The U.S. Department of Labor (DOL) is eyeing fiduciary changes and drug price transparency in an effort to reduce regulatory burdens, the department unveiled this month in its semiannual regulatory agenda.
Proposed employee benefits changes are just some of the policies the DOL plans to look at; the department's agenda included some 150 proposals.
In its agenda, the DOL said that it will consider the extent to which fiduciaries may prioritize environmental, social, and governance (ESG) factors in retirement investment decisions.
That agenda item comes roughly three months after the Trump administration ceased its legal defense of the rule allowing fiduciaries to consider ESG factors when choosing retirement investments, according to a legal filing with the 5th U.S. Circuit Court of Appeals. The DOL is being asked to replace it with a new regulation.
The ESG rule has been in effect since early 2023. It was finalized in 2022 following an executive order signed by former President Joe Biden in May 2021 that directed federal agencies to consider policies to protect against the threats of climate-related financial risk.
The ESG rule, titled "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights," permits retirement plan fiduciaries, such as 401(k) plan sponsors, to consider climate change and other ESG factors when they select investment options and exercise shareholder rights, including proxy voting for plan-held securities. The DOL at the time emphasized that while the rule allows fiduciaries to consider these factors, it does not mandate doing so.
The rule has been subject to significant debate, with opponents arguing that it will hurt retirement savings. Supporters of the ESG rule, meanwhile, say it is helpful to all parties because it enables fiduciaries to use their best judgment when making investment decisions by allowing them to consider ESG factors as a tie-breaker when other options equally served the plan’s interest.
Another proposal in the DOL agenda includes the "Improving Transparency into Pharmacy Benefit Manager (PBM) Fee Disclosure." The department said it will look at ways to improve transparency around the direct and indirect compensation PBMs receive from employer-sponsored health plans. That's in line with an April executive order on lowering drug prices and reducing costs for Medicare. Trump also issued another executive order in May aimed at curbing soaring prescription drug prices, including for popular weight loss drugs including GLP-1s.
The DOL also said in its agenda that it will examine ways it can improve market transparency in pricing and cost-sharing information for consumers.
Spending on prescription drugs remains the fastest-growing component of health benefit costs, according to data from Mercer. Drug benefit costs per employee rose 7.2% in 2024, and the ongoing introduction of very high-cost gene and cellular therapies is also adding to these higher costs, employers reported.