ERISA pension plan coverage and causing the eight-year vesting requirement to be unlawful under ERISA. Because it was undisputed that between 2018 and 2014, 92% of the recipients of payments under the awards were current employees and only 8% were former employees, the court found the payments “cannot be said to be ‘systematically deferred to the termination of covered employment or beyond’.” In addition, the court noted the following additional facts that supported its conclusion the awards were exempt bonuses rather than an ERISA pension plan: (i) the purpose of the awards was to encourage high-performing employees to remain employed with Merrill Lynch and not provide retirement benefits, (ii) the awards were limited to high-performing advisors and not available to all employees, (iii) the awards are not funded with money employees would otherwise be immediately entitled to receive; (iv) the awards were not funded, and (v) employees could not choose to defer payment until termination of employment or beyond.
