White House Announces Pause on Biden Administration Regulations That Have Not Been Finalized

Executive Action Pauses, and May Potentially Withdraw, the Announced Adequate Consideration Rule and Safe Harbor Exemption for ESOPs 

Washington, D.C. – In one of the first actions of the Trump presidency, the White House has announced a pause on all proposed regulations from the Biden Administration that have yet to be finalized. The moratorium effectively freezes pending Executive Branch agency regulations.

“The ESOP Association welcomes the moratorium on unfinalized regulations, which allows our membership more time to thoroughly review the Department of Labor’s proposed adequate consideration rule for ESOPs released last Thursday,” said James Bonham, President and CEO of The ESOP Association. “It affords us the opportunity to provide input to the new White House, Labor Department, and Congressional leaders, so we might explore the best path forward.  However, our first analysis of the noticed but unpublished proposal is that it is clearly and deeply flawed. It does not reflect an effort to make ESOPs easier or less costly to form or operate. It stretches into areas the agency does not have authority to regulate. And it sets up a regulatory approach that, were it to become final, would drive many if not all ESOP trustees and insurers out of the market. It will require substantial revision to its over-reach and biased approach.

“Nevertheless, we remain steadfast that a fair and clear set of regulations which Trustees can reasonably and prudently follow are essential so more ESOPs can be formed without fear of government persecution. Our goal remains unchanged: a fair and transparent rule that makes it easier and less costly for new ESOPs to be formed, per Congress’ intent, and we look forward to working with the Trump Administration to help make the dream of employee ownership a reality for more American workers.”

Full details of the President’s regulatory moratorium have not yet been released, but it is certain to include, at a minimum, a pause of the Notice of Planned Rule Making (NPRM) on adequate consideration issued last Thursday until such time as the new Administration can review. In last week’s NPRM, the agency noted the expected publication of the proposal in the January 22nd Federal Register. 

Under the Administrative Procedure Act (APA) a new regulation is not considered officially proposed until it has been published in the Federal Register. The ESOP regulations released last week are currently existing in a regulatory “no-man’s land” between the NPRM and official publication.

When taking office in 2017, then-President Trump issued a similar pause in regulation. At that time, regulations that were in this status between NPRM and Federal Register publication were immediately withdrawn and not published, thereby ending the proposal. Despite being initially withdrawn, several regulations were revised in whole or in part followed by a new NPRM and publication in the Federal Register.

The moratorium is a common approach taken by new Presidents. According to a report from the nonpartisan Congressional Research Service, “Such moratoria have essentially put a halt to rulemaking activities within federal agencies to allow the new Administration to take stock and decide which regulations to allow to move forward and which to abandon…Moratoria have been issued in the first days of all recent Administrations when the incoming President was of a different party from the outgoing President—including the Reagan, Clinton, George W. Bush, Obama, Trump, and Biden Administrations.” This approach allows time for new Presidents to review federal regulations that have not been finalized and determine if they meet the new Administration’s priorities.