Last month, the Department of Labor announced it was pausing its environmental, social and governance rule when choosing investment for retirement plans, after it has been challenged in court since it took effect during the Biden administration.
On Wednesday, the House Education and Workforce Committee approved the Protecting Prudent Investment of Retirement Savings Act, which enforces that ERISA retirement plan fiduciaries prioritize maximizing returns for a secure retirement rather than political or social impact using ESG factors.
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The legislation, which was aimed to further the DOL’s efforts to repeal the ESG rule, was introduced in April by Representative Rick W. Allen (GA-12), Chairman of the Health, Employment, Labor, and Pensions Subcommittee. The legislation which would codify that retirement plan fiduciaries must protect the $14 trillion in assets of retirement plans for 156 million workers, retirees and dependents, said Rep. Allen.
“Americans’ hard-earned retirement savings should never be jeopardized by politically motivated mismanagement,” he said. “Unfortunately, the Biden-Harris administration made this possible with an overreaching rule that allows fiduciaries to aggressively invest retirees’ money in ESG funds—which often charge steeper fees, carry higher risk, and have lower returns.”
"Americans don’t work to have their hard-earned savings funneled into higher-risk, lower-yield ESG investments,” said Education and Workforce Committee Chairman Tim Walberg. “The Biden-Harris administration’s misguided ESG policies allowed fiduciaries to play politics and steer retirees’ savings into left-wing investments for political and social purposes. I’m proud to support a bill … to protect Americans’ financial futures and promote retirees’ interest in a secure retirement.”
The new legislation would essentially repeal the Biden-era DOL rule, which was issued in December 2022, that allowed plan fiduciaries to consider climate change and other ESG factors when they select retirement investments.
However, shortly after the DOL's Employee Benefits Security Administration finalized its ESG rule, GOP attorneys general filed a lawsuit, alleging that the 2022 Rule “undermines key protections for retirement savings of 152 million workers—approximately two-thirds of the U.S. adult population and totaling $12 trillion in assets—in the name of promoting ‘ESG’ factors in investing, including the Biden Administration’s stated desire to address climate change. The challenge was denied twice, most recently in February.
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In April, the Trump-led DOL asked the Fifth Circuit Court overseeing the litigation challenging the ESG rule to suspend the ongoing proceedings. Then, last month the DOL announced it will move “as expeditiously as possible” to enact new regulations regarding retirement plan fiduciaries considering ESG factors when selecting investments, according to a Status Report filed before the court.
The DOL will now pursue changing and/or rescinding the existing ESG regulation through a formal regulatory notice-and-comment period. It is unclear if the DOL will rescind the 2022 final rule and restore the rule from the first Trump Administration, or issue a new rule.
The DOL will release the 2026 Spring Regulatory Agenda in July.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
