DOL Issues Advisory Opinion Regarding Investment Management Fees
The Department of Labor (DOL) has responded to fiduciary responsibility questions from Citigroup Inc. (Citi) related to their Racial Equity Asset Manager Program. Under the program, Citi pays all or a portion of investment management fees for “Diverse Managers” retained by Citi-sponsored employee benefit plans. Diverse Manager criteria would be determined by an independent firm. Citi’s request further details program parameters of its initiative.
DOL’s Advisory Opinion 2023-01a responds to questions related to whether Citi would be considered a fiduciary with respect to selection of investment managers, whether the investment committee would be in violation of ERISA for considering the fee arrangement, and whether requirements under ERISA 404(c) would be satisfied with inclusion of such program fee information included in their disclosure. DOL concludes that based on the representations of the program, DOL would not view Citi as a fiduciary solely by establishing the program or reimbursing fees pursuant to the program. Additionally, the investment committee members would not violate their duties by virtue of considering as one factor in the selection process that fees otherwise payable by the Plan will be paid under the program. And finally, the disclosure of the program’s existence and payments under the program would not result in “improper influence” by the investment committees or Citi.