Alan Lebowitz, Deputy Assistant Secretary for Program Operations, EBSA, has written a letter (which you can access here) to the AFL-CIO setting forth the DOL’s views regarding the ERISA violations that could occur if plan fiduciaries are involved in expending “plan assets to inform participants about the current public debate on Social Security” as well as the “hiring and firing of [plan] service providers based upon their opinions on Social Security reform.”
Regarding the issue of using plan assets to express views or provide information on Social Security policy, the DOL stated that “such expenditures are neither for the payment of benefits nor for plan administration, and accordingly fall outside the limited scope of expenditures permitted by ERISA.” The DOL rejected the assertion that such expenditures were permissible since “current Social Security proposals could have a significant impact on the national economy, financial markets, and plan investments.” The DOL stated, however, that in some very narrow circumstances, such as where a legislative proposal is near enactment and closely tied to plan issues, a “fiduciary could decide to spend plan assets to educate participants about the need to take the legislation into account in making particular decisions about their options under the plan.”
Regarding the issue of considering a service providers’ views on Social Security as a factor in selection and retention decisions, the DOL reiterated ERISA standards imposed on plan fiduciaries of acting with an “eye single to the interests of the participants and beneficiaries” and stated that “it would be unlawful for a plan fiduciary to review the plan’s service providers based, not upon the quality and expense of their services, but rather upon their views on Social Security or any other broad area of public policy.” The DOL went on to state:
Although your counsel’s opinion points out that a fiduciary may consider such collateral factors only when choosing a service provider that is better than or equal to alternative providers . . the Department is concerned that fiduciaries may nevertheless view the AFL-CIO’s recent attention to the question as an invitation to judge service providers first for their positions on Social Security and only second for their ability to meet plans’ particular needs.
DOL’s bottom line: “A fiduciary may never increase a plan’s expenses, sacrifice the security of promised benefits, or reduce the return on plan assets, in order to promote its views on Social Security or any other broad policy issue.”
The Wall Street Journal has an article commenting on the letter entitled “Pension Fund Politics.”
Also, you can access a New York Times article here.