With respect to IB 2016-01, FAB 2018-01 clarifies that if a plan’s investment policy includes rules around the use of ESG factors to evaluate investment options, the plan fiduciary must disregard these ESG rules if following the rules would result in an imprudent investment decision. Prior to issuing FAB 2018-01, the DOL believed that some plan fiduciaries may have felt obligated to follow the plan investment policy’s ESG rules regardless of the outcome.
If your ERISA plan engages in socially responsible investing, please discuss FAB 2018-01 with your plan’s investment advisor or investment manager so that you fully understand the potential impact on your plan’s investment strategy. More specifically:
- If you have a plan investment policy that includes ESG rules, consider revising this investment policy to specify that these ESG rules will be ignored if adhering to the rules would lead to an imprudent investment decision.
- If your defined contribution plan’s QDIA could be viewed as a socially responsible QDIA, reevaluate this selection under a strict interpretation of IB 2015-01.