{"id":31986,"date":"2023-11-06T10:00:14","date_gmt":"2023-11-06T10:00:14","guid":{"rendered":"https:\/\/wordpress-881230-3801000.cloudwaysapps.com\/?p=31986"},"modified":"2023-11-30T13:34:23","modified_gmt":"2023-11-30T13:34:23","slug":"erisa-retirement-security","status":"publish","type":"post","link":"https:\/\/esgexplainer.org\/erisa-retirement-security\/","title":{"rendered":"What is ERISA and why does it matter?"},"content":{"rendered":"\n<div class=\"wp-block-group has-background is-vertical is-content-justification-stretch is-nowrap is-layout-flex wp-container-core-group-is-layout-1 wp-block-group-is-layout-flex\" style=\"background-color:#1b2c34\">\n<h3 class=\"wp-block-heading has-white-color has-text-color\"><strong><strong><strong>&nbsp;&nbsp;&nbsp;Summary<\/strong><\/strong><\/strong><\/h3>\n\n\n\n<ul style=\"background-color:#e7eff4\" class=\"has-background wp-block-list\">\n<li>The Employee Retirement Income Security Act (ERISA) is a law that protects the savings of private sector workers.&nbsp;<\/li>\n\n\n\n<li>ERISA currently empowers those overseeing workers&#8217; retirement and health plans to consider all risks and opportunities, including ESG factors, without compromising returns.<\/li>\n\n\n\n<li>By not having responsible investing options like ESG in 401(k)s, workers might be exposing their retirement funds to long-term risks.<\/li>\n<\/ul>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><strong><strong><strong><strong><strong>What is the Employee Retirement Income Security Act (ERISA)&#8217;s fiduciary ESG standard and how does it affect my investments?<\/strong><\/strong><\/strong><\/strong><\/strong><\/h2>\n\n\n\n<p>The Employee Retirement Income Security Act of 1974 (ERISA) is a federal <a href=\"https:\/\/www.dol.gov\/general\/topic\/retirement\/erisa\" target=\"_blank\" rel=\"noreferrer noopener\">law<\/a> that protects the retirement and health plans of workers in the private sector. The law allows those managing workers\u2019 money to take into account all types of risks and opportunities, but it also <a href=\"https:\/\/www.dol.gov\/agencies\/ebsa\/about-ebsa\/our-activities\/resource-center\/fact-sheets\/final-rule-on-prudence-and-loyalty-in-selecting-plan-investments-and-exercising-shareholder-rights\" target=\"_blank\" rel=\"noreferrer noopener\">makes it easier<\/a> for workers themselves to choose investments that consider Environmental, Social, and Governance (ESG) factors as well as investments that provide non-financial benefits \u2014 as long as they do not sacrifice returns. Without responsible investing options like ESG available in 401(k)s, workers are shut out from being allowed to even consider long-term risks to their retirement security.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong><strong><strong><strong><strong><strong>How does ESG relate to the way asset managers manage their clients\u2019 money?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/h2>\n\n\n\n<p>Asset managers are fiduciaries and have a legal responsibility to consider long-term risks and opportunities, including when those risks and opportunities impact a client\u2019s overall portfolio. Anti-ESG attacks include efforts to muddy the waters regarding whether asset managers are allowed to consider ESG risks and opportunities when making decisions about where to invest their clients\u2019 money and how to engage with companies they are invested in. This puts workers\u2019 retirement security at risk.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong><strong><strong><strong><strong><strong><strong>Why is the anti-ESG movement targeting ERISA?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/h2>\n\n\n\n<p>In addition to targeting state pension plans and government investments, far-right lawmakers have taken aim at ERISA as a means to <a href=\"https:\/\/www.pionline.com\/esg\/house-republicans-advance-4-bills-block-esg-erisa-plans\" target=\"_blank\" rel=\"noreferrer noopener\">exclude<\/a> environmental, social, and governance considerations from private retirement plans. Some of the federal proposals also seek to restrict how ERISA plans can select retirement plan fiduciaries, counsels, employees, and other service providers by barring diversity considerations. By amending ERISA, these lawmakers hope to see restrictions imposed on a federal level that would limit the factors considered in investment decisions.<\/p>\n\n\n\n<p>Under the Trump administration, two Department of Labor (DOL) rules were issued imposing barriers to ESG investing. This rule was criticized by many stakeholders, leading subsequent DOL leadership to be concerned that the regulations created the perception that fiduciaries \u201cwould need to have <a href=\"https:\/\/www.federalregister.gov\/d\/2022-25783\/p-126\" target=\"_blank\" rel=\"noreferrer noopener\">special justifications<\/a> for even ordinary exercises of shareholder rights.\u201d The AFL-CIO wrote in opposition, noting that the regulations included \u201cvague terms that create additional <a href=\"https:\/\/www.regulations.gov\/comment\/EBSA-2020-0004-0633\" target=\"_blank\" rel=\"noreferrer noopener\">liability<\/a> for fiduciaries.\u201d The federal proposals discussed above are based on these two Trump-era rules.<\/p>\n\n\n\n<p>A new DOL rule, which took effect in January 2023, made amendments to correct these issues. These amendments safeguard ERISA retirement plans\u2019 ability to consider <a href=\"https:\/\/www.federalregister.gov\/d\/2022-25783\/p-837\" target=\"_blank\" rel=\"noreferrer noopener\">factors<\/a> reasonably determined to be \u201crelevant to a risk and return analysis,\u201d including the economic effects of climate change and other environmental, social, or governance factors, \u201cusing appropriate investment horizons consistent with the plan&#8217;s investment objectives.\u201d Another provision of the rule allows fiduciaries to consider collateral benefits (such as stimulating union jobs and investing in the geographic region where participants live and work) as tie breakers in cases where investment options under consideration equally serve the financial interests of the plan.\u00a0 Republican lawmakers attempted to nullify the new rule, an effort President Biden rejected by issuing the <a href=\"https:\/\/www.reuters.com\/business\/sustainable-business\/biden-vetoes-resolution-block-labor-dept-rule-esg-investing-2023-03-20\/\" target=\"_blank\" rel=\"noreferrer noopener\">first veto<\/a> of his presidency.<\/p>\n","protected":false},"excerpt":{"rendered":"<div class=\"tmnf_excerpt\"><p>The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that protects the retirement and health plans of workers in the private sector. The law allows those managing workers\u2019 money to take into account all types of risks and opportunities, but it also makes it easier for workers themselves to choose investments that consider Environmental, Social, and Governance (ESG) factors as well as investments that provide non-financial benefits \u2014 as long as they do not sacrifice returns. Without responsible investing options like ESG available in 401(k)s, workers are shut out from being allowed to even consider long-term risks to their retirement security.<\/p>\n<\/div>","protected":false},"author":1,"featured_media":31988,"comment_status":"closed","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","slim_seo":{"title":"What is ERISA and how does it impact my retirement?","description":"ERISA is a law that sets minimum standards for most workers\u2019 retirement and health plans in the private sector to protect individuals in these plans. Anti-ESG attacks have been threatening to weaken a rule that allows those managing these plans to take into account all types of risks."},"footnotes":""},"categories":[74],"tags":[81,85,80],"class_list":["post-31986","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-secure-transparent-investing","tag-esg-bills","tag-esg-risks","tag-retirement-investing"],"uagb_featured_image_src":{"full":["https:\/\/esgexplainer.org\/wp-content\/uploads\/2023\/11\/erisa-retirement-security.jpg",1200,675,false],"thumbnail":["https:\/\/esgexplainer.org\/wp-content\/uploads\/2023\/11\/erisa-retirement-security-150x150.jpg",150,150,true],"medium":["https:\/\/esgexplainer.org\/wp-content\/uploads\/2023\/11\/erisa-retirement-security-300x169.jpg",300,169,true],"medium_large":["https:\/\/esgexplainer.org\/wp-content\/uploads\/2023\/11\/erisa-retirement-security-768x432.jpg",750,422,true],"large":["https:\/\/esgexplainer.org\/wp-content\/uploads\/2023\/11\/erisa-retirement-security-1024x576.jpg",750,422,true],"1536x1536":["https:\/\/esgexplainer.org\/wp-content\/uploads\/2023\/11\/erisa-retirement-security.jpg",1200,675,false],"2048x2048":["https:\/\/esgexplainer.org\/wp-content\/uploads\/2023\/11\/erisa-retirement-security.jpg",1200,675,false],"knowbase_single":["https:\/\/esgexplainer.org\/wp-content\/uploads\/2023\/11\/erisa-retirement-security-790x450.jpg",790,450,true],"knowbase_blog":["https:\/\/esgexplainer.org\/wp-content\/uploads\/2023\/11\/erisa-retirement-security-310x310.jpg",310,310,true],"knowbase_tabs":["https:\/\/esgexplainer.org\/wp-content\/uploads\/2023\/11\/erisa-retirement-security-90x90.jpg",90,90,true]},"uagb_author_info":{"display_name":"Americas","author_link":"https:\/\/esgexplainer.org\/author\/americas\/"},"uagb_comment_info":0,"uagb_excerpt":"The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that protects the retirement and health plans of workers in the private sector. The law allows those managing workers\u2019 money to take into account all types of risks and opportunities, but it also makes it easier for workers themselves to choose investments&hellip;","_links":{"self":[{"href":"https:\/\/esgexplainer.org\/wp-json\/wp\/v2\/posts\/31986","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/esgexplainer.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/esgexplainer.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/esgexplainer.org\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/esgexplainer.org\/wp-json\/wp\/v2\/comments?post=31986"}],"version-history":[{"count":6,"href":"https:\/\/esgexplainer.org\/wp-json\/wp\/v2\/posts\/31986\/revisions"}],"predecessor-version":[{"id":32328,"href":"https:\/\/esgexplainer.org\/wp-json\/wp\/v2\/posts\/31986\/revisions\/32328"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/esgexplainer.org\/wp-json\/wp\/v2\/media\/31988"}],"wp:attachment":[{"href":"https:\/\/esgexplainer.org\/wp-json\/wp\/v2\/media?parent=31986"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/esgexplainer.org\/wp-json\/wp\/v2\/categories?post=31986"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/esgexplainer.org\/wp-json\/wp\/v2\/tags?post=31986"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}