Recently, the Department of Labor issued guidance on fund managers’ ERISA fiduciary duties when considering investments for social or political purposes. The guidance is applicable to labor funds and single employer pension plans – and is in response to the Chamber of Commerce, which previously asserted that pension plan managers have put political agendas ahead of the funds’ best interests.
The DOL’s guidance states that pension plan fiduciaries may not consider “factors outside the economic interests of the plan” in making investment choices unless they can provide an economic analysis that shows that the “investment alternatives were of equal value.” For example, a plan manager who adopts a policy to favor investments in “green” companies may not consider only “green” firms, but “must consider all investments that meet the plan’s prudent financial criteria.”
The guidance appears to be a “win” for the Chamber of Commerce, although some labor fund officials claim that it has not really changed the fiduciary obligations. For more on funds’ fiduciary best practices, see the “ERISA Securities Litigation” Practice Area.
Last Call for 409A Amendments
As many of you are aware, the deadline to be in compliance with Section 409A is fast approaching. Effective January 1, 2009, all things that are (or are considered to be) deferred compensation arrangements for employees, directors and other service providers must be in compliance. Many continue to push for another extension of the deadline (the last extension was granted in October ’07) – see the various commentaries on CompensationStandards.com “The Advisors’ Blog” – but it doesn’t look likely at this point. The penalty for non-compliance falls mostly on the employee, who becomes subject to immediate income tax and hefty penalties.
On the other hand, there has been a more much visible pushback against another deadline that is fast approaching (i.e., December 31st) – the beginning of the transition to the Pension Protection Act of 2006’s funding provisions. The PPA is intended to ensure that company pensions are adequately funded to meet the promised payouts. It requires companies to bring their pensions up to “full” funding over the next seven years.
Those companies that fall short will be forced to take steps such as freezing the accrual of new benefits for current plan members. Last week, a group of 300 companies sent a letter to Congress urging a “softer” transition from the old rules to the new ones.
More on Corp Fin Comments on REIT 10-Ks
A while back, we blogged about Corp Fin’s guidance for drafting REIT 10-Ks. In this new memo, Goodwin Procter reviews the most recent batch of REIT 10-K comment letters and notes these top six (non-accounting) areas of Staff comment:
– Lease expirations
– Occupancy rates and annual rents
– Dividends and distributions in excess of FFO/cash flows
– FFO presentation
– Non-GAAP measures
– Trends or uncertainties
Most of these comments were “futures” and did not seek amendment of the 10-K. For more on REITs, check out our “REITs” Practice Area.
– Julie Hoffman