Investing August 16, 2016

CalPERS Adopts ESG Strategic Plan

The five-year plan identifies six strategic initiatives and key performance indicators.
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The California Public Employees’ Retirement System (CalPERS) Board of Administration adopted the Environmental, Social, and Governance (ESG) 5-Year Strategic Plan, a six -point plan that is the next evolution of CalPERS’ work on sustainable investing and the Global Governance program.

The plan identifies six strategic initiatives that will direct staff’s work. The initiatives are data and corporate reporting standards; UN PRI Montreal Pledge company engagement; diversity and inclusion; manager expectations; sustainable investment research; and private equity fee and profit sharing transparency. These initiatives are cross-cutting issues which will have impacts on risk and return. Each initiative has specific objectives, key performance indicators, and a timeline.

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The comprehensive plan is a result of more than a year’s worth of review by staff and the CalPERS Investment Committee. During this time, staff presented a thorough review of each channel—environmental, social and governance. Staff also reported on how each channel could use the approach of integration, engagement, advocacy and partnerships to move the strategy forward.

“I am very proud of this bold plan. It will guide our ESG efforts in a comprehensive and integrated way across all asset classes,” says Henry Jones, CalPERS Investment Committee chair.

The strategic plan serves as the framework by which CalPERS executes its shareowner proxy voting responsibilities; engages public companies to achieve long-term, sustainable risk-adjusted returns; and works with internal and external investment managers to ensure their practices align with CalPERS’ Investment Beliefs. 

The key performance indicators will serve as benchmarks to measure the success of efforts for each initiative. Staff will report to the board the status of the key performance indicators on a quarterly basis.

“CalPERS’ ESG efforts have made significant progress on important fronts including proxy access, board diversity, and climate risk reporting,” says Anne Simpson, CalPERS investment director of Global Governance. “Under this new strategy, we have a clear path for our efforts through 2021, which is very exciting.”

Ask the Experts August 16, 2016

(b)lines Ask the Experts – Beneficiary Rules for Non-ERISA Church Plans

“We are a denominational church plan that has not elected to be covered by the Employee Retirement Income Security Act (ERISA).
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“A participant has remarried after his first wife died. He and the current wife signed a prenuptial agreement that said the balance of his 403(b) plan at the time of the marriage would go to his children from his first marriage in the event of his death; any accumulation afterward would belong to her. The plan provisions state that the spouse is the primary beneficiary unless he/she waives that right in writing. Is this agreement sufficient for the new wife to waive her rights to the 403(b) plan?” 

Michael A. Webb, vice president, Cammack Retirement Group, answers:  

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This is an excellent and complex question, primarily due to the fact that your plan is not subject to ERISA. Because your plan is not subject to ERISA, it is subject to relevant state law, the provisions of which vary from state to state. In addition, should the issue ever be in dispute (and, unfortunately, beneficiary litigation is EXTREMELY commonplace) the issue of whether a prenup would constitute a waiver that is “in writing” for retirement plan purposes, and even the interpretation of what your plan requires, may be a matter for a local court to decide. Thus, you should contact outside counsel with specific expertise in such matter to determine whether the prenup is sufficient as a valid beneficiary designation, or if further documentation such as a new waiver would be required.

Should an actual dispute arise between the parties as to who is entitled to the benefit, you should also look to the claims procedures in the plan. Non-ERISA plans are not required to have claims procedures, but they often do, and can be protective of the plan administrator by providing clear rules for any disputes.

If your church plan had elected to be covered under ERISA, the answer would have been much simpler. ERISA plans provide certain rights to a participant’s spouse in the event of the participant’s death that CANNOT be waived by a prenuptial agreement. The participant must provide specific written consent to waive these spousal rights in the manner proscribed by the plan document.

It should be noted that what we have discussed thus far applies only in the event of a participant’s death, as opposed to the dissolution of a marriage. ERISA plans are subject to what are called qualified domestic relation orders (QDROs) which often stipulate the division of retirement plan assets in the event of divorce, as well as any other marital property, child support or alimony disputes. Church plans are not subject to all of the rules regarding QDROs, but can also divide retirement plan assets under a domestic relations order if one is provided to the plan.

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.  

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to rmoore@assetinternational.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.

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