Release Date: October 16, 2008
U.S. Department of Labor updates fiduciary guidance on exercising shareholder rights and investing in economically targeted investments
Washington – The U.S. Department of Labor today announced the issuance of new guidance under the Employee Retirement Income Security Act (ERISA) clarifying the obligations of plan fiduciaries when considering shareholder rights and investments in economically targeted investments. The guidance is being issued in the form of two interpretive bulletins detailed below.
“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 the Employee Benefits Security Administration Bradford P. Campbell. “Today the 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.”
The bulletin on economically targeted investments supplements earlier guidance issued by the department 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 supplement further clarifies, through explanation and examples, that fiduciary consideration of non-economic factors should be rare and, when considered, must comply with ERISA’s rigorous fiduciary standards.
The bulletin on shareholder rights updates prior guidance issued by the department on the application of ERISA’s fiduciary standards to proxy voting. The new bulletin includes clarifications of the earlier guidance, as well as interpretive positions issued by the department since 1994 on shareholder activism and socially-directed proxy voting initiatives.
The guidance 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.
The interpretive bulletins are to be published in the October 17 edition of the Federal Register.
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