One DOL bulletin, on economically targeted investments, clarifies that “fiduciary consideration of non-economic factors should be rare and, when considered, must comply with ERISA’s rigorous fiduciary standards,” according to a DOL news release issued Thursday, October 16.
The second bulletin, on shareholder rights issues, clarifies that plan fiduciaries “may never increase expenses, sacrifice investment returns or reduce the security of plan benefits in order to promote legislative, regulatory or public policy goals that have no connection to the payment of benefits or plan administrative expenses.”
Officials at the U.S. Chamber of Commerce had sought the clarifications; they said DOL policy during the Clinton administration encouraged unions and others to consider non-economic factors when investing pension funds, and the trend has continued.
“This is an effort to bring the pendulum back to make it absolutely clear that investment decisions should be made on economic factors alone,” said Randy Johnson, chamber vice president, labor, immigration and employee benefits.
Damon Silvers, associate general counsel at the AFL-CIO in Washington, said the new bulletins, to be published in the Federal Register on Friday, October 17, had not changed the underlying requirements but made them more confusing. Fiduciaries continue to be obliged by ERISA to vote proxies in the pension plan’s economic best interests and to subordinate “collateral” considerations to economic factors,. Silvers said.