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DOL Will Not Enforce Trump Administration’s ERISA “ESG” Investing and Proxy Voting Rules

On March 10, 2021, the U.S. Department of Labor (the “DOL”) issued a statement that it intends to revisit its final rules issued late last year on “Financial Factors in Selecting Plan Investments” (summarized here) and “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights” (summarized here), which some viewed as restricting “do-good” or “ESG” investing by investors subject to the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  The DOL further stated that, until it issues further guidance, the DOL will not enforce either rule or otherwise pursue enforcement actions against any ERISA plan fiduciary based on a failure to comply with those final rules with respect to an investment (including a “Qualified Default Investment Alternative” offered under a 401(k)- or 403(b)-type plan) or investment course of action or with respect to an exercise of shareholder rights.

The DOL undertook a review of these rules as part of the Biden administration’s directive to review Trump administration regulations that were inconsistent with, or presented obstacles to, the promotion and protection of public health and the environment.  The DOL reportedly heard from a wide variety of stakeholders, including asset managers, labor organizations and other plan sponsors, consumer groups, service providers, and investment advisers, who expressed the following highlighted concerns: (i) the rules did not properly reflect the scope of an ERISA plan fiduciary’s duties of prudence and loyalty, (ii) the rulemakings were unnecessarily rushed and failed to consider and address evidence from public commenters on the use of “ESG” to improve ERISA plan investment returns, and (iii) the rules (and confusion about the rules) already have had a chilling effect on the appropriate integration of “ESG” factors in ERISA plan investment decisions.

Notwithstanding the DOL’s non-enforcement statement, the regulations have not been rescinded.  Accordingly, ERISA plan fiduciaries should continue to step carefully when making “ESG”-related investment decisions and when exercising shareholder rights based on “ESG” considerations.

© 2023 Proskauer Rose LLP. National Law Review, Volume XI, Number 69

About this Author

Ira G. Bogner, Tax, Employee Benefits, ERISA, Attorney, Proskauer, Law firm

Ira G. Bogner is Chair of the firm’s Tax Department and a member of the Employee Benefits, Executive Compensation & ERISA Litigation Group.

Ira has provided guidance to clients on a wide variety of matters in the areas of employee benefits and executive compensation, including the investment of plan assets, the implementation of employee benefit plans, employee benefit issues in mergers and acquisitions, the awarding of equity-based compensation, and the negotiation and drafting of employment agreements and severance arrangements.

Seth Safra, Proskauer Law Firm, Employee Benefits, Executive Compensation and ERISA Litigation Attorney

Seth Safra is a partner in the Employee Benefits & Executive Compensation Group, where he counsels clients on all aspects of employee benefits and executive compensation.

Seth advises clients on ERISA and other related laws with respect to the design and administration of qualified and non-qualitied retirement plans, including defined contribution (including 401(k) and ESOPs) and cash balance plans. In addition, Seth counsels clients on their health & welfare plans, including advising on issues related to health care reform.

Russell L Hirschhorn ERISA Litigation, employee benefits attorney, Proskauer
Senior Counsel

Russell Hirschhorn is a Senior Counsel in the Labor & Employment Law Department, where he focuses on complex ERISA litigation and advises employers, fiduciaries and trustees on ERISA benefit and fiduciary issues. 

Russell represents employers, plan sponsors, plans, trustees, directed trustees and fiduciaries in all phases of litigation, arbitration and mediation involving employee benefits, including class action and individual claims relating to ERISA’s fiduciary duty and prohibited transaction provisions, denials of claims for benefits, severance plans, ERISA Section 510,...