Allen Steinberg : Perspectives

The U.S. Department of Labor has issued new final regulations that attempt (once again) to clarify how plan fiduciaries can consider the use of environmental, social and governance factors (“ESG”) in making plan investment decisions. The goal of these new final regulations was to walk back regulations, finalized during the waning days of the Trump administration in December 2020, that placed obstacles in the way of fiduciaries considering the use of ESG factors.

Several recent decisions handed down by federal appellate courts offer some good news for plan fiduciaries. In each of these cases the courts affirmed dismissals of fiduciary litigation, concluding that the facts alleged were just not enough to support a claim. The dismissals were based on the courts’ assessment that even if the general facts alleged were true (e.g., that other plans paid less in recordkeeping or management fees or that other funds performed better) –those facts would not show that the actions taken by the fiduciaries for these specific plans were not prudent.

The Supreme Court’s decision leaves unanswered many difficult questions facing fiduciaries.

There is an increased focus on protecting retirement plan data. However, both regulators and the courts are taking a narrow view of the kinds of protections that should be in place,

A recent court case provides some potentially valuable guidance into ways plan fiduciaries can approach fiduciary litigation. Most importantly, the case could force plaintiffs to focus on truly comparable situations in alleging that a plan’s actions were imprudent--this would limit plaintiffs’ ability to use, as benchmarks of prudent behavior, general industry data or different categories of investments (such as comparing index funds to actively managed funds).