The DOL announced a somewhat softened final rule on Friday that provides guidance on proxy vote procedures for retirement plan fiduciaries. The release came after intense criticism from opponents both within and outside the financial services and investment industries.
“The final rule will help managers of retirement plans fulfill their duties of prudence and loyalty to American workers and retirees when voting proxies and exercising other shareholder rights,” Labor Secretary Labor Eugene Scalia said in a statement. “The rule reflects modifications in response to rulemaking comments in order to establish appropriately-tailored safeguards for employee benefit plans using a principles-based approach.”
SEE THE DOL’S FINAL RULE HERE
“The DOL listened to investors and the public and made significant changes to the proxy voting proposal which was released on August 31, 2020,” said Lisa Woll, CEO of US SIF, an advocacy organization for sustainable and responsible investing.
The rule’s intent, according to the DOL
The final rule is intended to protect the interests of participants and beneficiaries by:
- Confirming that proxy voting decisions and other exercises of shareholder rights must be solely in the interest of, and for the exclusive purpose of, providing plan benefits to participants and beneficiaries considering the impact of any costs involved.
- Ensuring that plan fiduciaries not subordinate the interests of participants and beneficiaries in their retirement income or financial benefits under the plan to any non-pecuniary objective or promote non-pecuniary benefits or goals.
- Improving fiduciary practices relating to the selection and monitoring of proxy advisory firms.
“Cost savings and other benefits to plans will flow to participants and beneficiaries in the form of more secure retirement income,” the DOL claims.
The department issued this final rule after reviewing approximately 300 written comments and 6,700 submissions (i.e., form letters) as part of two petitions that were received in response to the proposal.
The rule is effective 30 days after the rule is published in the Federal Register and applies to exercises of shareholder rights after such date. The final rule includes delayed compliance dates to January 31, 2022, for certain recordkeeping and proxy voting policy requirements, subject to conditions set forth in the rule.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
