Presidential Veto of Joint Resolution of Congress, H.J. Res. 30 (Mar. 20, 2023); Joint Resolution of Congress, H.J. Res. 30 (Mar. 9, 2023)
President Biden issued the first veto of his presidency on March 20, 2023, blocking H.J. Res. 30, a bill that would have nullified a DOL rule allowing retirement plan fiduciaries to consider the potential financial benefits of investing in funds that take into account climate change and other environmental, social, and corporate governance (“ESG”) factors without automatically running afoul of fiduciary duty requirements (see our Checkpoint article). The extent to which ESG considerations can be analyzed when selecting plan investments has been a subject of long-standing controversy and confusion. Generally, the rules have been modified in accordance with the change of presidential administrations and ideologies. The veto essentially ensures that the final rule, which became effective on January 30, 2023, will remain in place absent an unlikely veto override by two-thirds of both Congressional chambers.
EBIA Comment: The final rule clarifies that plan fiduciaries may consider the potential financial benefits of investing in ESG funds when selecting investments, and that doing so may not cause them to violate ERISA. It does not require fiduciaries to consider the benefits of investing in ESG funds, a common complaint by critics of the rule, including those who supported passage of H.J. Res. 30. Under the final rule, ERISA plan fiduciaries still must focus on relevant risk-return factors and may not subordinate the interests of participants and beneficiaries to objectives unrelated to the provision of benefits under the plan. For more information, see EBIA’s 401(k) Plans manual at Sections XXV.D.2.b (“ESG Investments”) and XXVI.J (“Fiduciary Protection for Qualified Default Investment Alternative (QDIA)”).
Contributing Editors: EBIA Staff.