HR 2988119th CongressIntroduced

Protecting Prudent Investment of Retirement Savings Act

Introduced: Apr 24, 2025

Financial Services

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Protecting Prudent Investment of Retirement Savings Act would amend the Employee Retirement Income Security Act (ERISA) in several areas to tighten fiduciary decision-making and increase transparency. The core changes affect: (1) the use of non-pecuniary (non-financial) factors in investments, requiring fiduciaries to base decisions primarily on pecuniary (financial) factors; (2) nondiscrimination in selecting service providers; (3) the exercise and monitoring of shareholder rights (proxy voting) by plan fiduciaries; and (4) disclosures related to brokerage windows and non-designated investment options in retirement plans. The bill introduces specific requirements, safe harbors, and reporting obligations, with separate effective dates for each division. In short, it aims to ensure investments are guided by financial impact on plan participants, promote non-discriminatory provider selection, formalize how proxies are voted, and improve information provided to investors about non-designated investment choices.

Key Points

1Limitation on non-pecuniary factors by fiduciaries (Division A, Sec. 1002)
2- Fiduciaries must act solely in the financial interest of participants and beneficiaries, basing decisions on pecuniary factors.
3- Non-pecuniary factors may be used only if pecuniary factors are insufficient to distinguish among investment options, with documented justification and a comparison of portfolio characteristics (diversification, liquidity, expected return, etc.).
4- For participant-directed plans, non-pecuniary factors can be considered if they still meet other requirements, but not when a designated (default) investment uses non-pecuniary objectives.
5- Defines pecuniary and investment course of action and sets a 12-month window after enactment for applicability.
6No discrimination in service provider selection (Division B, Sec. 2002)
7- Amends ERISA to require selecting, monitoring, and retaining fiduciaries/service providers without regard to race, color, religion, sex, or national origin.
8Retirement proxy protection (Division C, Sec. 3002)
9- Adds a new ERISA provision on the exercise of shareholder rights (proxy voting) requiring fiduciaries to act in the plan’s and participants’ economic interests, with proper documentation and recordkeeping.
10- Fiduciaries may use a proxy voting policy or safe harbor approach, but must monitor and periodically review the policy.
11- Establishes monitoring duties for investment managers and proxy advisory firms involved in voting or advising on proxies.
12- Effective date: applies to actions and voting from January 1, 2026 onward.
13Providing complete information to retirement investors (Division D, Sec. 4002)
14- Expands brokerage window disclosures in 404(c) plans: participants must receive notice before directing investments into non-designated arrangements, acknowledging a four-part notice describing designated investments, risk/costs of non-designated options, and a retirement balance illustration.
15- Defines “designated investment alternative” and explicitly excludes brokerage windows and similar arrangements.
16- Effective date: January 1, 2027.

Impact Areas

Primary group/area affected- Plan sponsors and fiduciaries: new duties, documentation, and monitoring requirements; potential limit on considering non-financial factors; need to adjust investment policies and governance.- Participants and beneficiaries: enhanced disclosures and protection against non-financially motivated investment decisions; potential restrictions on non-pecuniary investment strategies.Secondary group/area affected- Investment managers and proxy advisory firms: increased oversight responsibilities and reporting on proxy voting; must comply with fiduciary monitoring standards.- Service providers (fiduciaries, counsel, or other plan officials): non-discrimination requirements in selection and retention.Additional impacts- Compliance costs and administrative burden for plan sponsors to implement new disclosures, recordkeeping, and policy requirements.- Potential shifts in how ESG or other non-financially motivated investment strategies are used or presented within plans.- Possible changes in how brokerage windows are offered and communicated to participants.Pecuniary factors: financial considerations that are expected to materially affect risk or return of an investment.Non-pecuniary factors: non-financial considerations (e.g., ESG goals, social aims) that historically some fiduciaries have weighed in investment decisions.Brokerage window: a plan feature allowing participants to self-direct investments beyond the plan’s designated options, often with higher risk/ fees and less oversight.

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