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THE AGENDA DOL FINALIZES NEW FIDUCIARY GUIDANCE– WHAT SHOULD DIRECTORS DO NOW? IN ADDITION TO THE FIDUCIARY duties that directors owe to shareholders, many directors also serve as ERISA fiduciaries of the various employee benefits plans that the company sponsors. Most often, this ERISA fiduciary duty arises because the directors appoint the company employee(s) (referred to in this article as the administrative committee) responsible for overseeing the ERISA plans on a day-to-day basis. The US Department of Labor has made clear that board members in such a situation have an ongoing duty to monitor the performance of the administrative committee, and directors at many companies have been sued for allegedly failing to oversee the delegatees. As a result, many boards have their administrative committees report on a regular basis on some of the significant activities undertaken by the committee since the last report. In early April, and after much debate and several different proposals spanning six years, the DOL released new rules regarding ERISA fiduciaries. The new rules represent a significant expansion of the rules from prior DOL guidance and have received extensive coverage in the mainstream press. In light of the new rules and media attention, directors may wonder if the new DOL rules will affect how they should discharge their fiduciary duties. The new DOL rules will not significantly change the type or scope of directors’ ERISA fiduciary duties. However, as part of the directors’ annual review of the administrative committee, the new rules may change the discussion topics for upcoming meetings with the committee. Specifically, directors would be well served to ask their administrative committee representative what steps have been or will be taken to comply with the new DOL guidance. 10 Co r p o r at e B oa r d M e M B e r S e Co N d Q Ua rt e r 2 0 1 6 For example: • Some investment advisers took the position that they were not ERISA fiduciaries based on certain limitations contained in the 1975 DOL definition of a fiduciary. If the administrative committee had investment advisers that previously took such a position, will those advisers now agree to act as fiduciaries pursuant to the new, expanded DOL definition of a fiduciary and will updated contractual arrangements be put in place? Or, will new advisers be engaged? • Similarly, a 2005 DOL advisory opinion had concluded that a recommendation to a plan participant on how to invest the proceeds of a contemplated plan distribution was not fiduciary investment advice. The new guidance reverses this position and subjects such advice to the heightened fiduciary standard. Directors may want to ask the administrative committee what steps will be taken to ensure compliance with the new rules if participants are to receive advice (from any source, for example, the plan’s record keeper or its affiliate) regarding whether to roll their accumulated retirement savings over to an IRA or to use their retirement savings to purchase an annuity. Asking these types of questions, thinking critically about the answers, and documenting the discussion in the board minutes can help directors demonstrate that they have properly discharged their ERISA fiduciary responsibilities. llllll Joseph S. Adams is a partner in the international firm of McDermott Will & Emery. His practice focuses on executive compensation and employee benefits.