Joint Trades Request Comment Period Extension for DOL ESG Proposal

Office of Regulations and Interpretations
Employee Benefits Security Administration
Room N–5655
U.S. Department of Labor
200 Constitution Avenue NW
Washington, DC 20210
Attention: Financial Factors in Selecting Plan Investments Proposed Regulation

Dear Sir or Madam:

The American Bankers Association,i the Defined Contribution Institutional Investment Association,ii Insured Retirement Institute,iii the Investment Adviser Association,iv Investment Company Institute,v the Securities Industry and Financial Markets Association,vi and the SPARK Institutevii write in response to the Department of Labor’s (“Department’s”) proposed rule on Financial Factors in Selecting Plan Investments (the “Proposal”).viii We respectfully request a 30-day extension of the deadline for public comments on the Proposal, currently scheduled to end on July 30, 2020.

The changes described in the Proposal are significant and demand comprehensive review in order to properly consider their impact on plan investments and current practices. We recognize the fact that the Department may believe that the Proposal does little more than reiterate ERISA’s statutory fiduciary standards, “codify” existing sub-regulatory guidance and require actions that it believes plan fiduciaries should already be taking. To the contrary, however, we believe that the Proposal, as currently drafted, would make sweeping changes to current rules. It would not only make substantial changes to the application of ERISA to investments that incorporate environmental, social and governance (ESG) factors, but the changes made to the Investment Duties regulation also would have extensive impacts far beyond ESG investments.

The Proposal represents a major overhaul to DOL regulation section 2550.404a-1, which applies to a fiduciary’s selection of all plan investments and has been in place since 1979. To help avoid unintended consequences that could include increased costs and burdens on fiduciaries for the selection of any plan investment, significant limitations on the investment choices of plan participants, and increased risk of litigation against plans, more than thirty days is needed for analysis.

Proposed changes to this regulation have not received significant prior input. Unlike other proposals the Department has issued recently with a similarly short comment period (e.g., recent regulation on electronic delivery, RFI on multiple employer plans (MEPs) (including pooled employer plans or PEPs), and the proposed fiduciary prohibited transaction class exemption (Proposed PTE)), these changes have not been the subject of prior public comment. These other proposals build on longstanding public policy issues (multiple employer plans and investment advice) for which the Department has sought public input many times, whereas the changes proposed here call for thoughtful consideration that takes time. The Department has never sought public input (nor input from the ERISA Advisory Council) on the question of financial factors in investment decisions.

For these reasons, we are requesting a 30-day extension of the comment period. The undersigned organizations believe that this extension would lead to more thoughtful and comprehensive input, which will ultimately result in improvements to the regulation that would benefit all parties.

Thank you for your attention on this matter.

American Bankers Association
Defined Contribution Institutional Investment Association
Insured Retirement Institute
Investment Adviser Association
Investment Company Institute
Securities Industry and Financial Markets Association
SPARK Institute