[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 5174 Introduced in Senate (IS)]
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118th CONGRESS
2d Session
S. 5174
To amend the Employee Retirement Income Security Act of 1974 to clarify
the criteria by which fiduciary responsibility is exercised in
protecting shareholder rights.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 25, 2024
Mr. Cassidy introduced the following bill; which was read twice and
referred to the Committee on Health, Education, Labor, and Pensions
_______________________________________________________________________
A BILL
To amend the Employee Retirement Income Security Act of 1974 to clarify
the criteria by which fiduciary responsibility is exercised in
protecting shareholder rights.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Restoring Integrity in Fiduciary
Duty Act''.
SEC. 2. EXERCISE OF FIDUCIARY DUTY.
(a) In General.--Section 404(a) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1104(a)), is amended by adding at the
end the following:
``(3) Investments based on pecuniary factors.--
``(A) In general.--For the purposes of paragraph
(1), a fiduciary--
``(i) may evaluate an investment or
investment course of action based only on
pecuniary factors, except as provided in
subparagraph (B);
``(ii) may not subordinate the interests of
the participants and beneficiaries in their
retirement income or financial benefits under
the plan to other objectives;
``(iii) may not sacrifice investment return
or take on additional investment risk to
promote nonpecuniary benefits or goals; and
``(iv) shall weight each pecuniary factor
in a manner that appropriately reflects a
prudent assessment of the impact of the factor
on risk and return.
``(B) Use of nonpecuniary factors for investment
alternatives.--Notwithstanding subparagraph (A), when
choosing between or among investment alternatives, if a
fiduciary is unable to distinguish between or among
investment alternatives or investment courses of action
on the basis of pecuniary factors alone, the fiduciary
shall use the capita aut navia standard as the deciding
factor in the investment decision, provided that--
``(i) the fiduciary documents detail--
``(I) why pecuniary factors were
not sufficient to select the investment
or investment course of action;
``(II) how the selected investment
compares to the alternative investments
with regard to the composition of the
portfolio with regard to
diversification, the liquidity, current
return of the portfolio relative to the
anticipated cash flow requirements of
the plan, and the projected return of
the portfolio relative to the funding
objectives of the plan; and
``(III) how the selected investment
is consistent with the interests of the
participants and beneficiaries in their
retirement income or financial benefits
under the plan; and
``(ii) the fiduciary demonstrates that it
did not expend any resources during the
investment course of action on nonpecuniary
factors that place weight between or among
investment alternatives for the purpose of the
investment decision.
``(C) Investment alternatives for participant-
directed individual account plans.--In selecting or
retaining investment options for a pension plan
described in subsection (c)(1)(A), a fiduciary may
consider, select, or retain an investment option on the
basis that such investment option promotes, seeks, or
supports 1 or more nonpecuniary benefits or goals, only
if--
``(i) the fiduciary satisfies the
requirements of paragraph (1) and subparagraphs
(A) and (B) of this paragraph in selecting or
retaining any such investment option; and
``(ii) such investment option is not added
or retained as, or included as a component of,
a default investment described in subsection
(c)(5) (or any other default investment
alternative).
``(D) Definitions.--For the purposes of this
paragraph:
``(i) Capita aut navia.--The term `capita
aut navia' means a standard by which a
fiduciary chooses at random between or among
investment alternatives where pecuniary factors
are equal and does not give added weight to 1
investment or another, provided that the
investment alternatives have identical risk and
return attributes and choosing among the
investment alternatives would have
comparatively negligible impact, not
considering liquidity constraints or
transaction costs.
``(ii) Investment course of action.--The
term `investment course of action' means any
series or program of investments or actions
related to a fiduciary's performance of the
fiduciary's investment duties, and includes the
selection of an investment fund as a plan
investment, or in the case of a plan described
in subsection (c)(1)(A), a designated
investment alternative under the plan.
``(iii) Material.--The term `material,'
when used to qualify a financial risk or
financial return--
``(I) means a financial risk or
financial return in which there is a
substantial likelihood that a
reasonable investor would attach
importance when--
``(aa) evaluating the
potential financial risks or
returns of an existing or
prospective investment; or
``(bb) exercising, or
declining to exercise, any
rights with respect to
securities; and
``(II) does not include furthering
nonpecuniary, environmental, social,
political, ideological, or other goals
or objectives.
``(iv) Pecuniary factor.--The term
`pecuniary factor' means a factor that a
fiduciary prudently determines is expected to
have a material effect on the risk or return of
an investment based on appropriate investment
horizons consistent with the plan's investment
objectives and the funding policy established
pursuant to section 402(b)(1).''.
(b) Effective Date.--The amendments made by this section shall
apply to actions taken by a fiduciary on or after the date that is 1
year after the date of enactment of this Act.
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