Retirement plan committees, pay attention!
On Friday, plaintiffs filed a class action lawsuit against American Airlines and other plan fiduciaries, including the benefits committee, alleging breach of fiduciary duties as a result of including environmental, social and governance (ESG) strategies in American Airlines’ 401(k) plan line-up. Plaintiffs seek both injunctive relief and damages.
Late last year the Biden administration issued guidance retracting prior Trump guidance regarding ESG factors. Under the current guidance, plan fiduciaries are permitted to consider ESG factors “as appropriate” when selecting an investment option. However, as this complaint makes clear, decisions on ESG are not clear-cut.
Plan committees should consult with ERISA counsel before adopting ESG funds in order to ensure that their fiduciary duties are being satisfied.
The case is Spence v. American Airlines Inc., case number 4:23-cv-00552, in the U.S. District Court for the Northern District of Texas.