Amidst a highly politicized environment, retirement plan litigation recently has focused on the inclusion of ESG (environmental, social & governance) factors—or the lack thereof. Nevin (Adams) and Fred (Reish) examine the issue(s) and implications.
While the Biden administration’s final rule on ESG investments (more properly “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights”) seems to have landed pretty much where the Trump administration’s final rule on ESG investments did (save for the reliance on the term “pecuniary”), the issue remains polarizing (almost as though people hadn’t actually read the final regulation), triggering a number of suits involving retirement plans—most recently one brought by an American Airlines pilot-participant regarding investment options in that plan’s 401(k).
However, American Airlines has moved to dismiss that suit—on interesting grounds (and after the podcast recording, the plaintiff has responded to that motion by amending his suit). Come check it out!
Episode Resources:
Plaintiff Pushes Back on ESG Claims in American Airlines 401(k) Suit
In response to a motion to dismiss his suit regarding ESG investments—and ESG-friendly investment managers—in his 401(k), an American Airlines participant has expanded the information in his initial suit—and contradicted the claims of the plan fiduciaries.
American Airlines Pushes Back on Participant’s ESG Suit
Plan fiduciaries say that a suit brought by a participant alleging a breach of fiduciary duty by a plan that included ESG options on its menu—and funds managed by ESG-friendly managers—didn’t invest in those options and has no basis for the suit.
Suit Says ESG Options, Focus Put 401(k) Balances at Risk
A participant lawsuit claims that American Airlines has put retirement savings at risk by investing with managers and funds that “pursue leftist political agendas through environmental, social and governance ('ESG') strategies, proxy voting, and shareholder activism.”
ESG-Related Divestment Triggers Public Pension Participant Suit
Citing an “unlawful decision to elevate unrelated policy goals over the financial health of the Plans,” a new participant suit has charged three New York plans with jeopardizing the retirement security of plan participants.
DOL Final Rule: Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights (Dec. 1, 2022)
ESG Investing—Articles and Commentary
Brokerage Windows and Retirement Plans
When the Department of Labor issued Field Assistant Bulletin (FAB) 2012-02, the private sector was “shocked” by the DOL’s position on fiduciary responsibilities for brokerage windows in defined contribution plans, such as 401(k) plans. It continues to be a DOL position that plan sponsors have fiduciary responsibilities for brokerage windows in retirement plans.
Northwestern Excessive Fee Defendants Win Some, Lose Some
The decision by the Supreme Court of the United States (written by Justice Sotomayor), the nation’s highest court minced no words in stating that “the Seventh Circuit erred in relying on the participants’ ultimate choice over their investments to excuse allegedly imprudent decisions by respondents.”
