The November Monthly Minute examines the new DOL final rule addressing fiduciary duties relating to ESG investing and shareholder rights, and a DOL proposed rule that would permit self-correction of late employee contributions.

New DOL Rule Addresses Fiduciary Duties of ESG Investments and Proxy Voting

On November 22, 2022, the DOL released a new final rule clarifying how ERISA's fiduciary duties of prudence and loyalty apply to selecting investments and exercising shareholder rights such as proxy voting. Periodically over the years, the DOL has considered how ERISA's fiduciary duties apply to plan investments that promote environmental, social, or governance ("ESG") goals. As reported in the November 2020 Monthly Minute, in 2020, the DOL published a final rule, "Financial Factors in Selecting Plan Investments," which adopted amendments to ERISA's "Investment Duties" regulation. The amendments generally required plan fiduciaries to select investments based solely on "pecuniary factors." In 2020, the DOL also published a related final rule, which adopted amendments that addressed plan fiduciaries' ERISA obligations when voting proxies and exercising other shareholder rights. The 2020 rules became effective in January 2021, yet were quickly followed by a period of non-enforcement as a result of the change from the Trump administration to the Biden administration.

The final rule announced this month retains the core principle that the duties of prudence and loyalty require...

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