Friday, October 17, 2008

DOL Addresses SRI Funds


Today the Department of Labor issued an interpretative bulletin addressing the use of ERISA plan assets for socially responsive investing purposes.

"ERISA's plain text thus establishes a clear rule that in the course of discharging their duties, fiduciaries may never subordinate the economic interests of the plan to unrelated objectives, and may not select investments on the basis of any factor outside the economic interest of the plan except in very limited circumstances..In light of the rigorous requirements established by ERISA, the Department believes that fiduciaries who rely on factors outside the economic interests of the plan in making investment choices and subsequently find their decision challenged will rarely be able to demonstrate compliance with ERISA absent a written record demonstrating that a contemporaneous economic analysis showed that the investment alternatives were of equal value.

In short, while some SRI investments may still be prudent under ERISA, no allowance can be made outside the economic interests of plan participants. While this bulletin doesnt raise the bar for including and monitoring SRI funds in a 401(k) plan, it certainly makes the height of the bar and the risks for missing it more visible.

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