House Republicans aim to block ESG use in retirement plans

They say the bills will 'ensure financial institutions are focused on maximizing returns in retirement plans'

House Republicans aim to block ESG use in retirement plans

Four new bills were recently introduced by Republicans on the House Committee on Education and the Workforce, as reported in an article by Plansponsor.

The bills were made in an effort to continue the move of Republicans against plan sponsors who were offering retirement plans to their employees that involved ESG factors within their investment strategy.

Among the four bills, only two directly mentioned the ESG. However, the committee press release announced all four to be part of the move against President Joe Biden’s ESG Rule.

The Rollback ESG to Increase Retirement Earnings (RETIRE) Act

Proposed by Representative Rick Wilson, R-Georgia, the bill would repeal the current final rule on ESG in retirement plans made by the Department of Labor (DOL).

The DOL allows fiduciaries to use ESG considerations when making decisions and consider the “collateral” factors as a tiebreaker if there comes a time when two choices would “equally serve the financial interests of the plan over the appropriate time horizon.”

This bill would require fiduciaries to only act based on pecuniary factors and would restore the tiebreaker test that was previously put into place by the previous administration of former President Donald Trump.

Retirement Proxy Protection Act

Proposed by Representative Erin Houchin, R-Indiana, the bill would require fiduciaries to only consider “pecuniary factors” if they are voting shares on behalf of participants of the plan. It was intended to make sure that fiduciaries would not “advance radical policies.”

The bill further said that not voting every share is not a breach of the duties of fiduciaries. Fiduciaries were required to monitor third parties that provide advice regarding shareholder rights such as proxy voting advisers.

No Discrimination in My Benefits Act

Proposed by Rob Good, R-Virginia, the bill stated that there should be no discrimination when it comes to race, color, religion, sex, or national origin when selecting a fiduciary, counsel, employee, or service provider of an Employee Retirement Income Security Act (ERISA) plan.

Providing Complete Information to Retirement Investors Act

This bill will require defined contribution plans to explain the difference between investments selected by fiduciaries under ERISA and investments that were selected through a brokerage window to their participants.

Plans would need to notify their participants each time they “direct an investment into, out of, or within” a brokerage window that such investments were not selected by a fiduciary and that their returns may be lower than the investments that were offered in the plan.