,"The House narrowly passed a resolution to overturn the Biden administration’s rule that allows retirement plan managers to consider environmental..."
The House voted Tuesday to block a Biden administration rule that allows retirement plans to consider environmental, social and governance (ESG) factors when making investments, a move that could have major implications for retirement investors. The Senate will vote Wednesday on a resolution to reject the Department of Labor's (DOL) rule paving the way for ESG-investing in retirement plans. The rule has become a focus in a fight over what role the government should play in retirement investments.
The GOP-controlled House voted Tuesday to block a Biden administration rule that allows retirement plans to consider environmental, social and governance (ESG) factors when making investments. The move undid an effort under then-President Donald Trump to block such investments. The rule has become a focus in a fight over what role the government should play in retirement investments.
The Senate will vote on Wednesday on a politically charged resolution to overturn a Biden administration retirement investment rule that allows mutual funds and other retirement plan managers to consider social and environmental issues when making investments. The resolution, which was passed by the House on Tuesday, would nullify the Department of Labor’s (DOL) rule that would allow plan managers to consider environmental, social and governance (ESG) factors when making investments.
The move is largely seen as a rebuke of the Biden administration’s efforts to expand the role of retirement plan managers in considering ESG factors when making investments. The rule simply makes sure that retirement plan fiduciaries must engage in a risk and return analysis of their investment decisions and that they do not put the interests of plan participants at risk.
Opponents of the rule have argued that it politicizes retirement investments and that the Biden administration is overstepping its bounds in dictating how retirement plans should be managed. They also argue that the rule could lead to higher costs for plan participants and that it would put retirement plan managers in the position of having to make politically motivated decisions when investing.
However, proponents of the rule argue that ESG-based investing can help to protect and grow retirement assets over the long-term and that considering ESG factors can provide retirement plan participants with benefits such as improved financial performance and reduced risk. They also point to research that suggests that ESG-based investing can lead to better long-term returns and can help to protect retirement assets from downside risk.
The resolution to reject the DOL's rule paving the way for ESG-investing in retirement plans will now go to Biden's desk, which he has said he'll veto — setting up a potential showdown between the White House and Republicans in Congress. The House vote was largely along party lines, with two Republicans, Reps. Brian Fitzpatrick (R-PA) and Don Bacon (R-NE), voting against the resolution. Both are up for reelection in red states next year.
The IRS also released proposed regulations on Tuesday that would require retirement plan administrators to report the amount of forfeited funds that are placed into plan suspense accounts. In its proposal, the IRS said some defined contribution plan administrators place forfeited funds into a “plan suspense account” in which the funds are held until they are reallocated or used to pay plan fees.
The House narrowly passed a resolution to overturn the Biden administration’s rule that allows retirement plan managers to consider environmental, social, and governance (ESG) factors when making investments. The resolution, which passed by a narrow margin, would nullify the Department of Labor’s (DOL) rule that would allow plan managers to consider ESG factors when making investments.
Retirement fiduciaries, not House Republicans, are best positioned and bound by law to make prudent investment decisions on behalf of participants and beneficiaries. This resolution would take away their ability to consider the best interests of plan participants when making investments.
