February 6, 2023 |
Managing retirement funds means making them grow for the investor, not advocating for leftist social and environmental agendas.
That’s how Governor Mark Gordon and the Wyoming Congressional delegation feel about President’s Joe Biden’s new rule allowing fund managers to invest the retirement savings of millions of Americans in environmental causes.
In late January, Wyoming joined a 25-state coalition in a lawsuit over the Department of labor rule that allows 401(k) managers to direct their clients’ money to ESG (Environmental Social Governance) investments rather than long-standing fiduciary standards outlined in the Employee Retirement Income Security Act of 1974 (ERISA).
Biden’s proposed rule impacts $12 trillion worth of retirement funds in 29,000 defined contribution plans and 5,500 defined benefit plans. It replaces the previous mandate that financial decisions be made solely on getting the best returns for the 152 million Americans who depend on ERISA for their retirement.
Governor Gordon, in a statement announcing the lawsuit on January 26th, said, “Allowing political agendas to guide managers investing Americans’ retirement accounts is unacceptable and shortsighted. Their sole responsibilities must be the best financial interests of the beneficiaries.”
The new rule took effect on January 30th. It allows fund managers who participate in shareholder votes without considering the interests of the employees and retirees they represent, to consider and promote “non-pecuniary,” or non-financial benefits. Two-thirds of the U.S. population’s retirement savings accounts would be affected.
U.S. Senators John Barrasso and Cynthia Lummis, both R-Wyo., joined U.S. Senator Mike Braun (R-Ind.) and all of their Republican colleagues in challenging the rule through a Congressional Review Act (CRA) joint resolution of disapproval.
The rule puts the retirement funds of cash-strapped Americans at risk to fund social programs that may not be aligned with their views. Investors won’t have any say where their money goes or what it funds.
Senator Barrasso said in a statement that the president “is now prioritizing a far-left political agenda over Americans’ savings.”
Senator Lummis agrees, saying, “Fiduciary decisions should be made solely on investment returns not woke priorities that leave retirement accounts less valuable and less stable.”
The Congressional Review Act can be used by Congress to overturn federal agency regulations and actions through a joint resolution of disapproval. A CRA must be approved by both houses of Congress and have enough votes to override a presidential veto—a tall order given the political make-up of the Senate and the House.
The lawsuit filed by the 25 states may be more successful. The legal filing claims the rule undermines key protections for retirement savings of 152 million workers — approximately two-thirds of U.S. adults — in the name of promoting environmental and social causes — including the Biden administration’s stated desire to address climate change. It was filed in U.S. District Court, Amarillo, Texas. It says the rule is “arbitrary and capricious.” The states seek a preliminary injunction.
