Pay Now
Client Login

On March 20, President Joe Biden vetoed the US Senate’s vote to overturn the Environmental, Social, and Governance (ESG) rule, which allows retirement plan fiduciaries to consider ESG factors when selecting investments.

The Senate’s vote followed the US House of Representatives’ approval of an identical resolution on February 28.

The rule is firmly opposed by Republican lawmakers and state attorneys general. In late January, 25 states filed a lawsuit against the Biden administration, alleging that the ESG rule does not align with the Employee Retirement Income Security Act (ERISA) mandate, which covers approximately 2.5 million health plans, 747,000 retirement plans, and 673,000 other welfare benefit plans. ERISA requires fiduciaries of retirement plans to act solely in the best interests of their beneficiaries.

Opponents of the ESG rule argue that it imposes undue burdens on fiduciaries and may result in suboptimal investment decisions. They contend that the rule’s focus on ESG factors may cause fiduciaries to prioritize environmental and social concerns over the financial well-being of plan beneficiaries.

Lack of Clarity and its Controversy  

The ESG rule aims to look beyond profit and loss to determine whether to make an investment. This lack of clarity makes it a rather controversial rule. As Joe McGowan says, writing in Forbes, “Conservatives, rightfully or wrongly, believe that ESG has become a tool for outside interests to impose their beliefs on private companies. Not just environmental concerns, but also political debates…. This has become a significant concern within the business sector, hence the congressional override by Republicans.”

Overriding the president’s veto is unlikely, as it would require a two-thirds majority in both chambers of Congress. However, even though the ERISA rule is going to stand for now, its implementation remains problematic, as the Department of Labor deals with how to write up clear guidelines on its implementation and the states continue to fight it.

For more Employee Benefits tips, contact INSURICA today.

Copyright © 2023 Smarts Publishing

This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. 

About the Author


Share This Story

Stay Updated

Subscribe to the INSURICA blog and receive the latest news direct to your inbox.

Subscribe to the blog

Related Blogs

Preventing Burnout in Working Parents Helps Employers

May 3rd, 2024|Blog, Employee Benefits|

For companies aiming to elevate productivity, engagement, and loyalty in the workforce, prioritizing support for working parents may be a wise investment. Experts agree the stress of balancing professional and family obligations exacts a significant toll, frequently culminating in burnout — and businesses bear the brunt of the consequences.

Using Employee Feedback to Optimize Benefits Packages

May 2nd, 2024|Blog, Employee Benefits, Trending|

As employers look to reduce spending, many are slashing essential worker benefits like 401(k) plans, health insurance, and tuition assistance. However, experts warn against indiscriminately axing the costliest perks employees rely on. They say a better strategy is identifying underutilized offerings to cut and reallocating those dollars toward in-demand benefits.

The Game-Changing Benefit You’ve Been Overlooking: SECURE 2.0’s Student Loan Matching

May 1st, 2024|Blog, Employee Benefits|

A key provision in the SECURE 2.0 Act that took effect January 1 could be a game-changer for employers looking to assist workers with student debt while also bolstering retirement savings.

Go to Top