Labor & Employment
8/27/2009 7:37:12 AM EST
Bender's Labor & Employment Bulletin: Fiduciary Check-Up
Introduction
During this period of financial crisis, it is important that employers who sponsor benefit plans understand their fiduciary obligations under the Employee Retirement Income Security Act of 1974 (''ERISA'') and proactively confirm that their practices and procedures are in legal compliance. This article provides a checklist of the most critical, common ERISA practices.
Minutes
A fiduciary can demonstrate ERISA procedural prudence by providing detailed information in the minutes of a trustee or fiduciary committee meeting. Minutes from these meetings can show why investments were selected, removed, or retained, as well as document other fiduciary considerations given to investment options. Written minutes should also document actions taken with regard to the management and control of plan assets. Fiduciaries should review past minutes to make sure that fiduciary decisions are in compliance with ERISA fiduciary obligations.
Proxy Voting
The United States Department of Labor (''DOL'') has issued an interpretive bulletin describing how ERISA applies to the voting of proxies on securities held in a pension plan's investment portfolio. The interpretive bulletin also provides guidance on the appropriateness of active monitoring of corporate management by fiduciaries. As a result of this recent guidance from the DOL, fiduciaries should require that investment managers provide plans with the most recent copy of its proxy voting guidelines and should vote proxies consistent with that policy. The investment manager should also maintain accurate records on the voting of proxies and should provide the information from those records to the plan upon request. Those records should include an explanation of each proxy that investment managers vote with respect to securities held by the fund. To confirm that investment managers adhere to this practice, fiduciaries should review their investment management agreements to verify that their investment managers' proxy responsibilities are contractually delineated to adhere to the DOL's guidance.
(footnotes omitted)
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