On October 14, 2021, the U.S. Department of Labor (the “DOL”) issued a proposed rule (the “Proposed Rule”) clarifying whether investments made by fiduciaries of plans subject to the Employee Retirement Income Security Act of 1974 (“ERISA”) may take into account environmental, social and governance (“ESG”) concerns in selecting investments and investment courses of action, as well as fiduciary duties in exercising shareholder rights.[1] The Proposed Rule aligns more closely with recent trends toward ESG-oriented investing and seeks to reduce any chilling effects introduced by the Trump administration’s regulatory and non-regulatory guidance on fiduciary duty-compliant ESG investing.
Continue Reading New DOL Proposal on ESG Investing and Fiduciary Exercise of Shareholder Rights
ARPA to Expand 162(m) Limits on Executive Compensation
By Cleary Gottlieb on
On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (the “ARPA”), the much-debated $1.9 trillion COVID-19 stimulus legislation. The ARPA includes a provision, added by Senate amendment on March 6, 2021, which will further limit the deductibility of amounts deemed to be “excessive employee remuneration” under…
DOL Declines to Enforce Trump Administration Rules on ERISA Plan Investments, Proxy Voting
By Michael Albano, Mary E. Alcock, Alexander Kurtz & Francesca M. Crooks on
On Wednesday, March 10, after engaging in conversations with stakeholders, the U.S. Department of Labor’s Employee Benefits Security Administration issued an enforcement policy statement in which it declined to enforce two DOL rules put in place by the Trump administration in 2020.
The first of these rules placed limitations on the ability of plans subject to ERISA to invest in environmental, social and governance (“ESG”) funds. In particular, it provided that a fiduciary’s duty of loyalty and prudence under ERISA would only be satisfied if investments were selected solely on the basis of pecuniary factors (defined as factors that have a material effect on the risk and return of an investment), and that ESG factors could only be considered to the extent they created economic risks or opportunities that qualified investment professionals would treat as material economic considerations under generally accepted investment theories. The ESG rule, which many regarded as making ERISA plan investments in ESG-oriented funds prohibitively difficult, received overwhelmingly negative comments from both financial institutions and the public at large. This latest development is not surprising, as the Biden administration had previously signaled that it would be reexamining this rule.
Continue Reading DOL Declines to Enforce Trump Administration Rules on ERISA Plan Investments, Proxy Voting