ERISA Preemption of State Legislation Prohibiting Investments tied to Chinese/Foreign Adversaries

Looking to find any case law that concerns ERISA preemption of state legislation limiting the investment scope of pension plans concerning investments tied to China (or similar foreign adversaries). 

Note that last month 17 AGs gave notice to Blackrock, and similar providers, that inadequate disclosures (of material risks) for funds with Chinese investments potentially constituted a breach of fiduciary duty. 

https://www.asppa-net.org/news/2025/2/chinese-investments-evoke-concern-of-state-ags/

Similar federal legislation is also in the works: 

https://www.congress.gov/bill/118th-congress/house-bill/4008

The House bill you point to was introduced in the 118th (2023-2024) Congress, saw no action beyond the introduction, and died with the end of the 118th Congress.

Even if similar legislation is introduced in the 119th Congress, enactment in 2025 or 2026 seems unlikely. Among other reasons, I doubt 50 Senators would vote to abolish or change the Senate’s unlimited-debate rule. Thus, unless support for the legislation is unanimous, proceeding to a Senate vote on a bill would require 60 Senators to vote for cloture. And because a bill might suffer multiple filibusters, even a bill supported by 60 or more Senators might be delayed.

The States’ attorneys general February 6, 2025 letter:

mentions that some officials of some States have suggested that a governmental plan divest from China;

asserts that BlackRock and some other investment managers had not sufficiently disclosed information about some funds’ investments in China;

asserts that some descriptions about a fund’s ESG, especially environmental, qualities are misleading;

describes an ERISA-governed plan’s fiduciary’s responsibility to meet ERISA § 404(a)(1)(B)’s prudence in evaluating the fiduciary’s investment decision. Following this, the letter suggests that a fiduciary who too easily relies on a prospectus, offering statement, or other description with omitted or misleading information might not meet § 404(a)(1)(B)’s prudence.

The letter does not state that any State’s constitution, statute, or other act that has the force of law precludes an investment in China or a foreign adversary.

If there is such a State law, ERISA supersedes a State law that relates to an ERISA fiduciary’s responsibility.

For a background on how courts have interpreted ERISA § 514, see “The Complex World of ERISA Preemption” [chapter 9] in ERISA: A Comprehensive Guide (Wolters Kluwer 10th ed. updated Dec. 18, 2024). If your firm isn’t a subscriber, see https://law-store.wolterskluwer.com/s/product/erisa-a-comprehensive-guide-10e-misb/01t4R00000PHIACQA5. (Although I’m a contributing author in that treatise, I get no $ for suggesting it and no royalty on sales.)

ERISA might not preempt a State law that regulates banking, insurance, or securities. Yet, other Federal law often preempts a State law that would regulate banking or securities.