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CCH® PENSION AND BENEFITS — 11/10/08

EBSA reinforces position on investment of plan assets and shareholder rights

The Employee Benefits Security Administration (EBSA) has issued new guidance clarifying the obligations of plan fiduciaries concerning investments in economically targeted investments and shareholder rights. “Recent events highlight the importance of ensuring secure and transparent retirement savings plans for American workers, retirees and their families,” said Assistant Secretary of Labor for EBSA, Bradford P. Campbell. “[T]he department reiterates and clarifies its longstanding view that workers’ money must be invested and used solely to provide for retirements, not for political, corporate or other purposes,” Campbell stressed.

The guidance, issued in the form of two interpretive bulletins, reiterates that plan fiduciaries, who are charged by law with the responsibility for operating employee benefit plans on behalf of plan participants, 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.

Economically targeted investments

The bulletin on economically targeted investments supplements earlier guidance issued by EBSA addressing the limited circumstances under which ERISA fiduciaries may, in connection with investment decisions, take into account factors other than the economic interests of the plan. The bulletin further clarifies, through explanation and examples, that fiduciary consideration of non-economic factors should be rare. Further, when considered, such discussion should be documented to demonstrate compliance with ERISA’s rigorous fiduciary standards.

Shareholder rights, proxy voting

The bulletin on shareholder rights updates prior guidance issued by the Labor Department on the application of ERISA’s fiduciary standards to the exercise of shareholder rights and written statements of investment policy, including proxy voting policies or guidelines. The new bulletin includes clarifications of earlier guidance, as well as interpretive positions issued by the Department since 1994 on shareholder activism and socially-directed proxy voting initiatives.

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