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The longstanding view of the Department of Labor (the “DOL”) has been that proxy voting and other shareholder rights held by an ERISA plan are subject to ERISA’s fiduciary duties of prudence and loyalty. Previously, this view was expressed by the DOL in sub-regulatory guidance, such as interpretive and field assistance bulletins. In September of 2020, the DOL published a proposed rule (the “Proposal”) regarding an ERISA fiduciary’s duties with respect to shareholder rights. On December 16, 2020, the Department of Labor published the final regulation (the “Regulation”). Much like the Proposal, the Regulation requires that when a fiduciary decides whether and when to exercise plan shareholder rights, it must act prudently and solely in the interests of participants and beneficiaries and for the exclusive purpose of providing them benefits and defraying the reasonable expenses of administering the plan. However, in the Regulation, the DOL took an approach that is less prescriptive and more principles-based than the Proposal.
Continue Reading Final ERISA Regulations Describe Fiduciary Duties Related to Plan Proxy Voting

On October 30, 2020, the U.S. Department of Labor (“DOL”) released its final regulation (“Final Rule”) relating to a fiduciary’s consideration of environmental, social and governance (“ESG”) factors when making investment decisions for plans subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). In response to the proposed rule (the “Proposal”), the DOL received several thousand comments, the vast majority of which opposed the new rule. Many plan sponsors and investment professionals voiced objection to the Proposal’s antipathy towards the consideration of ESG factors. In the Final Rule, the DOL generally softened its stance toward the consideration of economic ESG factors, but retained its opposition to the consideration of non-pecuniary ESG or other non-pecuniary factors.
Continue Reading The Department of Labor’s ESG-less Final ESG Rule

The Department of Labor’s recent pronouncement on the permissibility of investing 401(k) and other defined contribution plan assets in private equity has gotten wide-spread attention. Yet the guidance, which was issued in the form of an information letter, does not establish any new fiduciary principles, or provide any exemptions under the Employee Retirement Income Security Act of 1974 (“ERISA”). This blog discusses why the recent guidance is so significant and what it does and does not do.
Continue Reading DOL Issues Guidance about Private Equity Investments in 401(k) Plans

As most of you have heard, on March 15, 2018, the U.S. Court of Appeals for the Fifth Circuit issued an opinion vacating, in its entirety, the Department of Labor’s amendment to regulations defining “investment advice” for the purpose of determining who is a fiduciary (the “DOL Fiduciary Rule”) on the basis that the Department violated the Administrative Procedures Act and exceeded its regulatory authority.  The Department had the right to request an en banc review of the decision by the full Fifth Circuit panel within 45 days of the date of the decision and to appeal the decision to the U.S. Supreme Court within 90 days after the date of the decision.  The Department of Labor did not file the request for review or an appeal to the Supreme Court within such deadlines.  On June 21, 2018, the Fifth Circuit issued the mandate implementing its decision to vacate the DOL Fiduciary Rule.
Continue Reading The Department of Labor Fiduciary Rule: Lots of Work, Lots of Drama, Lots of Uncertainty

Many alternative funds in recent years have included environmental, social or governance (“ESG”) considerations as part of their investment strategies. On April 23, 2018, the U.S. Department of Labor (“DOL”) issued new guidance under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) on the extent to which a plan fiduciary can consider ESG factors when making investment decisions and the use of plan assets in exercising shareholder rights.
Continue Reading New DOL Guidance May Cause ERISA Plans to Be Wary of Environmental, Social and Governance (ESG) Themed Investment Options