On April 14th, 2021, the Department of Labor (“DOL“) issued cybersecurity guidance to plan sponsor and fiduciaries, recordkeepers and other service providers and participants and beneficiaries of plans regulated by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The guidance is presented in three separate parts: Tips for Hiring a Service Provider with Strong Cybersecurity Practices, Cybersecurity Program Best Practices and Online Security Tips for Participants and Beneficiaries.

Over the past ten years, cybersecurity has become an area of critical importance to plan sponsors, plan administrators and plan participants. With plans holding trillions in assets as well as sensitive participant information, retirement accounts have been attractive targets for cyber-enabled fraud. Plan participants are known to check their retirement account balances less frequently than personal banking, credit card or other financial accounts. As a result, there can be a delay before attacks on retirement accounts are discovered, making tracing and recovery efforts exceptionally difficult. Plans also permit electronic access to funds and rely upon outside service providers, which provide additional access points for breach. There is a growing body of litigation involving participants who have suffered retirement plan losses due to cyberattacks. Bartnett v. Abbott Laboratories, No. 20-cv-02127 (ND Ill., 2020) (motion to dismiss participant suit against plan sponsor and administrator granted, but denied with respect to third party record-keeper); Leventhal v. The MandMarblestone Group LLC, No. 18-cv-2727 (ED PA, 2019) (motion to dismiss suit by plan sponsor and participant against third party administrator denied); and Berman v. Estee Lauder, No. 4:19-cv-06489 (ND CA, 2019) (participant suit against plan sponsor, committee and third party record-keeper settled).


Continue Reading U.S. Department of Labor Weighs in on Cybersecurity for ERISA Plans

Plan sponsors and fiduciaries may have spent 2020 scrambling to amend their plans and operating procedures to accommodate breaking COVID-19 guidance, but the Department of Labor’s (“DOL”) and federal courts’ wheels continued to turn, churning out decisions and guidance on a variety of ERISA issues—and plan sponsors and fiduciaries should take note. Included in recent DOL guidance are rules for reviewing and selecting retirement plan investments, voting proxies, and distributing retirement plan notices. Meanwhile, various federal appellate court decisions should lead fiduciaries to review summary plan descriptions (“SPDs”) and the inclusion of single-stock fund investment options in defined contribution plan lineups. The following checklist sets out 2020 developments for plan sponsors and fiduciaries to consider in the new year.
Continue Reading 2021 Plan Sponsor/Fiduciary Compliance Checklist

The longstanding view of the Department of Labor (the “DOL”) has been that proxy voting and other shareholder rights held by an ERISA plan are subject to ERISA’s fiduciary duties of prudence and loyalty. Previously, this view was expressed by the DOL in sub-regulatory guidance, such as interpretive and field assistance bulletins. In September of 2020, the DOL published a proposed rule (the “Proposal”) regarding an ERISA fiduciary’s duties with respect to shareholder rights. On December 16, 2020, the Department of Labor published the final regulation (the “Regulation”). Much like the Proposal, the Regulation requires that when a fiduciary decides whether and when to exercise plan shareholder rights, it must act prudently and solely in the interests of participants and beneficiaries and for the exclusive purpose of providing them benefits and defraying the reasonable expenses of administering the plan. However, in the Regulation, the DOL took an approach that is less prescriptive and more principles-based than the Proposal.
Continue Reading Final ERISA Regulations Describe Fiduciary Duties Related to Plan Proxy Voting

On September 4, 2020, the U.S. Department of Labor (the “DOL”) issued a proposed rule regarding a plan fiduciary’s duties with respect to shareholder rights appurtenant to shares of stock held by an ERISA plan (the “Proposal”). ERISA requires that a plan fiduciary carry out its duties prudently and solely in the interests of participants and beneficiaries and for the exclusive purpose of providing benefits to participants and beneficiaries and defraying the reasonable expenses of administering the plan.

The DOL originally articulated its position that ERISA’s fiduciary duties extend to the voting rights of stock in an opinion letter published in 1988 (commonly known as the “Avon Letter”). Since that time, the DOL has provided additional sub-regulatory guidance in the form of Interpretive Bulletins and Field Assistance Bulletins. Much like the DOL’s guidance on ESG investing, the DOL’s guidance in this area has shifted in focus with each presidential administration; however, a published regulation, subject to review and comment like the Proposal, would be more difficult to overturn by a future administration if finalized.

The DOL’s previous guidance issued in 2016 generally encouraged the voting of proxies by plan fiduciaries, other than in certain limited circumstances. In contrast, the Proposal warns that a fiduciary can only vote proxies that it prudently determines to have an “economic impact on the plan after the costs of research and voting are taken into account.”
Continue Reading To Vote, or Not to Vote, That is the Question

On May 21, 2020, the US Department of Labor (DOL) and the Employee Benefits Security Administration (EBSA) issued final regulations expanding the use of electronic disclosures for retirement plans. The regulations provide a new safe harbor that will substantially ease the use of electronic delivery by retirement plan administrators to satisfy the disclosure requirements of Title I of the Employee Retirement Income Security Act of 1974 (ERISA). The new regulations were published in the Federal Register on May 27, 2020, and they take effect on July 27, 2020 (though the DOL will not take enforcement action against a plan administrator that relies on the regulations’ new safe harbor before that date).

Continue Reading The DOL Embraces Wider Use of Electronic Notices for ERISA Disclosures

The Department of Labor (together with the Treasury Department) has issued helpful deadline relief for participants and beneficiaries in health, disability, other welfare and pension plans, as well as for plan sponsors and administrators of such plans, during the COVID-19 National Emergency.  The guidance came just in time for plan administrators at risk of missing the deadline for distributing annual funding notices, which was April 29 this year.

Continue Reading DOL Issues COVID-Related Deadline Relief

On April 23, 2018, the U.S. Department of Labor (“DOL”) issued Field Assistance Bulletin No. 2018-01 (the “FAB”), which revisits two important topics relating to ERISA plan investments: (1) whether and to what extent a fiduciary can consider environmental, social and governance (“ESG”) factors when deciding between different investment options and (2) the exercise of shareholder rights.

The FAB clarifies that while ESG factors can present economic risks or opportunities that can be appropriately considered as part of an economic analysis, prior guidance should not be read to suggest that an investment’s promotion of ESG factors or positive market trends means that the investment is automatically a prudent investment choice. Rather, fiduciaries must always focus on the economic interests of plan beneficiaries and must be careful not to put too much weight into ESG factors.
Continue Reading DOL Issues Guidance on the Use of Environmental, Social and Governance Factors in Evaluating Plan Investment Options and the Exercise of Shareholder Rights