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

The U.S. Department of Labor (“DOL”) has recently extended the relief previously granted to five financial institutions which allows these banks to continue to rely on the QPAM exemption (Prohibited Transaction Exemption 84-14). The QPAM exemption permits ERISA plans and comingled funds to engage in transactions with “parties in interest” to those ERISA clients without running afoul of ERISA’s prohibited transaction rules, provided that the ERISA plan or fund is managed by a qualified professional asset manager (“QPAM”) and certain other conditions are satisfied. 
Continue Reading DOL Extends QPAM Relief to Five Financial Institutions

As we previously reported in our Legal Update, in April 2016 the U.S. Department of Labor (“DOL”) replaced its 1975 regulation that set the parameters for determining when a person should be treated as a fiduciary under ERISA when providing advice with respect to investment matters (the “Fiduciary Rule”).  The new definition treats persons who provide investment advice or recommendations for a fee or other compensation with respect to assets of a plan or IRA as fiduciaries in a much wider array of relationships than was true under the 1975 regulation. In connection with the publication of the new Fiduciary Rule, the DOL also published two new administrative class exemptions from the prohibited transaction provisions of ERISA and the Internal Revenue Code—the BIC Exemption and the Principal Transactions Exemption—as well as amendments to PTE 84-24, commonly relied upon for the sale of insurance contracts to ERISA plans.  As discussed in the Legal Update, just as plan fiduciaries geared up for these major changes, the DOL began to back peddle as a result of the change in administration and new leadership at the DOL. So where are we now?
Continue Reading DOL Fiduciary Rule Update – Where Are We Now?