Toomey, Crapo, Burr Urge DOL to Put Americans’ Retirement Savings Above ESG Objectives
DOL needs to enforce two critical ERISA fiduciary rules
Washington, D.C. – U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.), U.S. Senate Finance Committee Ranking Member Mike Crapo (R-Idaho), and U.S. Senate Health, Education, Labor and Pensions (HELP) Committee Ranking Member Richard Burr (R-N.C.) today expressed concern over the Department of Labor’s (DOL) recent announcement that it will not enforce two important fiduciary rules issued in 2020 to protect the retirement savings of millions of American workers.
The
two rules—which amended the Investment Duties regulation under the Employee
Retirement Income Security Act of 1974 (ERISA)— were implemented
in 2020 to prevent fiduciaries from putting non-pecuniary interests, such as
environmental, social, and governance (ESG) objectives, above the financial
interests of American workers and retirees.
In
a letter to the Acting Secretary, the Ranking Members wrote:
“DOL’s refusal to enforce these rules
will harm Americans’ retirement savings by allowing plan fiduciaries to
sacrifice investment returns to promote non-pecuniary policy objectives like
social justice, diversity quotas, and lower carbon emissions.”
As
the Ranking Members point out, DOL’s decision not to enforce these rules
inevitably puts the interests of Wall Street asset managers ahead of American
workers.
“DOL’s decision to not enforce rules
that protect the retirement savings of American workers is particularly
concerning because it reportedly came after Wall Street asset managers lobbied
the incoming Biden administration for this outcome. Asset managers that sell
ESG funds—which ‘are a growing profit center for asset managers’—stand to
benefit from DOL’s decision.”
Read
the full letter here
or below.
March 18, 2021
Mr.
Al Stewart
Acting Secretary
U.S. Department of Labor
200 Constitution Avenue, NW
Washington, DC 20210
Re:
Enforcement of the DOL Investment Duties Regulation
Dear
Acting Secretary Stewart:
We
are concerned by the Department of Labor’s (DOL) March 10, 2021 statement that
it will not enforce two important final rules that were issued in 2020 to
protect the retirement savings of millions of American workers. These rules,
which amended the Investment Duties regulation under the Employee Retirement
Income Security Act of 1974 (ERISA), collectively prohibit the fiduciaries of
private-sector retirement plans from making investment decisions and exercising
shareholder rights in a manner that subordinates the financial interests of
workers and retirees to non-pecuniary interests, such as environmental, social,
and governance (ESG) objectives. Both rules are the products of open and
transparent notice and comment rulemaking processes.
DOL
should immediately reverse its ill-considered decision to not enforce these
rules. DOL has a legal responsibility to enforce ERISA and the rules issued
thereunder. The final rules are based on the common-sense, unobjectionable
principle that fiduciaries of retirement plans must put the financial interests
of plan participants and beneficiaries first.
The
specific details of these rules are equally unobjectionable. For example, one
of the rules requires plan fiduciaries, when making investment decisions, to
consider factors such as diversification, liquidity, and projected and current
returns. The other rule requires plan fiduciaries to act in accordance with the
financial interest of plan participants and beneficiaries when deciding whether
and how to vote proxies and exercise shareholder rights. DOL’s refusal to
enforce these rules will harm Americans’ retirement savings by allowing plan
fiduciaries to sacrifice investment returns to promote non-pecuniary policy
objectives like social justice, diversity quotas, and lower carbon emissions.
In
addition, DOL’s decision encourages plan fiduciaries to take actions that may
make them vulnerable to class action liability under ERISA. For example, DOL’s
non-enforcement policy may prompt a plan fiduciary to make investment decisions
based on non-pecuniary policy objectives in violation of DOL’s Investment
Duties regulation. While DOL would not take action against a plan fiduciary for
such action, plaintiffs’ lawyers could by bringing a class action lawsuit under
ERISA.
DOL’s
decision to not enforce rules that protect the retirement savings of American
workers is particularly concerning because it reportedly came after Wall Street
asset managers lobbied the incoming Biden administration for this outcome.
Asset managers that sell ESG funds—which “are a growing profit center for asset
managers”—stand to benefit from DOL’s decision. Since DOL is allowing
plan fiduciaries to put non-pecuniary policy objectives above the financial
interests of plan participants and beneficiaries, fiduciaries are now free to
include ESG funds in their plans even if they have lower returns, higher costs,
and/or higher risks.
In
the interests of protecting the retirement savings of millions of American
workers, we ask that DOL enforce the important rules issued in 2020 that
amended DOL’s Investment Duties regulation.
Sincerely,
Richard
Burr
U.S. Senator
Ranking Member
U.S. Senate Committee on Health, Education, Labor and Pensions
Mike
Crapo
U.S. Senator
Ranking Member
U.S. Senate Committee on Finance
Pat
Toomey
U.S. Senator
Ranking Member
U.S. Senate Committee on Banking, Housing, and Urban Affairs
cc:
Ali Khawar, Principal Deputy Assistant Secretary, EBSA
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