U.S. Department of Labor Releases Field Assistance Bulletin Clarifying Issues Regarding Proxy Voting, Shareholder Engagement, and Economically Targeted Investments

WASHINGTON, DC – The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) today released a Field Assistance Bulletin (FAB) providing guidance to EBSA’s national and regional offices regarding proxy voting, shareholder engagement, and economically targeted investments by fiduciaries of private-sector employee benefit plans covered by the Employee Retirement Income Security Act (ERISA).

The FAB clarifies earlier interpretations set forth in Interpretive Bulletins (IB) 2015-01 and 2016-01. In IB 2015-01, the Department held that fiduciaries may not sacrifice returns or assume greater risks to promote collateral environmental, social, or corporate governance (ESG) policy goals when making investment decisions. In IB 2016-01, the Department addressed issues surrounding written statements of investment policy, proxy voting, and other exercises of shareholder rights by fiduciaries when managing plan assets that are corporate stock.

ERISA fiduciaries must always put first the economic interests of the plan in providing retirement benefits. The FAB announced today advises that fiduciaries of ERISA-covered plans must avoid too readily treating ESG issues as being economically relevant to any particular investment choice. It further advises that ERISA does not necessarily require plans to adopt investment policy statements with express guidelines on ESG factors. The FAB addressed issues that arise in the use of ESG-themed investment alternatives in 401(k)-type plans, and as qualified default investment alternatives. The FAB also clarifies that plan fiduciaries (including investment managers) may not routinely incur significant plan expenses to pay for the costs of shareholder resolutions or special shareholder meetings, or to initiate or actively sponsor proxy fights on environmental or social issues.

The FAB is part of the Department’s ongoing compliance assistance program to help employers, plan officials, service providers, and others comply with ERISA.  All FABs are publicly available at www.dol.gov/ebsa.