The Department of Labor’s fiduciary investment rule is at risk of being vacated following the US Supreme Court’s decision in Loper Bright v. Raimondo that changed how courts consider federal agency expertise. As a result, fiduciaries should bolster all investment decisions with hard data to protect themselves and their clients.
Under the Employee Retirement Income Security Act, fiduciaries have a duty to establish and follow procedures based on their duties of loyalty and prudence. Section 404(a) of ERISA requires fiduciaries to act solely in the interests of the plan’s participants and beneficiaries for the exclusive purpose of providing benefits to the participants and beneficiaries. The DOL’s ESG rule addresses how qualified plan fiduciaries may consider other factors if there is an investment “tie.”
But now, ERISA fiduciaries lack clear answers on how Loper Bright might impact their role in selecting plan investments, especially when selection leans towards environmental, social, and governance marketplace participation. Investment data used in decision-making must be reliable and accurate, especially when financial factors can be considered in a tiebreaker.
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