New 'Balance the Scales Act' Requires Feds to Notify Employers Before Aiding ERISA Lawsuits

The newly proposed Balance the Scales Act introduces strict new reporting and notification rules for the Secretary when providing specific assistance to attorneys planning to sue employee benefit plans under the Employee Retirement Income Security Act (ERISA). Essentially, if the Department is going to help a lawyer build a case against a plan sponsor or employer, they now have to tell the target first and sign a detailed contract about the help they’re providing. This bill also formally establishes that promoting and encouraging voluntary private retirement plans is the official policy goal of the Act.

The New Rules of Engagement: Government-Aided Lawsuits

Section 2 of this bill, which deals with what it calls "adverse assistance," is the part that will create the most immediate change. If the Secretary decides to offer specific help—like sharing information or giving advice—to an attorney who is planning to file a civil lawsuit against a plan sponsor or employer, they must now jump through two major hoops. First, they must sign a written agreement with the attorney detailing the exact scope and nature of the help. Second, and this is the big one for employers, they must send a copy of that agreement to any employer, plan sponsor, or fiduciary who might be directly hurt by that assistance. Think of it as a mandatory heads-up before the government helps someone take you to court over your 401(k) plan.

Accountability by the Hour

Beyond the initial notification, the Secretary now faces a hefty annual reporting requirement to Congress regarding every single one of these adverse assistance agreements. This isn't just a summary; the report must include the agreement itself (with personal identifiers redacted), the date it was signed, and a thorough breakdown of the help provided. This includes a log of all phone calls and meetings—detailing the date, attendees, communication method, and the purpose of the discussion. For the busy professionals who manage these plans, this means that if their plan is targeted, the government's involvement will be highly scrutinized and documented, potentially increasing transparency but also creating a massive administrative lift for the Department of Labor.

Shifting the Policy Goal to Retirement Security

Section 3 sets a clear policy direction: the government should actively promote, encourage, and make it easier for businesses to voluntarily set up and maintain private retirement plans. This section is Congress laying its cards on the table, stating that the retirement security of millions of Americans is directly tied to these voluntary plans. While this sounds like a positive, common-sense goal, it’s important to note that this section doesn't create any new programs or funding; it just formalizes the policy intent. However, when combined with the new notification rules in Section 2, the message is clear: the government wants more private plans, and it's making the process of suing those plans more transparent for the sponsors.

Practical Challenges and The Fine Print

While increased transparency is generally good, the extensive documentation required in Section 2 could create a serious administrative bottleneck for the Secretary's office. For the average person, the impact is subtle: if you rely on a private pension or 401(k), this law is intended to support the continued existence of that plan by offering plan sponsors more procedural protection. However, the bill does allow the Secretary a 60-day grace period after the law passes to retroactively sign agreements and notify parties for assistance that was already underway. This means for any ongoing investigations or assistance, the notification might come after the fact, potentially undermining the spirit of the new notification rule for current cases.