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Economically Targeted Investments

The DOL has issued guidance concerning the ETIs (economically targeted investments) offered in ERISA covered retirement plans. The new guidance confirms the DOL’s view expressed in a previous interpretive bulletin that fiduciaries must not accept lower expected returns or assume greater risks to secure collateral benefits from ETIs, but can take such benefits into account when investments considered are otherwise equal regarding their economic and financial characteristics. Environmental, social and governance factors may have direct relationships to the economic and financial value of an investment, and may be more than “tiebreakers.” In such cases, such factors are proper considerations of analysis among potential investment choices.

This new guidance is considered necessary, as a past interim bulletin effectively served to discourage fiduciaries from considering environmental, social and governance factors when contemplating such investments. That bulletin required plan fiduciaries determine the equal condition only “rarely” with economic benefits separate from the return to the plan in “very limited circumstances.”

EBSA News Release, dol.gov; October 22, 2015.
www.plansponsor.com, December 2015.