Pension plan assets must be invested and used solely to provide for the retirements of plan participants, not to advance political, corporate or other goals, according to new bulletins from the Department of Labor.
One DOL bulletin, on economically targeted investments, clarifies that fiduciary consideration of non-economic factors should be rare and, when considered, must comply with ERISAs rigorous fiduciary standards, according to a DOL news release issued today.
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, the release said.
Officials at the U.S. Chamber of Commerce had sought the clarifications; they claimed that 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, Washington, said the new bulletins, to be published in the Federal Register on Friday, had not changed the underlying requirements but made them more confusing. Fiduciaries continue to be obliged by ERISA to vote proxies in the pension plans economic best interests and to subordinate collateral considerations to economic factors, said Mr. Silvers.