The American Retirement Association (ARA) and sustainable markets advocacy organization Ceres filed an amicus brief last week in the 5th U.S. Circuit Court of Appeals. It supported the U.S. Department of Labor’s (DOL) rule “that ensures retirement plan fiduciaries, including 401(k) sponsors, can consider all relevant factors, when making investment decisions.”
The full brief is available here.
The DOL rule, Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, took effect in January 2023 and immediately faced a legal challenge in the Northern District of Texas. The court ruled in favor of upholding the rule, citing its alignment with decades of legal precedent and prior DOL rulemakings. The decision was appealed in the 5th Circuit where it is now under consideration.
“For 50 years ERISA has required plan fiduciaries to make investment decisions solely in the best interest of plan participants,” Brian Graff, CEO of the American Retirement Association, said. “We believe the Department’s regulation should be upheld because it takes a neutral approach giving plans fiduciaries the discretion to determine which financial factors are relevant when making investment decisions while ensuring that the financial interests of plan participants always remain paramount.”
“Any attempt to limit the risk and return factors that retirement professionals can consider when making investment decisions puts the lifesavings of millions at risk,” Steven Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets at Ceres, added. “This rule, as the district court concluded, takes a neutral, middle-of-the-road approach to the consideration of environmental, social, and governance factors. We hope the appeals court will agree with the lower court and leave it in the capable hands of fiduciaries to determine which risk and opportunity factors to assess.”
Ceres, in collaboration with US SIF and the Environmental Defense Fund, conducted an analysis of comments submitted during the DOL’s rulemaking process in January 2022, which it said, “demonstrated overwhelming support for the new rule, including from financial industry commenters.”
