:: New ERISA Advisory Opinion Issued On Use Of Plan Assets To Achieve Collateral Objectives

The Department has also consistently rejected a construction of ERISA that would render ERISA’s tight limits on the use of plan assets illusory and that would permit plan fiduciaries to expend trust assets to promote myriad public policy preferences. Rather, the Department has reiterated its view that plan fiduciaries may not increase expenses, sacrifice investment returns, or reduce the security of plan benefits in order to promote collateral goals.

ERISA Advisory Opinion 2008-05A (June 27, 2008)

In this recent advisory opinion, the DOL responds to a request made on behalf of the U.S. Chamber of Commerce requesting guidance on whether the fiduciary rules of the Employee Retirement Income Security Act of 1974 (ERISA) prohibit the use of plan assets to promote union organizing campaigns and union goals in collective bargaining negotiations. The DOL answers the query by opining that:

The Department believes the use, or threat of use, of pension plan assets or plan management to achieve a particular collective bargaining objective is activity that subordinates the interests of participants and beneficiaries in their retirement income to unrelated objectives.

The issue transcends the immediate question, however, and has implications for any fiduciary that uses plan assets for purposes beyond those in the exclusive interests of the plan participants and beneficiaries.

The ERISA statute, and all subsequent guidance issued by the Department, makes it clear that in deciding whether and to what extent to make, or refrain from making, a particular investment, a fiduciary may only consider factors relating to the interests of plan participants and beneficiaries in their retirement income. A decision to make or refrain from making an investment may not be influenced by a desire to promote a particular industry or industry member, or to generate employment within that industry or industry member, unless the investment, when judged solely on the basis of its economic value to the plan, would clearly be equal or superior to alternative investments available to the plan.

In my opinion, this prohibition logically reaches other uses of plan funds to achieve collateral objectives. For example, public and some private pension programs are being asked to consider if and when they should include social and ideological screens when making investments. In the case of public funds, their plan operations will typically be exempt from ERISA as governmental plans, but not so private sector funds.

The opinion thus serves as a reminder that plan assets exist for a sole purpose – the benefit of plan participants and beneficiaries.