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The DOL Announces a Non-Enforcement Policy on Final ESG Investment and Proxy Voting Rules

On March 10, 2021, the DOL released an enforcement policy statement (the ?Ç£Statement?Ç¥), which announced that until the DOL publishes further guidance, it will not enforce the recently issued ?Ç£Financial Factors in Selecting Plan Investments?Ç¥ final rule (the ?Ç£ESG Rule?Ç¥) and the ?Ç£Fiduciary Duties Regarding Proxy Voting and Shareholder Rights?Ç¥ final rule (the ?Ç£Proxy Voting Rule?Ç¥, together with the ESG Rule referred to herein as, the ?Ç£Final Rules?Ç¥). The ESG Rule generally required plan fiduciaries to select investments and investment courses of action based solely on consideration of ?Ç£pecuniary factors,?Ç¥ and the Proxy Voting Rule set forth a plan fiduciary?ÇÖs obligations when voting proxies and exercising other shareholder rights in connection with plan investments. The implementation of the ESG Rule in particular has caused concerns for plan fiduciaries about the use of environment, social, and governance considerations in its investment decisions and has been met with increasing criticism from a… Continue Reading

Is it Time for an Investment Committee Tune-up?

Companies sponsoring a 401(k) plan to help their employees save for retirement often form an investment committee to help select plan investments without realizing the duties that the committee assumes.?á To help prevent investment committee members from unintentionally breaching their fiduciary duties, companies periodically review their investment committee compliance and should keep complete records of appointments, policies, and procedures.?á The following investment committee checklist can be a starting point for this review: Review the underlying plan document to determine who it lists as the ?Ç£named fiduciary?Ç¥.?á Most plan documents provided by third party administrators list the ?Ç£plan sponsor?Ç¥ as the named fiduciary, which means the board of directors is the governing body responsible for acting as a fiduciary, absent a delegation of such fiduciary responsibility by the board of directors to a committee.?á If your plan lists the ?Ç£plan sponsor?Ç¥ as the named fiduciary and you have a committee selecting… Continue Reading

The DOL Says Certain Private Equity Investments May Be Permissible Designated Investment Alternatives Under Individual Accounts Plans

On June 3, 2020, the DOL issued an information letter addressing the possibility of including a private equity type investment as a ?Ç£designated investment alternative?Ç¥ under a participant directed individual account plan. The DOL concluded that, as a general matter, ?Ç£a plan fiduciary would not . . . violate [ERISA?ÇÖs fiduciary duties] solely because the fiduciary offers a professionally managed asset allocation fund with a private equity component as a designated investment alternative for an ERISA covered individual account plan in the manner described in [the] letter.?Ç¥ The DOL observed that private equity investments ?Ç£involve more complex organizational structures and investment strategies, longer time horizons, and more complex, and typically, higher fees?Ç¥ and they generally have ?Ç£different regulatory disclosure requirements, oversight, and controls?Ç¥ and ?Ç£often have no easily observed market value.?Ç¥ In addition to these considerations, the DOL listed several factors that plan fiduciaries should evaluate when considering whether a… Continue Reading

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