GOP's Effort to Undo 401(k) ESG Rule Centers on Investment Ties

GOP's Effort to Undo 401(k) ESG Rule Centers on Investment Ties

April 9, 2024, Bloomberg Law

Jason Levy’s commentary was included in a Bloomberg Law article examining Republican attorneys generals’ claims that a 30-year-old test retirement plans use to break ties between substantially similar investment options violates federal benefits law in their challenge to the Biden administration’s ESG-friendly 401(k) rule. Jason comments on the argument being employed by both sides.

Jason points out that lawyers for the government have an interest in positing a framework before the court that minimizes the frequency that tiebreakers occur. He adds that Republican critics of the policy are relying on that single feature to try to undermine the entire rule, which otherwise allows ESG consideration when it’s financially material, the chief concern outlined under Employee Retirement Income Security Act of 1974 and U.S. Supreme Court precedent.

“I think it’s noteworthy that the appellants in their brief no longer seem to challenge that the main body of the investment standard is inconsistent with ERISA,” Jason said. “With that argument off the table, they’re now focused on an extremely minor real-world application of the rule, which exposes the gap between the requested relief of vacating the entire Biden rule based off a very narrow provision.”