An important labor rule last fall reinforced that the Employee Retirement Income Security Act (ERISA) requires retirement plan fiduciaries to act “solely in the interest” of participants.  Furthermore, it prevented pension plan and asset managers from considering ESG (environmental, social and governance) factors like climate, workforce diversity and political donations unless they had a “material effect on the return and risk of an investment”.   Effectively, it prevented plans from automatically placing an employee’s funds into an ESG fund as a default option.

However, a new rule will now coerce workers and businesses into supporting progressive policies.  The Department of Labor’s new rule would allow plan sponsors to enroll workers in ESG 401(k) funds as their default selection so workers would unknowingly pay higher fees.  As a true fiduciary, we believe your retirement savings is of the utmost importance and should not be adversely impacted by attempts to advance ideological agendas.  Furthermore, according to Morningstar, the asset-weighted average expense of U.S. “sustainable” funds was 0.61% compared to 0.12% on passive funds.  Does the nearly 0.5% in cost make a difference?  Consider the chart below that illustrates an 8% net return versus a 7.5% net return over a 40-year working life of someone who is contributing $10,000 a year to their 401(k).  In the end, that extra 0.5% cost that individual over $354,802!

Policies matter!  We hope the DOL will reverse this proposed rule change and keep the true fiduciary standard that every American worker deserves.

#DOL #invest #economy #financialplanning #finance #stockmarket

Full listing of all disclosures (bit.ly/3lGX3mM)