Tag: ERISA investment factors

Are the floodgates about to open after the demise of Chevron deference?

Utah v. Julie A. Su, a new opinion from Fifth Circuit, concerns an appeal of the “weighty question”—post Chevron—of whether, as phrased by the Court, “ERISA allow[s] retirement plan managers to consider factors that are not material to financial performance when making investment decisions affecting workers’ retirement savings.”  Can ERISA fiduciaries “consider ‘collateral benefits’ when making investment decisions on behalf of the pension plans they manage”? In 2021, the Department of Labor adopted a new rule that interpreted ERISA to allow retirement plan managers to consider “‘the economic effects of climate change and other environmental, social, or governance factors’ in the event that competing investment options ‘equally serve the financial interests of the plan.’” That rule had effectively reversed a “midnight regulation” adopted by the prior Administration that “forbade ERISA fiduciaries from considering ‘non-pecuniary’ factors when making investment decisions.”  The new rule was immediately challenged by a group of states, companies and trade associations, claiming that the new rule was inconsistent with ERISA and arbitrary and capricious under the Administrative Procedure Act.  The district court, following the mandate of Chevron, deferred to the interpretation of the current DOL and rejected the challenge. Plaintiffs appealed.  And then…… SCOTUS overruled Chevron. In a new decision, a three-judge panel of the Fifth Circuit has elected not to answer that weighty question on appeal—not now at least: “Given the upended legal landscape, and our status as a court of review, not first view, we vacate and remand so that the district court can reassess the merits.”   Are we about to see a slew of these types of decisions revisiting agency regulations after the demise of Chevron? Time will tell.