E&W Blog

Today, the Health, Employment, Labor, and Pensions Subcommittee held a hearing examining the Employee Retirement Income Security Act (ERISA) and the Left’s efforts to manipulate ERISA plans to push a radical political agenda. These benefit plans hold an estimated $14 trillion in assets and benefit 156 million workers, retirees, and dependents.

The hearing started off with Subcommittee Chairman Rick Allen (R-GA) discussing how the Biden-Harris administration encouraged retirement plan fiduciaries to consider environmental, social, and governance (ESG) factors for impact investing at the expense of financial returns, and by doing so threatening these savings.

“Americans’ hard-earned retirement savings should never be jeopardized by politically motivated mismanagement. Unfortunately, the Biden-Harris administration made this possible with an overreaching rule that allows fiduciaries to aggressively invest retirees’ money in ESG funds—which often charge steeper fees, carry higher risk, and have lower returns.”

Rep. Allen also highlighted his bill, the Protecting Prudent Investment of Retirement Savings Act, which would codify that retirement plan sponsors must make investment decisions solely based on financial returns—ensuring Americans’ hard-earned savings are invested sensibly.

Witnesses also echoed concerns with forced investment in ESG. “The evidence clearly shows that ESG funds tend to lag the broader market, and the long-term ramifications of accepting even a small reduction in the returns to one’s retirement savings are significant,” said Mr. Ike Brannon, President of Capitol Policy Analytics.

This topic was personal for Rep. Randy Fine (R-FL), whose father benefits from on a retirement plan. Rep. Fine asked Democrat-invited witness Mr. Brandon Rees, the Deputy Director for Corporations and Capital Markets of the AFL-CIO, “Do you think there are any times when an investment manager should make a decision on how to invest those funds driven by anything other than what would maximize the returns [my father] would get when he needs them? Or should financial returns be the sole criteria that a financial advisor should use to be making those financial decisions?”

Mr. Rees ended up agreeing that investments should always be focused on returns.

In an exchange with Committee Chairman Tim Walberg (R-MI) about the issue of fiduciary loyalty and the conflict of fiduciaries being motivated to produce a benefit for a third party or their own ethics when investing someone else’s retirement, Professor Max M. Schanzenbach of the Northwestern University Pritzker School of Law said, “A fiduciary cannot reach into the retirement pot and take out 50 dollars for himself, nor can he reach in and take out 50 dollars to give to a favorite charity. We understand that this is self-dealing and it’s a violation of fiduciary obligation. It is no different if the fiduciary impairs the investment returns so as to produce that same benefit for third parties—it is all a breach of the duty of loyalty and has widely understood to be such in trust law for generations.”

Rep. Virginia Foxx (R-NC) brought up the topic of proxy advisory firms which have been given a role in critical decisions by ERISA fiduciaries.

Mr. Charles Crain, Managing Vice President of Policy at the National Association of Manufacturers, responded by highlighting the issues with ERISA plans using proxy firms:“Proxy firms are conflicted, they are unregulated, they have specific agendas that they use their voting power to achieve, and it absolutely undermines ERISA fiduciary obligations.”

Mr. Crain also explained the role of ERISA best: “[ERISA fiduciaries] need to be making decisions in the best interest of those plan participants so that plan savings are there for them when they retire and that’s absolutely the bedrock of ERISA.”

Bottom Line: It’s time to stop playing politics with Americans’ retirement. Republicans are committed to protecting the retirement savings of workers, retirees, and their families.