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Benefits

DOL Proposes Amending Investment Selection and Proxy Provisions of Investment Duties Regulation

EBIA  

EBIA  

Proposed Rule: Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, 29 CFR Part 2550, 86 Fed. Reg. 57272 (Oct. 14, 2021); Fact Sheet: Notice of Proposed Rulemaking on Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights (Oct. 13, 2021)

Proposed Rule

Fact Sheet

As we went to press with this week’s edition of the EBIA Weekly, the DOL released advance copies of a proposal to amend the investment duties regulation. The proposal would remove or modify provisions that might discourage plan fiduciaries from exercising shareholder rights and giving appropriate consideration to climate change and other environmental, social, or governance (ESG) factors when selecting plan investments. (Enforcement of the current regulation, which was amended twice in 2020, was suspended in March (see our Checkpoint article).) Generally, the proposed changes would clarify when ESG factors may be considered, remove special rules that preclude the use of investments that consider non-pecuniary factors as qualified default investment alternatives (QDIAs), drop some of the current regulation’s tiebreaker requirements, and eliminate “safe harbor” examples and recordkeeping requirements that might discourage the exercise of shareholder rights.

We will cover these proposed regulations in next week’s EBIA Weekly. For more information on the current rule and related matters, see EBIA’s 401(k) Plans manual at Sections XXV.D (“Selecting the Plan’s Investment Funds”), XXV.L (“Proxy Voting and Shareholder Rights”), and XXVI.J (“Fiduciary Protection for Qualified Default Investment Alternative (QDIA)”).

Contributing Editors: EBIA Staff.

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