EMPOWERS Act

To establish a process by which participants of employee welfare plans select guidelines to be used by the plan fiduciary for voting proxies on securities held in investment portfolios under the plan, and for other purposes. 1. Short title This Act may be cited as the Encouraging More Proxy voting by Organized Workers, Employees, and Retirement Savers Act EMPOWERS Act 2. Trusteeship of single-employer plans Section 403(a) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1103(a) (1) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively; (2) by striking Except as (1) Except as (3) by adding at the end the following: (2) (A) The assets of a single-employer plan shall be held in trust by a joint board of trustees, which shall consist of 2 or more trustees representing on an equal basis the interests of the employer or employers maintaining the plan and the interests of the participants and their beneficiaries. (B) (i) Except as provided in clause (ii), in any case in which the plan is maintained pursuant to one or more collective bargaining agreements between one or more employee organizations and one or more employers, the trustees representing the interests of the participants and their beneficiaries shall be designated by such employee organizations. (ii) In any case in which clause (i) does not apply with respect to a single-employer plan because the plan is not described in clause (i), the trustee or trustees representing the interests of the participants and their beneficiaries shall consist of 1 or more participants under the plan elected to serve as such in accordance with this clause. (C) Not later than one year after the date of enactment of the Encouraging More Proxy voting by Organized Workers, Employees, and Retirement Savers Act (i) employee trustee elections are— (I) fair and democratic and free from interference by the employer, the employer’s fiduciaries, and the investment managers; (II) designed to maximize participation by plan participants and their beneficiaries and to be convenient for participants, and their beneficiaries when appropriate, to vote; (III) use the latest technologies to meet the objectives described in subclause (II); (IV) provide for a secret ballot to be used by the participants of the plan (or, in the case of a deceased participant, by the beneficiary of such participant); and (V) provide one vote per participant, which, in the event a participant is deceased, may be cast by the deceased participant's beneficiary; and (ii) trustee vacancies are filled— (I) by the election process, and not by appointment; and (II) not later than one month after the trustee position is vacant. . 3. Proxy voting guidelines for single employer plans (a) Establishment of plan Section 402 of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1102 (d) Proxy voting guidelines for single employer plans (1) In general The trustees of a plan shall establish a set of proxy voting guidelines to direct the voting of the plan's shares of corporate stock by plan fiduciaries, except in the case of an employee stock ownership plan as defined in section 407(d)(6). (2) Trustees (A) Training Each plan trustee described in paragraph (1) shall undergo training, which shall— (i) include education on proxy voting issues, fund and executive compensation practices, procedural prudence, and appropriate long-term investing for retirement savers; and (ii) be administered by a third party nonprofit organization with significant experience in educating trustees for service as employee representatives on employee benefit boards. (B) Training curriculum The training described in subparagraph (A) shall follow a curriculum established by an entity selected by the Secretary. (C) Fiduciary duty to undergo training A failure to undergo training and fulfill the obligation to develop guidelines in accordance with paragraph (1) shall be deemed to be a violation of fiduciary duties under section 404. (3) Voting guidelines with respect to different investment options A plan may establish multiple voting guidelines, with each set of voting guidelines applicable to specific fiduciaries and investment options available to the plan participants. (4) Availability of voting guidelines The voting guidelines established pursuant to this subsection with respect to a plan shall be made available to all plan participants and beneficiaries. (5) Investment companies and pooled investment vehicles (A) Provision of voting guidelines If an employee benefit plan is invested in securities issued by an investment company registered under the Investment Company Act of 1940 ( 15 U.S.C. 80a–1 (B) Proxy voting An investment company or pooled investment vehicle described in subparagraph (A) shall vote in accordance with the guidelines provided under that subparagraph with respect to the percentage of proxies that is equivalent to the percentage of ownership of the employee benefit plan in the investment company. (C) Proxy voting record report An investment company described in subparagraph (A) shall annually provide to the participant representation board a report on all the votes the investment company cast on behalf of the plan in the last year. Each such report shall provide the relevant provision of the plan’s guidelines illustrating how the investment company made its determination. (D) Rule of construction Nothing in this paragraph may be construed to deem securities issued by investment companies to employee benefit plans to be senior securities, as defined in section 18(g) of the Investment Company Act of 1940 ( 15 U.S.C. 80–18(g) (6) Exemption for small plans The Secretary may exempt from the requirements of this subsection any plan with fewer than 100 participants, subject to the same requirements with respect to an exemption to reporting requirements under section 2520.104–46 of title 29, Code of Federal Regulations (or any successor regulations). (7) Conforming with Secure Act Not later than one year after the enactment of this subsection, the Secretary shall promulgate rules to ensure that the requirements of this subsection apply to multiple employer plans with pooled providers plans as described in section 413(e) (8) Investment manager proxy voting policies No investment manager shall require participating investors to accept the investment manager’s own proxy voting policy as a condition of investment . (b) Prudence requirement Section 404(a)(1) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1104(a)(1) (1) in subparagraph (C), by striking and (2) in subparagraph (D), by striking the period and inserting ; and (3) by adding at the end the following: (E) in exercising a plan’s proxy voting rights with respect to plan assets— (i) may vote proxies in accordance with the plan's proxy voting guidelines as established by the plan's trustees, unless the fiduciary determines that the casting of any proxy vote would be inconsistent with subparagraphs (A) and (B); and (ii) may consider— (I) the distinct and specific investment objectives and horizons of the participants and beneficiaries, especially in contrast with other market actors engaged in proxy voting; and (II) the diversified nature of the plan’s investments and the effect of any negative externalities generated by portfolio companies on the plan’s ability to provide benefits to participants and beneficiaries by reducing the returns from other plan assets. .

Summary: Encouraging More Proxy voting by Organized Workers, Employees, and Retirement Savers Act or the EMPOWERS Act This bill modifies the requirements for single-employer retirement plans with respect to the fiduciaries and proxy voting procedures for such plans. Specifically, it requires the assets of such plans to be held in trust by a joint board of trustees that represents the interests of the employer and the interests of the plan participants and their beneficiaries on an equal basis. Additionally, the trustees of each plan must undergo training and establish proxy voting guidelines for the plan. In exercising a plan's proxy voting rights, a fiduciary may consider (1) the investment objectives of the plan participants and their beneficiaries, and (2) certain effects of negative externalities generated by portfolio companies.