In the article “EBSA broadening its focus on enforcement” from Pensions&Investments, Faegre Drinker partner Brad Campbell discusses how the Department of Labor began sending enforcement letters to plan sponsors and registered investment adviser firms requesting documents pertaining to environmental-, social- and governance-themed fund decisions earlier this year.
Campbell, who was also the former assistant secretary of labor for the Department of Labor’s Employee Benefits Security Administration (EBSA) during President George W. Bush’s administration, likened the environmental, social and governance (ESG) investigations to a “brushback pitch” in baseball. “I think they wanted to remind folks that you have to choose prudent investments, and you can’t just put a thumb on the scale in favor of an investment because it’s ESG — it still has to be prudent,” he said.
Further, according to Campbell, any time the Labor Department has investigated a plan sponsor that he or his colleagues have been made aware of in recent years, the investigations have always included questions about missing participants.
To obtain the greatest amount of compliance from plan sponsors and best outcomes for missing participants, the Labor Department should put forth “a clear standard to point to and make sure it’s universally adopted, rather than having vague standards and sort of a lingering threat of enforcement about whether your actions are good enough,” Campbell added.
But the enforcement focus on missing participants will likely continue under the new administration because it has been such a success for the Labor Department, Campbell said. He also stated that the retirement industry would have to wait and see until the Biden administration’s personnel is in place before determining its enforcement priorities.