Retirement plan fiduciaries may not sacrifice plan performance when using plan assets to either help or fight unions.
Robert Doyle, a director at the Employee Benefits Security Administration, comes to that conclusion in Advisory Opinion 2008-05A, which was written in response to a letter from David Chavern chief operating officer of the U.S. Chamber of Commerce, Washington.
Chavern asked EBSA, an arm of the U.S. Labor Department, whether the fiduciary rules of the Employee Retirement Income Security Act prohibit the use of plan assets to support union organizing and collective bargaining efforts.
“Fiduciaries may not, consistent with ERISA, increase expenses, sacrifice investment returns, or reduce the security of plan benefits in order to promote or oppose union organizing goals or collective bargaining objectives,” Doyle writes in the advisory opinion.
“In addition, expenditures of plan assets to urge union representation of employees in the collective bargaining process or to promote a particular collective bargaining demand may constitute a prohibited transfer of plan assets for the benefit of a party in interest… and potentially an act of self-dealing,” Doyle warns.
Sections 404(a)(1)(A) and (B) of ERISA require plan fiduciaries to discharge their duties “prudently and solely for the exclusive purpose of providing benefits to participants and beneficiaries and defraying reasonable expenses of administering the plan,” Doyle writes.
Fiduciaries cannot interpret that requirement to permit them to promote other public policy goals on the ground that anything that helps the national economy helps plan participants, Doyle writes.
“A fiduciary may only consider factors relating to the interests of plan participants and beneficiaries in their retirement income,” Doyle writes.
When, for example, a fiduciary decides whether to invest the plan sponsor’s industry, the decision “may not be influenced by a desire to promote a particular industry or industry member, or to generate employment within that industry or industry member, unless the investment, when judged solely on the basis of its economic value to the plan, would clearly be equal or superior to alternative investments available to the plan,” Doyle writes.
The U.S. Labor Department believes using pension plan assets to further collective bargaining objectives subordinates the interests of plan participants to other interests, Doyle writes.