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DOL Issues Guidance Cautioning 401(k) Fiduciaries Against Offering Crypto as an Investment Option

The DOL issued guidance reminding responsible 401(k) plan fiduciaries of their ongoing duty to monitor investments and cautioning that the DOL “has serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies.” The DOL listed five reasons why cryptocurrency investments and their derivatives (collectively, “Crypto”) may not be a prudent selection at this time and threatened that 401(k) plan fiduciaries who allow Crypto as an investment option (even if through a brokerage window) “should expect to be questioned about how they can square their actions with their duties of prudence and loyalty.” Accordingly, 401(k) plan fiduciaries who are contemplating including or retaining Crypto as a plan investment option should factor this DOL guidance into their decision-making process.   Compliance Assistance Release No. 2022-01 is available here.

DOL Announces Temporary Enforcement Policy for PTE 2020-02

The DOL recently issued Field Assistance Bulletin No. 2021-02 (the “Bulletin”) announcing a delay in the enforcement of Prohibited Transaction Exemption 2020-02, Improving Investment Advice for Workers & Retirees (“PTE 2020-02”). PTE 2020-02 was adopted by the DOL on December 18, 2020, and sets forth several requirements that investment advice fiduciaries who rely on the exemption must satisfy when providing advice, which we previously discussed on our blog here and here. PTE 2020-02 became effective on February 16, 2021, but the DOL previously provided transitional relief through December 20, 2021. In the Bulletin, the DOL announced a temporary enforcement policy which provides that (i) for the period from December 21, 2021 through January 31, 2022, the DOL will not pursue prohibited transaction claims against investment advice fiduciaries who are working diligently and in good faith to comply with the impartial conduct standards for transactions that are exempted under PTE 2020-02… Continue Reading

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

Review Investment Policy Statements for ESG Investment Compliance

The DOL recently updated its ?Ç£investment duties?Ç¥ regulation to provide further guidance in light of recent trends in environmental, social, and governance (?Ç£ESG?Ç¥) investing, which we previously posted on our blog here. As the DOL increases its investigations and inquiries into ESG investments held by retirement plans, plan fiduciaries should review their plan investments and policies to: (i) determine if their retirement plans hold any ESG-type investments, and (ii) if they do hold such investments, (a) review their investment policy statements (?Ç£IPS?Ç¥) and evaluate whether such policies comply with the current rules for ESG investments (and will comply going forward with the DOL?ÇÖs guidance), and (b) confirm whether such investments remain appropriate for the plan. Plan fiduciaries may need to consult with their financial/plan advisors to determine if ESG-type investments are currently held by their plan. If a plan holds ESG investments and the IPS does not address such investments,… Continue Reading

November 2022
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