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Labor Department Finalizes Rule on Pension Investments

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The U.S. Department of Labor has adopted a final rule that requires pension plan managers to make investments based solely on financial implications, according to The Wall Street Journal (subscription).

What it does: The rule clarifies that pension plan managers can only consider “pecuniary” factors—that is, factors relating to the financial performance of the plan—when making investment decisions on pensioners’ behalf.

  • Existing standards hold managers to a fiduciary duty to represent pensioners’ financial best interests; the new rule cautions plan managers against considering so-called environmental, social and governance (ESG) factors unless they would have a financial impact on plan performance.
  • The goal of the rule is to prevent investment decisions based on non-pecuniary metrics rather than on the financial interests of the workers whose savings are at stake.

A win for the NAM: The NAM sent a comment letter supporting the DOL’s proposed rule in July, arguing that fund managers should be required to look out for the financial interests of pension plan participants.

The last word: “This is a positive outcome for manufacturing workers across the country,” said NAM Director of Tax and Domestic Economic Policy Charles Crain. “Pension plan participants should be able to trust that their long-term savings will be protected over any other considerations so that they can enjoy a stable and secure retirement.”

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