Protecting Prudent Investment of Retirement Savings Act
Protecting Prudent Investment of Retirement Savings Act
Plain Language Summary
# Summary of HR 2988: Protecting Prudent Investment of Retirement Savings Act **What the bill does:** This legislation changes how people who manage employer retirement plans (like 401(k)s) must make investment decisions. Currently, there's debate over whether plan managers can consider non-financial factors—such as environmental, social, or governance concerns—when choosing investments. This bill would require them to focus primarily on financial factors like risk and return, though it allows limited exceptions for certain types of plans or when investment options are otherwise identical. **Who it affects:** The bill impacts millions of American workers with employer-sponsored retirement plans, as well as the financial companies and consultants that manage these plans.
It also affects plan administrators and fiduciaries (people legally responsible for managing retirement funds responsibly). **Key provisions:** Plan managers must base investment choices on financial performance rather than broader policy considerations, cannot discriminate when hiring advisors or service providers, and are prohibited from using non-financial criteria except in specific situations. The bill essentially aims to prevent what supporters call "political investing" while critics worry it could limit plans' ability to consider long-term risks. **Current status:** The bill has passed the House of Representatives and awaits action in the Senate.
CRS Official Summary
Protecting Prudent Investment of Retirement Savings ActThis bill modifies the requirements for fiduciaries of employer-sponsored retirement plans.First, the bill generally requires a plan fiduciary to make investment decisions based solely on pecuniary factors (i.e., factors that a fiduciary prudently determines are expected to have a material effect on the risk or return of an investment based on appropriate investment horizons consistent with the plan's policies and objectives).The bill allows nonpecuniary factors to be considered in certain situations, such as when selecting investment options for certain participant-directed retirement plans or if the fiduciary is unable to distinguish between investment alternatives on the basis of pecuniary factors alone.The bill also prohibits a plan fiduciary from discriminating when selecting, monitoring, and retaining any fiduciary, counsel, employee, or service provider of the plan.The bill requires a plan fiduciary to act solely and prudently in accordance with the interests of the plan's participants and beneficiaries when exercising a shareholder right (e.g., voting of proxies). However, the fiduciary duty to manage shareholder rights does not require the voting of every proxy or the exercise of every shareholder right.Finally, the bill requires a plan fiduciary to provide specified notices with respect to a pension plan that provides a participant or beneficiary the opportunity to select from designated investment alternatives.
Latest Action
Received in the Senate and Read twice and referred to the Committee on Health, Education, Labor, and Pensions.