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New Common Terminology for ESG Fund Investing Strategies
August 11, 2020 WEBCAST
Investment Company Institute

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[Guidance Overview]

24 pages. "The world has changed dramatically, and plan sponsors, as well as pension professionals, often get confused as to what type of retirement program will work best for a particular employer, its participants, and its retirement plan. This paper will identify the main types of plan structures that can be used, the pros and cons of each, and cues as to which might be the right fit in a given situation."

Ferenczy Benefits Law Center, for Transamerica

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[Guidance Overview]

Plan Fiduciaries: What About All That COVID-19 Regulatory Relief? (PDF)

"[EBSA Disaster Relief Notice 2020-01 ] did not provide blanket extensions. Rather, it conspicuously and carefully notes that deadline relief is only available 'if the plan and responsible fiduciary act in good faith and furnish the notice, disclosure, or document as soon as administratively practicable under the circumstances.' So even as to the notices covered by Notice 2020-01, if a plan sponsor's business and/or ability to fulfill the normal deadlines for dissemination of covered notices was/is not significantly impacted by the pandemic, it may well be that extending deadlines would not fulfill fiduciary duties."

Boutwell Fay LLP

[Guidance Overview]

"[W]hile the proposed rule, if adopted, will increase fiduciary pressure for U.S.-based benefit plan investors, it will not directly impose requirements on most external public investment vehicles ... Moreover, absent action by States, it will not apply to state-managed pension funds ... By essentially assuming that ESG factors are non-pecuniary and requiring that their pecuniary nature meet generally accepted investment theories, the proposed rule could inadvertently create support for integrated reporting."

Vinson & Elkins LLP

16 pages. "To promote the understanding of investors, other market participants, regulators, and others, [ICI's ESG Working Group] agreed that it would be good practice for funds to use consistent terminology to describe ESG strategies in their public communications. This publication sets forth the working group's understanding of the range of those strategies and explains how a fund investor might differentiate among them."

Investment Company Institute [ICI]

"401(k) plan participants investing in equity mutual funds incurred an average expense ratio of 0.39% in 2019, compared with 0.42% in 2018 and 0.77% in 2000. The average expense ratio that plan participants incurred for investing in hybrid mutual funds fell to 0.46% in 2019, from 0.49% in 2018 and 0.72% in 2000. [T]he average expense ratio that 401(k) plan participants incurred for investing in bond mutual funds rose from 0.34% in 2018 to 0.35% in 2019. However, this is down from 0.60% in 2000[.]"

American Retirement Association [ARA]

Plan Advisor Checklist: Identifying the Best Retirement Plan Prospects

Retirement plan prospecting can be difficult. Successful advisors are targeted and focused on bringing new ideas to clients and prospects. Use this checklist to define your target audience, identify meaningful opportunities and communicate your value. 

"[S]everal states have enacted or implemented state-administered retirement savings programs to increase retirement plan access and savings among private-sector workers.... In March 2019, 33% of private-sector workers did not have access to a workplace retirement plan. State-administered retirement programs are intended to provide savings options for workers whose employer does not offer a workplace plan." [IF11611 Aug. 4, 2020]

Congressional Research Service [CRS]

"Despite the pandemic and the extreme market volatility it has caused, 'super savers' are continuing to save for their retirement ... Ninety-five percent say they are in good shape to endure a recession, and 81% say that because they cannot count on equity returns in this environment, they plan on saving more. In fact, 75% view the current market environment as a buying opportunity, and 30% have already increased their investments in the stock market in the past few months."

PLANSPONSOR; free registration may be required

"The [Federal Retirement Thrift Investment Board] reported that, among the more than 6 million TSP participants, there were only 3,797 CARES Act withdrawals. The average withdrawal was $26,270. The total amount of CARES Act withdrawals came to nearly $100 million. There were 787 CARES Act loans greater than $50,000. CARES Act loans averaged $74,402 and totaled $58.6 million."

planadviser

"July was a mixed month for pension finance, with strong stock markets offsetting the impact of new all-time low interest rates. Both model plans ... were close to even last month, with Plan A slipping 1% and Plan B treading water during July. For the year, Plan A is down 9% and Plan B is down 2% through the first seven months of 2020."

October Three Consulting

"The state of Kentucky revived and expanded a lawsuit that claims former officials of the state pension system and hedge fund firms violated their fiduciary duty by choosing risky investments. The state is demanding compensation from hedge funds for their excessive fees and underperformance. Kentucky's pension system remains one of the worst-funded in the nation, hovering around a 32.8% funding level." [Mayberry v. KKR & Co., L.P., No. 17-CI-01348 (Franklin Cir., Commonwealth of Ky. intervening complaint filed Jul. 20, 2020)]

Institute for Pension Fund Integrity [IPFI]

[Opinion]

Published comment letters submitted in response to EBSA's June 30 proposed regs on fiduciary considerations for ESG investments in retirement plans. Deadline for comments was July 30, 2020. (1,094 letters are online as of August 5.)

Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

"Compensation Committees are seeking to ensure incentive plans remain relevant, while also supporting company strategy. Key priorities may have changed and/or continue to be fluid, further increasing complexity and the need for nimble programs that can provide flexibility. In addition to discussions related to in-cycle/outstanding short-term incentive (STI) and long-term incentive (LTI) plans, Compensation Committees are also exploring potential design changes for the next fiscal year, which will become top of mind, as COVID-19 uncertainty continues into the Fall and Winter."

Meridian Compensation Partners, LLC

Proceed with Caution When Modifying Equity-Based Performance Awards

"Any modification of existing awards for named executive officers will require disclosure to shareholders and could cause backlash from shareholders and shareholder advisory groups like ISS or Glass Lewis. Modification of target and stretch goals may be impossible to do with any accuracy as the impact of the pandemic continues to be uncertain. If the modified performance goals also become impossible to achieve, the awards may remain worthless to employees, potentially causing additional employee relations issues. Some plans have limitations on the acceleration or modification of awards. Employers should confirm that any proposed changes would be permitted by existing plan terms."

Haynes and Boone, LLP

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"An attorney has a P.C. (100% owed). He also owns 50% of a CPA firm with which he is associated. No doubt this is an A-Org/FSO ASG. Some time in 2020 he sells his interest in the CPA firm. He still works there, but is no longer an owner. Does this break the ASG in 2020? When do we make that determination? First day of the year? Last day of the year? Any day of the year? I don't see any guidance on this. If this were a controlled group issue, does the determination date differ?"

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