WASHINGTON Pension funds regulated under the Employee Retirement Income Security Act cannot engage in politically motivated proxy activity or other shareholder activism, according to an advisory opinion issued Dec. 21 by the Employee Benefits Security Administration of the Department of Labor in response to a request from the U.S. Chamber of Commerce.
The chamber wrote the EBSA last year requesting the opinion, asking whether a shareholder activism campaign launched by the AFL-CIO on health-care issues was compatible with ERISA, according to a chamber statement released Jan. 4.
The chamber expressed concern about the use of pension plan assets by plan fiduciaries to further public policy debates and political activities through proxy resolutions that have no connection to enhancing the value of the plans investment in a company, the advisory opinion stated.
Last fall, the AFL-CIO office of investment initiated a 2008 proxy campaign on conflicts of interests at the board level involving health-care issues, Damon A. Silvers, associate general counsel, AFL-CIO, said in an interview.
The Chamber of Commerce hoped the DOL would attack proxy proposals about conflicts of interests related to the health-care industry, Mr. Silvers said. The DOL declined to do so. Its not clear what, if anything, has changed in the interpretation of ERISA in this letter.
The AFL-CIO is reviewing the advisory opinion, he added.
The advisory opinion sends a clear message that union pension trustees need to put workers retirement security first, instead of any political agenda, Thomas J. Donohue, president and CEO, U.S. Chamber of Commerce, said in the chamber statement.
The EBSA opinion, written by Robert J. Doyle, director of regulations and interpretations, addresses the chambers request generally, not mentioning union or any type of ERISA-regulated pension fund or commenting about any health-care-related proxy proposal or shareholder activism campaign.
The department has previously expressed strong concern about the use of plan assets to promote particular legislative, regulatory or public policy positions that have no connection to the payment of benefits or plan administrative expenses, the EBSA opinion stated. The mere fact that plans are important participants in the national economy, and are generally affected by legislation, regulations, actions and events that affect the economy as a whole, does not convert legislative, regulatory or policy proposals concerning the economy into a rationale for spending plan assets on the policy debate. The department rejects a construction of ERISA that would render the tight limits on the use of plan assets illusory, and that would permit plan fiduciaries to expend ERISA trust assets to promote myriad public policy preferences, and believes that these principles apply with equal force to a plan fiduciarys support or pursuit of a proxy proposal.