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Benefits

DOL Proposes Regulations to Clarify Fiduciary Duties Applicable to Socially Conscious Investing

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EBIA  

Proposed Rule: Financial Factors in Selecting Plan Investments, 29 CFR Part 2550; News Release: U.S. Department of Labor Proposes New Investment Duties Rule (June 23, 2020); Fact Sheet: Notice of Proposed Rulemaking on Financial Factors in Selecting Plan Investments Amending “Investment duties” Regulation at 29 CFR 2550.404a-1 (June 23, 2020)

Proposed rule

News release

Fact sheet

As we were preparing this edition of the EBIA Weekly, the DOL announced proposed regulations that would update and clarify guidelines for fiduciaries in response to trends in environmental, social, and corporate governance (ESG) investing. ESG investing generally refers to the selection of investments based on nonfinancial objectives, such as environmental, social, and public policy goals. The DOL notes in its news release that different iterations of guidance over the past 30 years may have created confusion with respect to these issues, and the proposal is meant to clarify that ERISA plan fiduciaries may not invest in ESG investments when they understand an underlying strategy of the investments is to subordinate return or increase risk for the purpose of nonfinancial objectives. Included in the proposed changes are requirements for individual account plans (including 401(k) plans) that select investment alternatives that include ESG objectives in their investment mandate or fund name. Public comments on the proposal are requested.

We will cover the proposed regulations in the July 2, 2020 EBIA Weekly. Meanwhile, for more information, see EBIA’s 401(k) Plans manual at Section XXV.D (“Selecting the Plan’s Investment Funds”).

Contributing Editors: EBIA Staff.

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