CHEYENNE, Wyo. — Wyoming has joined a 25-state coalition in a lawsuit over a Department of Labor rule which would affect the retirement accounts of millions of people.
The rule would allow 401(k) managers to direct their clients’ money to ESG, or Environmental Social Governance, investments rather than fiduciary standards. This is contrary to the laws outlined in the Employee Retirement Income Security Act of 1974, the Governor’s Office said in a press release.
“This rule is contrary to longstanding federal law and fiduciary principles that require fiduciaries to place their clients’ financial interests first,” Gov. Mark Gordon said. “Allowing political agendas to guide managers investing Americans’ retirement accounts is unacceptable and shortsighted. Their sole responsibility must be the best financial interests of the beneficiaries.
“Attorney General [Bridget] Hill looks for appropriate times to involve Wyoming in legal matters, and I appreciate that this legal action is one vehicle to challenge this concerning trend and protect Wyoming’s interests and make our voice heard.”
The new rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” takes effect on Jan. 30, 2023. Two-thirds of the U.S. population’s retirement savings accounts would be affected, totaling $12 trillion in assets. Strict laws placed in ERISA are intended to protect retirement savings from unnecessary risk. This rule allegedly runs counter to that principle.
From the complaint: “The 2022 Investment Duties Rule makes changes that authorize fiduciaries to consider and promote ‘nonpecuniary benefits’ when making investment decisions. Contrary to Congress’s clear intent, these changes make it easier for fiduciaries to act with mixed motives. They also make it harder for beneficiaries to police such conduct.”
The 25 states participating in this lawsuit are Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, South Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming.
A copy of the complaint may be found here.
