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Department of Labor’s proposed new ERISA rule

On Behalf of | Sep 14, 2020 | Uncategorized |

The Employee Retirement Income Security Act of 1974, more commonly known as ERISA, is an important law for those covered by most public-sector employer-provided health and retirement plans. The fact that ERISA covers both health and retirement plans is already confusing enough, but a new Department of Labor ERISA rule seeks to make the law a bit more clear. Essentially, ERISA sets the minimum standards for covered public-sector employer-provided health and retirement plans. The goal is to protect employee participants in these programs.

The proposed rule

The rule makes clear when ERISA-governed fiduciaries are required to cast proxy votes and exercise other shareholder rights under 29 C.F.R. § 2550.404a-1 (Investment duties). These fiduciaries are the ones that control covered public-sector employer-provided health and retirement plans, like plan administrators and trustees. The proposed rule limits proxy votes to only times when what is being voted on will, in fact, have an economic impact on the covered retirement or health plan.

Currently, the rule is not entirely clear when they have to expend resources to make decisions without violating their ERISA-mandated fiduciary duty to plan participants. This is why the rule seeks to reduce the scenarios where these fiduciaries are expending plan resources to research unimportant action items.

The confusion

DOL routinely provides guidance on these fiduciary research expenditures and out outlines which factors are to be considered before expending plan resources. Essentially, the use of plan resources must be in the best interests of the plan beneficiaries, not the fiduciaries themselves or objectives unrelated to those beneficiaries. The current confusion is because the factors DOL has already expounded resulted in a patchwork of guidance that this new rule seeks to clarify and make official.

A quick read of any DOL guidance, and indeed, this new rule reveals one thing, ERISA is about as clear as mud. This is why when an ERISA claim is denied, or when a covered public-sector employer-provided health and retirement plans denies coverage, the first call should be to a Washington state attorney.