"Investing for the Future: Honoring ERISA's Promise to Participants"
House Subcommittee on Health, Employment, Labor, and Pensions
2025-04-30
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Source: Congress.gov
Participants
Transcript
Good morning. The Subcommittee on Health, Employment, Labor, Pensions will now come to order. I note that a quorum is present. Without objection, the chair is authorized to call a recess at any time. Today's hearing is about protecting the retirement savings of American workers from the previous administration's attempt to water down a restless cornerstone fiduciary principle that investments are made in the financial interest of workers and retirees. During President Trump's first administration, the Department of Labor finalized rules with clear guidelines on investing and proxy voting. But the Biden-Harris administration revoked those protective rules and replaced them with weak rules that threatened the retirement savings of all Americans. As justification for revoking the Trump administration rules, the Biden-Harris DOL was misleading. Some would say they outright lied. At that time, DOL said its rule was needed to clear up any uncertainty surrounding whether a fiduciary under ERISA may consider ESG and other factors in making investment in proxy voting decisions under the Trump rule standard. The Biden-Harris administration repeatedly cited concerns and confusion raised in secret by unnamed stakeholders regarding whether climate change and other ESG factors may be treated as monetary factors under the Trump rule. The misleading justifications the Biden-Harris deal gave for revoking the Trump rule ranged from cherry-picking history to outright misstating the facts. DOL's real aim was to cast doubt on the Trump rules to bolster credibility for its own abrupt break with ERISA's core fiduciary duties. By creating an overly broad tiebreaker rule, the Biden-Harris administration allowed retirees' savings to be used to finance the latest pet policy goals of the left. In fact, the previous administration stated in the preamble to the proposed rule, for many years the department's non-regulatory guidance was recognized that, under the appropriate circumstances, a risk of fiduciaries can make investment decisions that reflect climate change and other ESG considerations, including climate-related risk, and choose economically targeted investments selected in part for benefits apart from their investment returns.
This statement is so far from ERISA's duty of loyalty and the Supreme Court's express statement of ERISA's duty of loyalty that it calls for immediate action to protect the retirement savings of American workers. Americans invest to secure their future, not to fund the Green New Deal or leftist pet projects. Fiduciaries governed by ERISA should not be allowed to make investments they know will not pay dividends. A fiduciary's most important responsibility is to make investments that are in the financial interest of workers and retirees. The mission of DOL's Employee Benefit Security Administration is to ensure the retirement, health, and other workplace benefits of American workers and their families. Instead of upholding this mission, the Biden-Harris administration DOL deliberately confused investing for the purpose of providing benefits with attempting to invest to advance partisan social and political goals. Congress reacted swiftly. Within the first three months of 2023, the House and Senate passed a Congressional Review Act resolution to nullify the Biden-Harris administration's ESG and proxy voting rule. However, when the CRA resolution reached President Biden's desk, he vetoed it. And last week, I introduced the Protecting Prudent Investment of Retirement Savings Act, which seeks to codify that those who manage other people's retirement savings under ERISA must prioritize maximizing returns for a secure retirement rather than political or social impact using risky ESG factors. Americans' hard-earned retirement savings should never be jeopardized by politically motivated mismanagement. 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.
The Protecting Prudent Investment of Retirement Savings Act would codify that retirement plan sponsors must make investment decisions solely based on financial returns. ensuring Americans' hard-earned savings are invested sensibly. I look forward to discussing this legislation and other efforts to protect Arista Plan participants saving for their retirement. With that, I yield to the ranking member for an opening statement. Thank you Mr. Chairman and I want to thank the witnesses before the hearing or at the start of the hearing. Today's hearing is expected to focus on what's called environmental social governance or ESG factors when making investments in retirement plans covered by ERISA.
Let's be clear about what ESG factors are. If a company is exposed to certain risks, such as sea level rise because of climate change, child labor violations, a record of poor corporate governance or mistreating workers, its stock could suffer over time. Retirement plan professionals must consider a long-term horizon when making investment decisions, as workers often contribute for decades before drawing down on what they save. It should be considered a best practice for retirement plan professionals to appropriately weigh ESG factors appropriately. And that premise should not be controversial. or at least committee Democrats don't think it should be. It's prudent in the words of a former Republican president. Prudence, there is no Biden era mandate for retirement plans to invest in ESG funds. Let me repeat that. There is no mandate for retirement plans to invest in ESG funds. In fact, the Biden era ESG rule does not change the fiduciary standard to which professionals making investment decisions for retirement plans are bound. The rule has been upheld twice by federal district court, most recently in February. In his opinion, the judge who was nominated by President Trump wrote that the Biden error rule, quote, does not violate ERISA's text because it never permits fiduciaries to deviate from exclusively achieving financial benefits for the beneficiaries alone, close quote. And to be clear, consideration of ESG factors is entirely consistent with making a profit.
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