As retirement plan fiduciaries may recall, in late 2022 the Department of Labor (DOL) released new final rules regarding environmental, social and governance factors (ESG) in investment decisions.
While most requirements are already effective, new proxy voting requirements take effect on December 1, 2023.
Plan fiduciaries should take particular note of the new requirements, including those for “pooled investment vehicles.”
These requirements include:
If a pooled investment vehicle holds assets from multiple employee benefit plans, the investment manager must reconcile, as much as possible, the investment policy statements (IPS) of each such plan and vote the relevant proxies in proportion to the plan’s interest. As an alternative, the investment manager may require participating plans to accept its IPS before allowing plans to invest.
The rules here can be complex (very complex), and in practical terms, the plan’s existing structure may be more than sufficient to comply with DOL rules, but this is a good example of a topic to cover at your next 401k committee meeting, with your investment consultant and ERISA counsel present, and document same in meeting minutes.