The Department of Labor (the “DOL”) recently finalized a regulation amending the rules under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), related to the selection of plan investments and the exercise of shareholder rights (the “Rule”). The Rule – entitled “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights” – is largely consistent with historic DOL positions, but it endeavors to provide fiduciaries with more latitude when considering environmental, social, and governance (“ESG”) investment factors and voting proxies. In addition to the summary of the Rule below, this alert includes comparisons of the Rule against both the 2020 Trump Administration regulations (here) and the Biden Administration's proposed regulation released in 2021 (here).

Plan fiduciaries may want to consider reviewing their investment and proxy voting policies in light of the regulatory changes. The Rule is scheduled to be published in the Federal Register on December 1, 2022, and it is generally effective 60 days after publication (i.e., January 30, 2022). However, certain provisions related to the reliance on proxy voting advisory firms and pooled fund manager proxy voting requirements will become effective one year after publication (i.e., December 1, 2023).

I. Background

ERISA requires that fiduciaries act prudently, solely in the interest of the plan participants and beneficiaries, and for the exclusive purpose of providing benefits...

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