Enforcement actions continued to rise at the Department of Labor's Employee Benefits Security Administration in fiscal year 2020, paced once again by missing participant recoveries, but that wasn't the only area where EBSA investigators turned their focus.
Earlier this year, the Labor Department began sending enforcement letters to plan sponsors and registered investment adviser firms requesting documents pertaining to environmental, social and governance-themed fund decisions.
"This kind of came out of nowhere," said Elizabeth S. Goldberg, a Pittsburgh-based partner with law firm Morgan, Lewis & Bockius LLP. "It seems like a lot of DOL muster in the investigations space has been on ESG in 2020."
In an enforcement letter sent in the spring to plan sponsors with ESG funds in their plan lineups, the Labor Department requested a slew of documents, including materials showing the "names, addresses and responsibilities of all persons or entities with responsibility for making investment decisions."
"The Department seeks to better understand the plan fiduciaries' selection of ESG funds for inclusion in the plan's investment options and compliance with their duty to administer the plan prudently and solely for the purpose of providing benefits to participants and beneficiaries, and defraying reasonable expenses of administering the plan," said Thomas Licetti, New York regional office director for EBSA, in a sample letter viewed by Pensions & Investments.