Clark Law Group, PLLC
Department of Labor Proposes New Rule on ERISA
Readers of our blog are likely familiar with ERISA, the Employee Retirement Income Security Act of 1974. ERISA sets the minimum standards for most public-sector employer-provided health and retirement plans, and this blog covers the topic extensively. Naturally then, when the Department of Labor proposes a new rule, our readers can expect a discussion on this Washington, D.C. blog.
The New Rule
DOL proposed this new rule Monday to narrow the times ERISA-governed fiduciaries are required to cast proxy votes and other shareholder rights. The new rule amends the DOL regulation at 29 C.F.R. § 2550.404a-1 (Investment duties).
In the new rule, these fiduciaries would only be required to cast proxy votes when what is being voted on will have an economic impact on the retirement plan. The goal of the proposed rule is to reduce expenses because it disallows fiduciaries from spending plan resources on researching action items that have no economic impact on the plan.
The proposed rule will not go into effect immediately. There is a 30-day comment period where the public can comment on the proposed rule. DOL will then respond to those comments, and as needed, modify, rescind or implement the new rule.
Over the years, DOL has provided guidance on the factors fiduciaries must consider when taking actions that affect the value of the ERISA-covered plan. They must maintain their focus on the best interests of the plan and its beneficiaries, not unrelated objectives. DOL believes that this piecemeal guidance is confusing, and their goal with the proposed rule is to clarify ERISA-governed fiduciaries’ duties.
As readers can see, ERISA rules are not always clear. But, readers should keep in mind that ERISA-covered plan administrators and others are fiduciaries to their members. This means that if they take actions that are not for the benefit of those members, members may be able to sue to recover losses.