DOL Issues Final Rule Addressing Pension Plan Investments in ESG Investments

On October 30, 2020, the U.S. Department of Labor issued its final rule (amending 29 CFR § 2550.404a-1) addressing when pension plan fiduciaries can consider non-pecuniary factors—such as social or environmental benefits of certain investments—when making investment decisions. This rule should help resolve an area that has caused substantial confusion.

Generally speaking, the rule requires fiduciaries to make plan investments solely based on the pecuniary merits of the investment. Although the regulation allows non-pecuniary factors to be evaluated when two investments are otherwise identical (the so-called “tie-breaker rule”), fiduciaries making such a decision must carefully analyze and document the reasons for their decision.

A link to the new regulations can be found here.

Andrew Holly

Andrew represents clients in a wide range of complex civil matters.

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