NYC Pension Funds Suit Illustrates The Importance Of ERISA

• Published date: 15 June 2023
• Subject Matter: Employment and HR, Litigation, Mediation & Arbitration, Retirement, Superannuation & Pensions, Employee Benefits & Compensation, Trials & Appeals & Compensation
• Law Firm: Cohen & Buckmann
• Author: Mr Jeffrey D. Mamorsky

A recent action against three New York City pension funds illustrates the important interplay of ERISA with state fiduciary laws that I discussed in last month's Law 360 article.

In Wayne Wong v. NYCERS, TRS and BERS (NY Supreme Court, Index No. 652297/2023, 5/11/2023), four participants of three New York City pension funds brought an action against the New York City Employees' Retirement System ("NYCERS") (a $77.5 billion defined benefit plan); the $64 billion Teachers' Retirement System of the City of New York ("TRS"); and the $5.9 billion Board of Education Retirement System of the City of New York ("BERS") for violating their fiduciary duty to administer the plans "solely in the interests of the Plans' participants and beneficiaries and for the exclusive purpose of providing retirement benefits" by divesting the Plans of approximately four billion dollars of holdings in companies involved in the extraction of fossil fuel.

According to the participants, energy company investments "shunned" by the Plans during the 2022 divestment period delivered exceptional returns outperforming the S&P 500 index by an order of magnitude of 58%. The complaint also argued that in contrast to the trustees in this case, the trustees of two other New York City pension funds rejectedproposals to divest from fossil fuel-related holdings, specifically because doing so would conflict with their fiduciary obligations. In addition, the complaint emphasized that public plans in California , Maine , Seattle, and Colorado have refused to divest from fossil fuels as inconsistent with fiduciary duties.

The participants asked the New York Supreme Court to declare that the Plans and their respective Boards of Trustees have breached their fiduciary duties to Plan participants through their divestment actions, and to order the Plans and Trustees to rescind their divestment policies and remediate the harm caused by those policies to the participants and retirees.

Fiduciary Arguments in the Complaint

New York Laws. The complaint reviewed the New York laws that protect retirement security , both through the common law of trusts and section 136-1.6 of New York's regulatory standards for actuarily funded public retirement systems. These impose "rigid fiduciary duties" on the public employee retirement systems in New York and require that its fiduciaries act "solely in the interests of the [participants] and beneficiaries of the systems they administer" (N.Y. Comp. Codes R. & Regs. tit. 11...