The Department of Labor in a May 3 letter warned the AFL-CIO about using its pension fund to lobby against President Bush's Social Security proposal.

A fiduciary could not, consistent with the duties of prudence and loyalty, simply exclude qualified service providers from consideration in hiring based solely upon their views on Social Security policy.

The union is one of the leading opponents of Bush's plan to allow Americans to divert a portion of their Social Security taxes into personal investment accounts and has indicated that an investment firm's support for the plan would be counted against it when the union selects pension fund money managers. This drew the attention of federal regulators.

"A fiduciary's reconsideration of its current service providers based solely upon the service provider's views on Social Security would raise grave concerns about the prudence and loyalty of the fiduciaries' [sic] actions," Alan Lebowitz, deputy assistant labor secretary, wrote in the letter. "Similarly, a fiduciary could not, consistent with the duties of prudence and loyalty, simply exclude qualified service providers from consideration in hiring based solely upon their views on Social Security policy."

An AFL-CIO official, though, said the union is doing nothing wrong since it is permitted to use a firm's position on the Social Security issue as one of several factors in its hiring decisions. The letter, AFL-CIO attorney Damon Silvers said, simply "confirms the position that we have been taking."

The letter also warned the union against using pension fund money in its campaign against the president's proposal.