Retirement Savings Reform – a focus for the Trump Administration and Congress

By Brandon Roman on December 17, 2018 Posted in Tax and Retirement

On August 31, 2018, President Trump issued an Executive Order directing the Department of Labor (DOL) and Treasury Department to take action to “promote retirement security for America’s workers” by, among other things, expanding access to Multiple Employer Plans (MEPs). Specifically, within 180 days of the issuance of the Executive Order, DOL must “consider…whether to issue a notice of proposed rulemaking, other guidance, or both, that would clarify when a group or association of employers or other appropriate business or organization could be an ‘employer.’” Within that same timeframe, the Treasury Department must “consider proposing amendments to regulations or other guidance… regarding the circumstances under which a MEP may satisfy the tax qualification requirements…including the consequences if one or more employers that sponsored or adopted the plan fails to take one or more actions necessary to meet those requirements.”

In response to that Executive Order, DOL on October 23, 2018, published a Notice of Proposed Rulemaking (NPRM) in the Federal Register that “would make it easier for small businesses to offer retirement savings plans to their workers through Association Retirement Plans, which would allow small businesses to band together to offer 401(k) plans to their employees.” Specifically, under title 29 of the Code of Federal Regulations, DOL’s NPRM seeks to clarify the circumstances under which an employer group or association or a professional employer organization (PEO) may sponsor a workplace retirement plan. In particular, the NPRM clarifies that employer groups or associations and PEOs can, when satisfying certain criteria, constitute “employers” within the meaning of section 3(5) of ERISA for purposes of establishing or maintaining an individual account “employee pension benefit plan” within the meaning of ERISA section 3(2). As part of the NPRM, DOL is requesting comments on whether it should address, by regulation or otherwise, whether there are other types of entities that should be treated as an “employer,” within the meaning of ERISA section 3(5), for purposes of sponsoring a MEP. Importantly, the NPRM would apply solely to defined contribution plans.

Under the NPRM, an employer generally would be required to execute a participation agreement or similar instrument that lays out the rights and obligations of the MEP sponsor and the participating employer before participating. However, these employers would not be viewed as sponsoring their own separate, individual plans under ERISA. Rather, the MEP, if meeting the conditions prescribed in the NPRM, would constitute a single employee benefit plan for purposes of title I of ERISA. Consequently, the MEP sponsor – and not the participating employers – would generally be responsible, as plan administrator, for compliance with the requirements of title I of ERISA, including reporting, disclosure, and fiduciary obligations.

Notably, DOL considered, but decided not to include two specific categories of MEPs that are “outside the scope” of the current NPRM “because they implicate different policy concerns”: (1) “Open MEPs” (i.e., multiple employer plans contemplated under proposed Senate legislation known as RESA (Retirement Enhancement Security Act) and the House counterpart tilted the Family Savings Act of 2018), which are plans that cover employees of employers with no relationship other than their joint participation in the MEP; and (2) “Corporate MEPS”, which are plans that cover employees of related employers which are not in the same controlled group or affiliated service group, within the meaning of section 414(b), (c), and (m) of the Code.

Interestingly, the NPRM also specifically notes:

The Department’s proposal differs in significant ways from several legislative proposals introduced in Congress. For one thing, the Department’s proposal is more limited because it relies solely on the Department’s authority to promulgate regulations administering title I of ERISA. Unlike the Department, Congress has authority to make statutory changes to ERISA and other areas of law that govern retirement savings, such as the Internal Revenue Code (Code). The Department does, however, have authority to interpret the statutes it administers, and it believes that a regulation clarifying the meaning of the statutory term “employer,” 29 U.S.C. 1003(a)(1), will ensure that statutory term is a clear legal standard for the use of MEPs under title I of ERISA.

As such, it does not appear that the NPRM – as currently drafted – is likely to have much of a substantive impact on ongoing legislative efforts surrounding Open MEPs. Comments on DOL’s NPRM are due by December 24, 2018. As for Treasury’s mandate under the Executive Order, the Department recently updated its unified regulatory agenda, which indicates that the Internal Revenue Service (IRS) intends to issue an NPRM on the “one bad apple rule” by April 2019.

One final note regarding the aforementioned legislative efforts: both the House and Senate – Republicans and Democrats alike – would like to get retirement savings reform done by year’s end. The Family Savings Act of 2018 – which is one of the three legs of “Tax Reform 2.0” that passed the House earlier this year – represents the House’s beginning negotiating position with the Senate on RESA, which is the retirement savings reform package passed unanimously out of the Senate Finance Committee last Congress. Notably, late last month, House Ways and Means Committee Chairman Kevin Brady (R-TX) released a package with various tax, retirement, and disaster-related provisions – including a provision related to open multiple employer plans (Open MEPs). Per the Committee:

Under the provision, multiple employer plans that meet specified requirements, including a requirement that the plan have a pooled plan provider, would be considered to be “pooled employer plans.” A pooled plan provider would be required to agree to be a fiduciary of the plan and to serve as the plan administrator, responsible for ensuring that the plan meets all applicable tax-law and ERISA requirements. In the event that one employer in a pooled provider plan violates one of the tax-law requirements, the other employers would not be affected by that failure. In addition, the ERISA requirements regarding the types of employers that may participate together in a multiple employer plan would be expanded for pooled provider plans to eliminate any requirement that the employers in the plan be related to each other in some fashion. The provision would be effective for plan years beginning after December 31, 2019.

Finally, note that whatever happens in the retirements savings space in the last few days of this Congress, with Democrats taking control of the House next year, expect for incoming House Ways and Means Committee Chairman Richard Neal (D-MA) to continue pursuing further reforms in the 116^th Congress. Note, too, with incoming Chairman Chuck Grassley (R-IA) taking the reins of the Senate Finance Committee next Congress, it will be important to keep apprised of his priorities – priorities which could well include retirement savings reform.

Michael Curto and Brandon Roman are the authors of this article.

NAFTA is Dead, Long Live NAFTA

By Squire Patton Boggs on October 18, 2018 Posted in International

On September 30, 2018, the US, Mexico and Canada announced the successful conclusion of talks to replace the North American Free Trade Agreement (NAFTA). The US-Mexico-Canada Agreement (USMCA) contains a number of chapters not included in the original deal, including sections on digital commerce, currency policies and state-owned enterprises (SOEs). Other standard chapters – such as Intellectual Property, Rules of Origin, and Sanitary and Phytosanitary (SPS) Measures – have also been updated to reflect the 21st century economy. Companies operating in North America must now closely examine the deal to determine how it could impact their supply chains. (For an actual/prospective timeline for Congressional consideration of the USMCA, click here).

What Is New?

The Office of the US Trade Representative (USTR), which led negotiations on behalf of the Trump Administration, has characterized the new agreement as a “plus-ed up” version of the Trans-Pacific Partnership, adding this deal will serve as the “model” for future trade agreements negotiated by the US.

Companies operating in North America must closely examine USMCA to ensure they understand the impact of its changes on trade across the continent, which could range from domestic content requirements to legal recourses available for disputes to customs procedures and much more. These changes include the following:

Digital Commerce. USMCA contains provisions on digital trade, an issue not previously discussed in NAFTA. One provision would ban data localization requirements, or laws that regulate the collection, storage and international transmission of data collected within the country. Notably, USMCA does not exempt financial services firms from this prohibition. More in line with American policy, USMCA also contains language that would not hold internet companies liable for content posted from third parties. Another provision would establish that companies wanting to do e-business need not have a physical presence in a jurisdiction to operate there.
Rules of Origin. USMCA tightens rules of origin for a variety of “steel intensive goods,” including – but not limited to – autos and auto parts. USMCA requires a 75% domestic content for auto inputs manufactured in North America in order for automobiles to qualify for preferential, duty-free treatment. This represents an increase from the current 62.5% requirement in NAFTA. Other, non-automotive steel goods would also be subject to more stringent requirements aimed at incentivizing the use of steel produced in North America.
Addressing China’s Trade Practices and Policies. USMCA includes a number of provisions seemingly aimed not at North America, but eastward toward China. A first-ever for the US, USMCA addresses currency manipulation and monetary policy in the core text of a trade agreement, including requirements related to transparency in foreign exchange activity that would be subject to the deal’s state-to-state dispute settlement mechanism. USMCA also contains a clause relevant to future free trade agreement negotiations with non-market economies, most notably China. USMCA would require the parties to give three month notice to the other parties if they seek to enter into new trade agreement negotiations with a non-market economy. The clause also provides that “Entry by any Party into a free trade agreement with a non-market country, shall allow the other Parties to terminate this Agreement on six-month notice and replace this Agreement with an agreement as between them (bilateral agreement).” Essentially, this provision would provide the US with a review mechanism should Canada or Mexico decide to seek a trade agreement with China, an act that could change the dynamic of trade among the North American partners.
Customs Procedures. The agreement modernizes and streamlines customs procedures among the three countries, which has the potential to save companies time and money as they transport goods across North American supply chains. USMCA also increases de minimis levels, or the value amount below which shipments will be exempted from customs duties or taxes. The US set its de minimis level at US$800, in accordance with existing law. Mexico and Canada agreed to set their de minimis levels at US$117 and C$150, respectively, for customs duties only; their de minimis levels for tax purposes remain low, at US$50 for Mexico and C$150 for Canada.
Investor-State Dispute Settlement (ISDS). USMCA would phase out ISDS between the US and Canada. Vis-à-vis the US and Mexico, ISDS protections currently in NAFTA would be preserved for five sectors: (1) oil and gas, (2) power generation services, (3) telecommunication services, (4) transportation services and (5) the management of ownership of infrastructure. The elimination of the provision for Canada and the pared back protections for specific investments in Mexico are likely viewed as a victory by US Trade Representative Robert Lighthizer, who continually expressed his belief that ISDS allows corporations to undercut a country’s sovereignty and encourages outsourcing. However, this change could have an impact on US business support for the deal, as some sectors (such as chemicals and mining) are unhappy they were not included among the five sectors.
Oil and Gas Industry. USMCA (like NAFTA) will continue to prohibit tariffs on raw and refined oil and gas products. USMCA would also seek to harmonize customs procedures. This includes allowing for alternative documentation that certifies natural gas and oil have originated in Canada or Mexico upon entering the US. The agreement no longer includes the so-called “proportionality clause,” which placed certain limitations on the ability of the three parties to constrain the export of energy products.
Pharmaceutical Industry. Canada agreed to a 10-year protection period for biologic drugs. The 10-year period goes beyond the maximum eight years that Canada agreed to in the Trans-Pacific Partnership, but is below the 12-year exclusivity period currently found in US law.
Future Review. Instead of the so-called “sunset” provision reportedly pursued by US negotiators originally, USMCA includes a six-year review mechanism and provides for a 16-year extension of the deal if no parties object.

What Is Next?

US President Donald Trump, Canadian Prime Minister Justin Trudeau and outgoing Mexican President Enrique Peña Nieto are expected to formally sign the agreement on November 30, at which point it must be approved under each party’s domestic procedures. In the US, Congress will ultimately decide USMCA’s fate. Trade agreements are not treaties under US law and, therefore, are not “self-executing.” Instead, trade agreements must be approved by both chambers of Congress and signed into law by the President through implementing legislation under a process known as Trade Promotion Authority (TPA). The attached flowchart sets out timeline for congressional consideration of USMCA under TPA.

Trump Administration officials say they do not plan to transmit USMCA’s implementing legislation to Congress until early next year, putting USMCA’s fate in the hands of the new Congress (the 116th session). If Republicans maintain control of both chambers, they will likely advance USMCA on the President’s schedule. However, USMCA could face some uncertainty if Democrats win a majority in either the House or the Senate and wish to further scrutinize the deal as negotiated by Trump officials. While some Democratic lawmakers have expressed concerns with aspects of the deal, Trump Administration officials point to USMCA’s strengthened labor and rules of origin provisions as appealing to the left. Regardless, President Trump could initiate withdrawal from the original NAFTA deal in an effort to hasten congressional approval of the replacement deal.

How We Can Help

We can assist companies in examining their supply chains for potential USMCA impacts, particularly if higher domestic content requirements involve affected inputs imported from abroad. Our lawyers and policy experts can also provide advice as USMCA moves through the domestic review process. US domestic companies will have opportunities to comment directly on chapters that benefit or disadvantage their operations to Trump officials or through their members of Congress, who must ultimately implement USMCA into US law. We are well-positioned to provide strategic advice and practical assistance.

Contacts

Frank Samolis
Partner, Washington DC
T +1 202 457 5244
E frank.samolis@squirepb.com

David Stewart
Principal, Washington DC
T +1 202 457 6054
E david.stewart@squirepb.com

Stacy Swanson
Public Policy Advisor, Washington DC
T +1 202 457 5627
E stacy.swanson@squirepb.com

Ludmilla Kasulke
Associate, Washington DC
T +1 202 457 5125
E ludmilla.kasulke@squirepb.com

Austin Harrison
Associate, Washington DC
T +1 202 457 6331
E austin.harrison@squirepb.com

US Senate Passes Tax Reform Legislation – Here Is What You Need to Know

By Squire Patton Boggs on December 4, 2017 Posted in Tax and Retirement

At two o’clock in the morning on Saturday December 2, 2017, the Senate took another major step towards accomplishing comprehensive tax reform – on a near party line vote, it passed its version of the most sweeping legislation to overhaul the US Tax Code in a generation. Although Republicans have made significant progress on tax reform – at lightning speed – they still have more work to do before the bill becomes law. This week, House and Senate leaders are expected to begin the process of conferencing their respective versions of the bill. In particular, they will have to reconcile differences between the two Chambers, including the phase-in of the corporate rate, pass-through rates, Byrd-rule compliance, repeal of the Obamacare individual mandate and the mortgage interest deduction (to name a few). With hopes of passing the reconciled bill and getting it to the President prior to December 25, 2017, the GOP could be mere weeks away from securing their long-awaited and hard-fought legislative “win.” (NB: Though we are currently predicting a formalized conference process between the two chambers, the possibility remains that the Senate will simply say to the House, “this is the best we can do – take it or leave it.”)

In our previous alerts, available here and here, we have discussed the substance of the House and Senate bills, respectively. Tax-writers have made important changes since those were published, so, in this alert, we take stock of the latest developments. Below we highlight key aspects of the Senate-passed bill, starting with a brief overview of some domestic provisions, followed by more detailed points applicable to multinationals.

Senate Finance Committee Releases Tax Reform Proposals

By Squire Patton Boggs on November 13, 2017 Posted in Tax and Retirement

The November 9 release of the Senate Finance Committee Chairman’s Mark has put into high gear the race to complete once-in-a-generation tax reform. A mere five hours after the House Ways and Means Committee completed a four-day markup and voted its legislation out of Committee along party lines (further discussed here), Senate Republicans released their “conceptual draft,” which they plan to markup on Monday, November 13. Senate Republicans hope to vote on the bill the week after Thanksgiving. A common talking point among tax policy folks is that the Senate version will control and will be handed back to the House with a take-it-or-leave-it message. That said, our preliminary review of the Senate’s conceptual draft has identified significant differences between the House and Senate proposals, suggesting a conference committee seems likely if each body passes a bill, unless the House simply accepts the final Senate bill, as it did with respect to the Senate 2018 budget resolution. We will update this portion of our assessment as the Senate Finance Committee markup continues, and as we continue to analyze the differences between the two proposals. In the event a true conference is necessary, there is no doubt that it would impact both the timing and substance of the Tax Cuts and Jobs Act. In an ideal scenario, the GOP still intends to finish tax reform by the end of the year, securing their much-needed political “win” before next year’s midterm elections.

Herein, we highlight key aspects of the Senate Republican proposal, starting with an overview of key domestic provisions, followed by points applicable to multinationals.

House Republicans Propose Tax Reform Legislation – Will This Become Law?

By Squire Patton Boggs on November 6, 2017 Posted in Tax and Retirement

It’s here! House Republicans have released the legislative text of the most serious effort to reform the US Tax Code since 1986. Republican tax-writers have come a long way from the “Blueprint” and the “Unified Framework” – they have offcially broken ground on sweeping tax reform legislation titled the Tax Cuts and Jobs Act (the Bill). Although they have made significant progress, Congress still has more work to do to pass a bill by their proclaimed end-of year target. On the other side of the Capitol, the Senate does not plan merely to rubber-stamp the House proposal. In fact, Senate Republicans intend to release their own plan next week and begin a markup during the week of November 13. With that, the content of a final bill remains uncertain at best. Although the substance of the final bill remains a work in progress, one aspect of this process is certain: there is a political imperative for Republican lawmakers to secure a “win” before next year’s midterm elections. Below, we highlight key aspects of the proposed legislation, starting with a brief overview of some domestic provisions, followed by more detailed points applicable to multinationals.

Senate Votes to Overturn CFPB Arbitration Rule

By Squire Patton Boggs on October 26, 2017 Posted in Financial Services

Late last night, the US Senate voted 51 to 50 to repeal a Consumer Financial Protection Bureau (CFPB) rule prohibiting class action waivers in arbitration agreements. All but two Republicans (Senators Lindsey Graham (SC) and John Kennedy (LA)) voted to repeal the CFPB’s arbitration rule, while all Democrats voted against repeal. Vice President Mike Pence broke the 50-50 tie. In July, the House also voted to repeal the CFPB arbitration rule. President Trump is expected to sign the resolution. In a statement following the Senate vote, the president said: “By repealing this rule, Congress is standing up for everyday consumers and community banks and credit unions, instead of the trial lawyers, who would have benefitted the most from the CFPB’s uninformed and ineffective policy.”

Tracking Anti-Opioid Legislation in Congress

By Rory Murphy on October 24, 2017 Posted in General Legislative

“Overdose deaths, particularly from prescription drugs and heroin, have reached epidemic levels.”

-Chuck Rosenberg, Acting Administrator, Drug Enforcement Administration, October 2015[1]

Opioid abuse in the United States has been a topic of much discussion in recent years, but the problem continues to grow. Since 1999, the number of opioid-related overdose deaths has quadrupled.[2] In a single year from 2014 to 2015, the number of opioid-related overdose deaths increased by over 15 percent. Now, close to two-thirds of all overdose deaths involve some type of opioid.[3] The Health and Human Services Department estimates health and social costs related to prescription opioid abuse to be $55 billion.

The growing epidemic in America is a problem without a short-term solution and will require long-term thinking coupled with substantial resources from, and coordination between, authorities at the federal, state, and local government level.

On August 10, 2017, President Trump announced his intention to declare the epidemic a national emergency, and he will reportedly soon make the official declaration. Congress, on the other hand, has yet to pass meaningful legislation or settle on a coherent strategy, settling only for minor plus ups in the appropriations process. This is despite the introduction of numerous legislative ideas.

As of August 2017, 31 bills had been introduced in Congress that aim to address some aspect of the opioid crisis. These bills fall broadly into one of five categories: (1) increased funding to combat the problem; (2) additional regulations for prescribers of opioids; (3) additional regulations for the sale and manufacture of opioids; (4) adjustments of the criminal aspects related to opioid sales and use; and (5) miscellaneous.

Treasury Report on Identifying and Reducing Regulatory Burdens

By Brandon Roman on October 10, 2017 Posted in Tax and Retirement

As you will recall, earlier this year, President Trump issued an Executive Order requiring the Department of Treasury to identify regulations issued during the last year of the Obama Administration that would increase burdens on taxpayers and impede economic growth. After identifying eight such regulations in an interim report released in June, Treasury last week issued a follow-up report with specific recommended actions.

Final and Temporary Regulations under Section 385 on the Treatment of Certain Interests in Corporations as Stock or Indebtedness

Treasury plans to propose revoking the Section 385 documentation regulations and replacing them with streamlined documentation rules. According to Treasury, the proposed rule should include an effective date that would allow sufficient time for comments and compliance. The proposed streamlined documentation rules are expected to modify the requirements related to a reasonable expectation of ability to pay indebtedness and treatment of ordinary trade payables.

US Tax Reform – A Global View (Tax Strategy & Benefits Podcast)

By Squire Patton Boggs on October 9, 2017 Posted in Tax and Retirement

Following the publication of the Tax Reform Framework, members of our Tax Strategy & Benefits team sat down to discuss the key policy announcements and consider what is likely to happen next and the possible ramifications for businesses in the US and around the world. We have recorded their conversation as a podcast.

The panel, drawing on our global tax policy and transactional expertise, comprises:

Linda Pfatteicher, managing partner, Tax Strategy & Benefits, San Francisco and Palo Alto (Chair)
Matthew D. Cutts, chair, Financial Services & Tax Public Policy, Washington DC
Mitch Thompson, deputy practice group leader, Tax Strategy & Benefits, Cleveland
Jeremy Cape, partner, Tax Strategy & Benefits, London
Bernhard Gilbey, practice group leader, Tax Strategy & Benefits, London

To listen to the podcast, please click here.

If you have any questions about the issues raised and discussed during this podcast, please contact a member of the panel, any other member of our Tax Strategy & Benefits team or your usual firm contact.

The Path to Tax Reform: Without a Blueprint, Where Are We Headed?

By Brandon Roman on September 22, 2017 Posted in Tax and Retirement

With Congress back in session following its August recess, one agenda item stands above the rest in terms of priority: tax reform.

After several failed attempts at repealing the Affordable Care Act earlier this year, and with few other major achievements nearly nine months into the 115th Congress, Republicans are in need of a win and hoping it might come in the form of reforming the nation’s tax laws. Still, there remain many obstacles that could derail their quest for tax reform.

How Did We Get Here?

As we discussed more than a year ago, the House Republican tax reform “blueprint” served mostly as a conversation starter about tax reform. However, since its release, many of the House Republicans’ proposals – the border adjustable tax (BAT), in particular – received pushback from a variety of industries and ultimately forced tax-writers to reassess their approach to tax reform.

NAFTA Modernization Talks – Round One Completed; Next Stop, Mexico

By Ludmilla Kasulke on August 28, 2017 Posted in International

The first round of 5-day negotiations to modernize the North American Free Trade Agreement (NAFTA) concluded on August 20. In a joint statement released by trade officials from the United States, Mexico and Canada, they restated the commitment to updating the deal, continuing domestic consultations, and working on draft text. They also committed to a comprehensive and accelerated negotiation process to bring the agreement up to 21st Century standards to continue benefiting the citizens of North America.

Our sister publication, Latin America Legal, provides a recap for the first round of talks here. The negotiations are expected to resume in Mexico beginning September 1 and goes through September 5. The third and last round is scheduled to be in Canada, reportedly around September 23-27.

Federal Communications Commission Tackles the “Reassigned Number Problem”

By Squire Patton Boggs on July 24, 2017 Posted in Technology and Communications

Reassigned numbers have been at the center of the surge in litigation under the Telephone Consumer Protection Act (“TCPA”) during the last few years. By now the story is well known to businesses that actively communicate with their customers: the customer consents to receive telemarketing and/or informational robocalls[1] at a wireless telephone number, but months or years later the customer changes his or her wireless telephone number and—unbeknownst to the business—the telephone number is reassigned to a different person. When the recipient of the reassigned number starts receiving calls or messages from the business, a lawsuit often ensues under the TCPA because that party has not consented to receive such calls. The FCC adopted on July 13 a Second Notice of Inquiry (“Second NOI”) that promises to address this problem in a meaningful way. Specifically, the Second NOI focuses on the feasibility of “using numbering information to create a comprehensive resource that businesses can use to identify telephone numbers that have been reassigned from a consumer who has consented to receiving calls to a consumer who has not.”

Trump Administration Releases NAFTA Negotiating Objectives

By Rory Murphy and Ludmilla Kasulke on July 17, 2017 Posted in International

On July 17, the Trump Administration released its negotiating objectives for the upcoming renegotiation of the North American Free Trade Agreement (NAFTA). The detailed objectives can be found here, and a press release from the Office of the U.S. Trade Representative can be found here.

Senate Updates the Better Care Reconciliation Act of 2017

By Katie Novaria on July 14, 2017 Posted in Health Care

On Thursday, July 13, Senate Republicans released their updated draft of the Better Care Reconciliation Act of 2017. A PDF of the updated text can be accessed here.

We found the following documents and articles helpful:

An updated Congressional Research Service Section-by-Section for Titles I and II of the Better Care Reconciliation Act of 2017 (link)
A summary of the newly included Title III (link)
The Washington Post’s Sean Sullivan, Kelsey Snell, and Juliet Eilperin provide an overview of the revised bill (link)

The Latest on Fintech: Federal and Beyond

By Squire Patton Boggs on July 10, 2017 Posted in Financial Services

As one of the most rapidly growing industries in the financial services sector, financial technology (fintech) is receiving significant attention in the nation’s capital and around the world.

This article analyzes and provides updates on recent key fintech developments at the regulatory level, on Capitol Hill, and in the courts – including a brief update on the international regulation of the fintech industry. A PDF version of this article can be found here.

OCC

In March of this year, the Office of the Comptroller of the Currency (OCC) released a draft supplement to its licensing manual on the licensing of special purpose fintech banks (analyzed in greater detail here). The OCC provided an opportunity for public comments on the licensing supplement, a move intended to be consistent with the agency’s guiding principles of transparency and fostering open dialogue with stakeholders.

The comment period closed on April 14, and since that time, we understand that the OCC has decided to press “pause” on considering applications for and issuing fintech bank charters for entities that would not be accepting deposits. Though the agency has yet to clarify what its next steps will be regarding issuing fintech bank charters to entities not already eligible for a national bank charter, there are a few critical factors likely to impact how the OCC ultimately decides to proceed.