|
Dear Mr. Chavern:
This is in response to your recent letter 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. Your inquiry was in addition to the issues the Department
recently addressed in Advisory Opinion 2007-07A regarding the expenditure
of plan assets by plan fiduciaries as shareholders of corporations in
support of proxy resolutions.
By way of background, sections 404(a)(1)(A) and (B) of
ERISA require each plan fiduciary to discharge his or her duties prudently
and solely for the exclusive purpose of providing benefits to participants
and beneficiaries and defraying reasonable expenses of administering the
plan. The Department has long construed the requirement that a fiduciary
act solely in the interests of, and for the exclusive purpose of providing
benefits to, participants and beneficiaries as prohibiting a fiduciary
from subordinating the interests of participants and beneficiaries in
their retirement income to unrelated 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.(1)
Among other things, the Department has explained that the mere fact that
plans are important participants in the national economy, and are
generally affected by actions and events that affect the economy as a
whole, does not convert policy proposals concerning the economy into a
rationale for using plan assets on debates surrounding such proposals.(2)
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.(3)
Similarly, the Department has made clear that the
expenditure of plan assets to pay costs or expenses that should be borne
by a plan sponsor or other entity in the ordinary course of its business
or operation violates ERISA’s prudence and exclusive purpose
requirements.(4)
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. Although union representation of plan participants and benefit
related provisions of collective bargaining agreements may in some sense
affect a plan, the fiduciaries may not, consistent with ERISA, increase
expenses, sacrifice investment returns, or reduce the security of plan
benefits in order to promote or oppose union organizing goals or
collective bargaining objectives. In addition, expenditures of plan assets
to urge union representation of employees in the collective bargaining
process or to promote a particular collective bargaining demand may
constitute a prohibited transfer of plan assets for the benefit of a party
in interest, under section 406(a)(1)(D) and potentially an act of
self-dealing under section 406(b)(1).
This letter constitutes an advisory opinion under ERISA
Procedure 76-1. Accordingly, it is issued subject to the provisions of
that procedure, including section 10 thereof relating to the effect of
advisory opinions.
Sincerely,
Robert J. Doyle
Director of Regulations and Interpretations
-
See ERISA Advisory Opinion
No. 2007-07A (December 21, 2007).
-
See letter from Alan D. Lebowitz,
Deputy Assistant Secretary for Program Operations, Employee Benefits
Security Administration, U.S. Department of Labor, to Jonathan P.
Hiatt, General Counsel, AFL-CIO (May 3, 2005) (copy attached).
-
See, e.g., Letter to the
Honorable Jack Kemp (November 23, 1990); ERISA Advisory Opinion 88-16A
(December 19, 1988); Letter to James S. Ray (July 8, 1988); Letter to
Reed Larson (July 14, 1986); Letter to Ralph P. Katz (March 15, 1982).
-
See ERISA Advisory Opinion
2001-01A (January 18, 2001).
|
